Sonoma County housing projects tied to SMART line face mounting obstacles

More than $1 billion in planned development along the passenger rail line in Sonoma County stands to be delayed as a result of the economic recession brought by the coronavirus pandemic, which has factored in setbacks for several marquee projects that cities and supporters have billed as transformative.

Many of the new projects are touted as living, working and retail spaces less reliant on cars. But the plans, from Petaluma to Healdsburg, have been postponed or thrown into limbo amid uncertainty about governmental approvals, financing and construction, crimping efforts to address the county’s housing crisis at the same time that people have been forced to reevaluate the way they work, shop, dine and use public transit.

The new reality has left developers scrambling to rethink the layout of mixed-use developments up and down the SMART line, where more than 1,800 units of high-density housing was planned or slated for construction.

The largest of those projects is Rohnert Park’s $400 million central square built around its Sonoma-Marin Area Rail Transit station. Groundbreaking on the Station Avenue project is a moving target, with no reported construction timeline, making the city’s decades-long dream of a downtown area elusive.

“It’s a hugely important project to Rohnert Park,” said longtime Councilman Jake Mackenzie. “Its execution has obviously not been made any easier by what we’re going through at the moment, but still the vision exists and the desire to help implement it still exists. I do believe that eventually it will be built. But what the timing is going to be on that, I don’t know.”

The City Council in late 2018 approved the project on the 32-acre former State Farm Insurance campus. It calls for 460 apartments, a five-story, 156-room luxury hotel, and 270,000 square feet of space for offices, shops and restaurants.

The obstacles for transit-oriented residential construction are some of the same across the building sector, and financing challenges are chief among them, said Keith Woods, chief executive officer of the North Coast Builders Exchange, a trade group.

The county’s easing of restrictions on residential construction earlier this month could pave the way for some projects, he said. But securing construction loans is bound to be tough under the current economic headwinds.

“That’s the great unknown,” Woods said. “These are great plans, and every one of these projects would have strong support of most of the community. But none of us write the checks for them, so the key becomes, can they get financing?”

Rohnert Park representatives say they are still optimistic about their downtown vision, but concede it’s likely to take longer to realize.

“It’ll be at this site, definitely. I think this developer still believes in the project,” said City Manager Darrin Jenkins. “I think it’s going to happen. It’s just a question of when, and that depends on what’s going on sort of around the globe really with respect to the virus and economic impacts of that.”

San Francisco-based Laulima Development paid $13.5 million for the land in late 2017 and has put the project on hold before, most recently over last summer, a delay that Laulima representatives linked to high local construction costs and financing challenges. Its original completion date for the first phase of the project was this fall.

David Bouquillon, Laulima’s managing partner, did not respond to interview requests over three weeks. In regular updates with city officials, Bouquillon has discussed revising the project, including moving the location of the hotel on the property, but keeping the remainder of the downtown development intact, according to Jenkins.

To the north, Windsor’s plans to develop a new, $280 million civic center, hotel and housing project around the Town Green also have hit the skids.

The Town Council approved last week a yearlong extension of its exclusive negotiating agreement with the Encinitas-based developer Robert Green Co.

“With COVID-19, the economy and business especially in the hospitality industry has been upended and it’s really uncertain on timing of when we might come out of this,” said Windsor Town Manager Ken MacNab. “A year is a reasonable amount of time. It may be generous, it may not be. We don’t know if in a year the developer will be in any better position than they are today.”

The controversial development is still in early stages of planning, but calls for a new city hall, police station, library and school district offices, along with a 151-room hotel and 87 condos.

The delay follows setbacks in Windsor for a pair of large multifamily housing projects that together account for almost 750 housing units near the town’s future $65 million SMART station, expected to open by the end of next year.

“One is within spitting distance and the other is a quarter-mile away. And people are anxious to get in,” said Windsor Councilwoman Deb Fudge, a longtime SMART board member. “I’m concerned the projects are already struggling to get funding and have now been hit again.”

Windsor recently granted a one-year extension for the Vintage Oaks housing project, which is comprised of 387 units in buildings of up to four stories. The development, tucked between Old Redwood Highway and Highway 101 north of the Town Green, has been approved and is “shovel-ready,” according to Peter Stanley, principal with planning and architecture firm ArchiLOGIX. It ran into a sudden financing issue that’s again pushed back start of construction for at least a year, according to Stanley.

The 360-unit Mill Creek project, south of Windsor River Road, also has stalled. Hollywood-based Developer Bob Bisno is behind both projects, each estimated in the $150 million range. Both developments are at least three years away from completion, according to Stanley, who said the current schedule envisions nearing the midway point on Vintage Oaks before starting on Mill Creek.

“The intention is obviously to build these things,” Stanley said. “It’s very expensive to get to the point at which they are. There’s no value if you’re not going to build them.”

Petaluma and Healdsburg also have high-density housing projects in the works near the SMART line.

A 405-unit multistory project is proposed to rise behind Petaluma’s downtown station. The development is tied to a complex set of land deals that would enable construction of Petaluma’s second SMART station, on the east side of town off Corona Road, plus 110 single-family homes nearby. But that set of deals is now the focus of a lawsuit filed mostly on environmental grounds against the city and the landowner where the single-family homes are planned.

Supervisor David Rabbitt, whose district includes Petaluma, estimated the multifamily housing project could be delayed by up to two years if the lawsuit moves forward.

“There is nothing quick in the legal process,” said Rabbitt, who is also a member of the SMART board of directors.

Meanwhile, Healdsburg last year approved the 208-unit Mill District mixed-use project, which also includes a 53-room upscale hotel and 15,000 square feet of retail space. The housing, made up of a mix of apartments and multifamily condos, will take at least a decade to complete because of the city’s restrictive residential development ordinance, which exempts affordable units but caps new development at an average of 80 homes per year.

Replay, the project’s Vancouver-based developer, has not provided an updated timeline for construction. The company is monitoring shifts in the market under evolving economic conditions as it continues to advance the project, according to Eric Chan, Replay’s director of development in Healdsburg.

SMART, likewise, has no timetable for its plans to extend service north of Windsor to Healdsburg, at cost of $194 million for five miles of track and a new station.

The exception at the moment among the rail corridor developments appears to a housing project destined for a vacant lot at Santa Rosa’s Railroad Square adjacent to the downtown SMART station. The rail agency sold the 5.3-acre plot in 2018 to Petaluma-based Cornerstone Properties for a housing-focused project with as many as 300 multifamily units.

“It’s important and needs to go forward,” said Julia Gonzalez, spokeswoman for SMART. “Getting people out of cars is not something we want to lose sight of.”

Initial designs for the phased project are expected to be submitted to the city in roughly the next month. The first phase would include more than 100 units in a six-story building along West 6th Street and take a year and a half to build once approved, said Stanley, who also is working on the Cornerstone project.

SMART expects the developer to complete the $6 million purchase with a $4 million payment by the November deadline. If advanced, the project would help address the region’s ongoing housing crisis and showcase the potential for new housing within walking distance of regional rail service, officials said.

“This project is absolutely important, to help kickstart transit-oriented development along the line, and to help bring housing closer to transit, which makes it that much more accessible,” said Santa Rosa Assistant City Manager David Guhin, who oversees planning and economic development. “But it’s also critical for Santa Rosa … to see some of our first high-density housing in the downtown go up.”

You can reach Staff Writer Kevin Fixler at 707-521-5336 or kevin.fixler@pressdemocrat.com. On Twitter @kfixler.