In The News : 2002

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Developer Gets Tentative Deal to Start Transforming UP Yard

November 1, 2002
This article also appears on another site: Sacramento Bee

An internationally renowned development team with ties to Union Pacific and the Maloof family, majority owners of the Sacramento Kings and Arco Arena, won the inside track Thursday to develop the first phase of UP's downtown railyard.

The railroad giant and Millennia Associates reached tentative agreement to transform about 70 acres of the railyard into a mix of restaurants, stores, offices and housing, along with a transportation center and railroad museum.

The agreement covers the southern portion of the 240-acre railyard, which long has been seen as the next frontier for downtown Sacramento. Through the years, everything from high-rise offices to a major league ballpark have been proposed for the site.

The latest grand plan for the entire railyard centers on a new arena for the Kings.

The selection of Millennia is viewed as the most concrete step yet toward redeveloping the railyard that once employed 7,000.

Millennia, based in the Southern California town of Venice, is the development arm of architect Jon Jerde's far-flung operations.

Most recently, the group turned a similar Union Pacific yard in Salt Lake City into a vibrant residential, cultural, business and entertainment district that was on worldwide display during the Winter Olympics in February.

"I think this is the best news," said Mayor Heather Fargo. "It shows we are about to make some significant progress in the railyard. ... The Jerde group has an international reputation for doing projects that really transform areas."

City Manager Bob Thomas hailed UP's selection of "such a great development team" and said he thinks construction could begin within two years.

If the tentative agreement becomes final, as expected within the next 45 days, the Millennia team also will include veteran capital developer David Taylor and the local office of the Morrison & Foerster law firm.

Suheil Totah, a partner in Morrison & Foerster who drove the Jerde group's campaign, said he hopes construction can begin early in 2005 after extensive community outreach efforts and navigating the city's development process.

Millennia was selected over three other finalists -- including a group led by downtown specialist Taylor. UP spokesman Mike Casey said Jerde's group "brought the most to the table."

"We just had a successful transaction and experience ... in Salt Lake City and we have every intent to enter into a permanent agreement with them," Casey said.

Jerde's firm specializes in creating large retail and mixed-use projects, from San Diego's Horton Plaza -- a model for redevelopment since 1985 -- to similar efforts in Japan, Taiwan and the Netherlands.

Jerde designed the Fremont Street Experience, which revitalized downtown Las Vegas along with the Maloof family's Palms Casino Resort that opened almost a year ago. The architect also redesigned Sacramento's Downtown Plaza in the early 1990s.

Casey said Jerde's dealings with the Maloofs had nothing to do with Millennia's selection, and City Manager Thomas said the relationship was insignificant.

Fargo and others, however, said Jerde's relationship with both Union Pacific and the Maloofs -- and with the city during the Downtown Plaza project -- could prove vital to efforts to use part of the railyard for an arena and entertainment district.

"I think that bodes very well for (Jerde's) ability to bring all the parties together and move forward," Fargo said. "I think that's part of the piece that will make this work."

Several of the contending development teams actively courted the Maloofs during the drawn-out competition for the first railyard contract, said industry sources.

Later this month, the city is expected to approve the second phase of a feasibility study for a downtown arena. The new study should clarify questions about location and financing for a basketball venue that could replace Arco Arena.

John Thomas, president of Maloof Sports and Entertainment, which owns the Kings, the Sacramento Monarchs WNBA team and Arco Arena, said the Maloofs played no role in the selection of Jerde.

But he said Jerde's group was "a world-class development and design firm."

"From our point of view, Mayor Fargo's vision for the railyard development is very exciting," Thomas said. "This seems to be a significant and positive step in that direction for the railroad and the city."

The tentative agreement announced Thursday covers the Depot District, which includes the southernmost 93 acres of the railyard.

The district has about 19 acres of railroad tracks and 11 acres that are expected to become an "intermodal center" for passenger trains, light rail and bus lines. The historic I Street depot will be part of the center.

The district also includes about 17 acres that will be an extension of the California State Railroad Museum.

While Millennia's tentative agreement does not cover the remainder of the massive railyard, the development group hopes to expand beyond the Depot District.

Spokesman Totah said Millennia has "a strong interest in the balance of the property." Both he and UP's Casey said the discussions over the next 45 days undoubtedly would include the remainder of the site.