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June 7, 2011 Portlandbiz

City OKs $2.3M Bayside property sale to Federated Cos.

Portland's city councilors unanimously approved the nearly $2.3 million sale of 3.25 acres in the Bayside neighborhood to The Federated Cos. at their council meeting last night, paving the way for Federated to build housing, retail, office and parking space in the gentrifying community.

The councilors did not reconsider another proposal from the University of New England and developer David Bateman, despite a suggestion from Bateman and other Bayside businesses last week that the city was too quick to sign off on the deal with Federated Cos. Mainebiz was unable to reach city officials or councilors to respond to Bateman's observation before deadline.

Starting last September, UNE began negotiating with the city to buy the land along Somerset Street to build a 60,000- to 80,000- square foot dental school and mixed- use clinic and education center. But the negotiations stalled, according to Thomas White, UNE's vice president for communications. "Certainly all along they had been concerned about a tax-exempt institution being in that space," he says.

In April, some months after talks broke down with the city, UNE partnered with Bateman Partners LLC of Portland to solve the issue of the tax-exempt status, according to White and Chris O'Neil, a Portland-based consultant who represents Bateman.

O'Neil wrote a letter to the councilors on Monday explaining the combined offer of Bateman Partners and UNE in greater detail. He explained that while he wouldn't ask the city to take any action, he thought the councilors would like the UNE proposal if they looked more thoroughly at it.

In his letter, O'Neil wrote, "A major obstacle to the UNE deal from the outset was the city's understandable reluctance to take on more tax-exempt real estate. Bateman Partners stepped in to solve that after discussion stalled between UNE and [the] city. The Bateman goal, embraced by UNE, was tax equivalency." In lieu of taxes, UNE and Bateman offered to pay the city $527,000 a year, deriving from a combination of the 504-space parking garage Bateman would build, 100 housing units for graduate students and teaching staff, and UNE's dental school and mixed-use clinic.

O'Neil wrote in his note that UNE's proposed dental school building would pay approximately $182,000 per year, which is less than the amount of taxes it would pay if it were taxed at full commercial rates, but 40% more than what the city suggest for payments in lieu of taxes.

UNE also offered to buy the land for $600,000 per acre, $100,000 less per acre than The Federated Cos.' offer. Earlier this year, The Federated Cos. bought student housing complex Bayside Village for $9.2 million.

UNE has characterized its proposed clinic as a multifaceted center, or "corridor." White says the project will be an integrated clinical model for health care training and delivery with three major components: dental medicine, dental hygiene and an education center that offers occupational therapy, physical therapy and social work services, among other services. The center would also serve veterans, he says.

Despite the deal not working out, White says there are no hard feelings, and that UNE is considering other options in and around Portland for its clinical education center. "Bayside was very attractive given the location in the heart of the city," White says. "We were excited by this idea of a clinical corridor, but it is not the only location that would suit our needs."

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