Is development finally headed to Sacramento railyard?

Sacramento’s downtown arena has been getting the headlines lately, but a much larger development – just blocks away – is poised for a big 2014.

The downtown Sacramento railyard, more than a dozen times the size of the Downtown Plaza arena site, has been called the most promising infill property nationally, future home to thousands of residents, offices, businesses, restaurants and a railroad museum.

For years, amid foreclosures and toxic cleanup fights, it has remained just that, a promise, not a reality.

That could change. A local development group is expected to take control of the railyard this spring, marking the first time since the early days of railroading that the land has been locally owned, and giving City Hall what it has long wanted: someone in charge who has a history in Sacramento and a commitment to the community.

Representatives of Inland American Real Estate Trust, the Illinois investment company that took control of most of the 240-acre railyard three years ago in foreclosure, say they hope to sign a deal in the next two to three months to sell the site to Downtown Railyard Venture, owned by Sacramento developer Larry Kelley, who built Stanford Ranch in Rocklin and turned McClellan Air Force Base into a private industrial park.

Inland took ownership, almost unwillingly, when previous owner Thomas Enterprises of Atlanta failed to repay a loan from Inland. City officials say Inland, although not a developer, has been a good steward of the site, working with the city to build the bridges and roads necessary to attract a developer.

The Illinois company and the Kelley group have been negotiating the sale since last summer, and both said last week they believe a deal is near. “We are optimistic about closing. We don’t see any things we don’t think we can get through at this point,” Kelley said.

Kelley said his team has been talking with several major entities, both governmental and private, interested in building in the railyard.

“They are significant and, candidly, it is very encouraging,” he said. “We want to hit it running. We want to create some energy and activity down there.”

Kelley declined to say what type of entities might agree to build the first facilities in the railyard, just north of downtown’s central business district. The state of California already has announced plans to buy a block-sized parcel in the yard at Sixth and H streets for a new Superior Court building.

The potential sale to the Kelley group is not expected to dramatically alter the city’s plans for turning the mostly vacant, dusty stretch of land, where thousands of workers once built locomotives and railroad cars, into an urban live-work community over the next two decades, those involved say.

“We’ll have a little bit of every type” of development, Kelley said. “Office for sure, housing for sure, retail for sure. There’ll be the rail museum, and opportunities for a farmers market, restaurants, and possibly other entertainment venues. We are hoping there will be some educational opportunities.”

But Kelley said some previous assumptions may change. The site has been approved for up to 12,000 housing units. Kelley said he doesn’t believe that many will be built. “If it were half that, it would be a lot,” he said.

City officials have said they believe the railyard, which sits just two blocks north of Downtown Plaza, could combine with the planned arena project to dramatically change the face of the core business district.

The question regarding railyard development, though, has always been: When?

The city first announced grand plans in the early 1990s to redevelop the property after Southern Pacific and later Union Pacific closed operations at the former railroad maintenance and manufacturing facility. But subsequent ownership changes, the recession, an ongoing toxic cleanup and the lack of basic infrastructure have kept the site on the “not now, maybe soon” development list for years.

Two of the biggest hang-ups appear less formidable entering 2014. Union Pacific, the former owner, has spent tens of millions of dollars on toxic cleanup. The job remains unfinished, but after years of fighting over who is responsible for the remaining work, UP, Inland and the Kelley group say they are engaged in talks on the last details.

“Everyone has recognized that to work together results in quicker cleanup,” Inland spokesman Jared Ficker said. “We don’t want to have a situation where the project is held hostage because of disputes.”

Simultaneously, Inland representatives say they expect this year to finish the critical task of building roads into and through the railyard to make it accessible for development.

Although no actual buildings are being erected yet, Ficker described the site as already the largest building project in downtown, with as many as 75 construction workers on site daily, creating the skeleton needed to support future development.

A quarter-mile extension of Sixth Street is nearly completed north from H Street, taking the street on a bridge over the railroad tracks into the site. A similar extension of Fifth Street will be done this year. Both will connect with the major street in the future development, Railyards Boulevard, where grading work has begun.

By year’s end, Railyards Boulevard is expected to be finished and will connect Fifth, Sixth and Seventh streets to Jibboom Street and Bercut Drive on the west side of the railyard. That will allow drivers to pass through the property between downtown and Richards Boulevard at Interstate 5.

This timetable means construction of the first new buildings in the railyard likely can’t begin until 2015 at the earliest.

At the same time, city officials say they are making progress in rehabilitation work on the train depot at Fifth and I streets, which the city owns. A seismic retrofit is nearly finished. This spring will bring a $30 million renovation to modernize the depot and turn it into a mixed-use building housing passenger train facilities, new offices and possibly a restaurant and a cafe.

The rehab project, which will take two years, also involves bringing portions of the building back to their historic design and use. It includes opening two archways in the back wall that have been covered for decades.

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