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    Granite Land Eyes Infill

Mike McCarthy, Staff Writer
From the November 29, 2002 print edition Sacramento Business Journal

The development arm of the huge Granite Construction Inc. has joined forces with a group of Sacramento-area developers to build up to $25 million worth of infill projects on urban sites around the region.

The group has won approval for a redevelopment project in Yuba City and is scouting prospects in Sacramento and a radius around it.

Their instrument is Main Street Ventures LLC a joint venture between Granite Land Co., of Sacramento, and West Sacramento's Capitol Avenue Development & Investments. The latter is a partnership formed this year by development veterans Bill Farley, Brad Hays and Patrick McCuen, son of a longtime local developer, the late Peter McCuen.

Granite Land is the development arm of Watsonville-based Granite Construction Inc. That firm also is the parent of Granite Construction Co., a builder of roads and other infrastructure whose operation garnered $1.5 billion in revenue last year.

By tackling infill development, Main Street Ventures has chosen a hard but politically attractive path projects built within established communities. Infill has become a buzzword during the past few years because many environmentalists and community planners see it as a tool with wide-ranging socioeconomic benefits.

Building in existing neighborhoods can remove blight and it reduces the need to develop rural land. It can also reduce the need for commuting from the outskirts to work centers, cutting down on air pollution and traffic congestion.

The concept is part of what's called "smart growth." But it is extremely tough to do, usually because municipalities are not prepared to process infill development applications. Not-in-my-back-yard groups and preservationists also take a toll, as does clearing the hurdle caused by deteriorated urban drainage pipes and other public works.

One project and counting: Main Street this month received municipal approval for its first project, a $3 million retail-and- office building in Yuba City's Town Center redevelopment.

The group is scouring for new projects in a territory that ranges from Fairfield to Reno and from Chico to Turlock. Main Street also will look for opportunity in the region's bulls-eye for infill development downtown Sacramento, said Farley, that city's economic development manager during the mid-1990s.

Hays, a longtime Sacramento developer, worked for McCuen Properties LLC before joining Farley's partnership this year. McCuen also worked for McCuen Properties.

Main Street came together after Farley approached Granite Land Co. several months ago about a joint venture. Granite liked the idea. "Infill is interesting because of the economic opportunities in Central Valley cities," said Tom Lewis, Granite Land's vice president. "There's good money to be made and it does good for the community as well."

Additionally, Capitol Avenue Development's partners understand infill development and have good relations with local redevelopment agencies, he said.

Granite hasn't set a specific amount of equity it will put into projects, but it will be enough to bring the joint venture's development scope to $25 million, he said.

Main Street doesn't intend to use the $25 million capacity on one project. The venture will generally take on projects of $5 million to $10 million, Farley estimated.

That's the optimal size for a small development outfit to tackle, he explained.

Lewis pointed out that Granite Construction's experts would be available to advise Main Street if it runs into that chronic problem for infill developers old, worn-out urban infrastructure.

Tapping a rebirth: Yuba City is a model project for the joint venture. The city's Town Center has attracted Sutter Health, which plans about 120,000 square feet of offices. Others plan medical buildings in the area. The planned projects will put hundreds of employees into the area, creating a demand for ancillary development, Lewis said.

Main Street decided to build a 17,000-square-foot mixed-use building with retail on the ground floor and offices on the second story. The retail should attract customers from the large office developments, while the offices could draw companies gravitating to the emerging medical area around Sutter. The project should start construction in the spring.

Granite Land and the three partners will likely contribute a combined $500,000 to $700,000 in equity. Then the venture will shop around for a bank loan for the balance of the cost, Farley said.

He estimated there are at least 15 cities within a 90-minute drive of West Sacramento where Main Street can do similar projects.

The fourth player: Granite Land was formed just three years ago, partly as a result of Granite Construction Inc.'s involvement in the unusual Granite Regional Park project. Granite Park, on Howe Avenue in Sacramento, is on the site of one of Granite's former gravel mines.

Under an agreement with the city, Granite donated land for the public park. In return the city approved a business park that would thread through the public park, with fees from the private development financing the playfields and other park facilities.

To develop Granite office park, Granite Construction formed a partnership with developers Dain Domich, Carl Panattoni and George Separovich. The company also formed Granite Land, run by Scott Wolcott.

The Main Street venture is the company's second development move in Sacramento. But Granite Land has been active elsewhere during the past few years. The company's projects include:

  • A shopping center in Antioch built in partnership with Sacramento's Taylor Properties.
  • Development of Water's Ridge Industrial Park in Dallas with Panattoni. The 3.5 million-square-foot park has been developed and sold.
  • A partnership with two other groups in Orange County's Rancho Santa Margarita community to develop land that can be sold for some $180 million.
  • The company is in contract to buy land for 400 homes near Seattle, and is working on a venture to develop 450 acres of commercial land in Dallas.

2002 American City Business Journals Inc.



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