PORTLAND — The Federated Cos. has sold Bayside Village, the city’s first housing development for college students, to a Chicago-based real estate investment firm for nearly twice what it paid for the property two years ago.

Federated, which paid $9.3 million to buy Bayside Village from the bank that had taken over the financially troubled property, sold it for $18.2 million to Blue Vista Capital Management.

When Federated bought the building, it had a 60 percent vacancy rate. Since then, the company has filled the 100-unit apartment building with tenants and increased the property’s value, said Greg Mitchell, Portland’s economic development director.

The sale is “completely separate” from Federated’s plan to build a million-square-foot, mixed-use project on seven lots along nearby Somerset Street, said Suzanne Tamargo, vice president of marketing for Federated.

The company and city officials have been negotiating the terms of the purchase agreement for the city-owned lots and other parts of the deal, such as access to a low-interest federal loan to pay for a parking garage.

Mitchell said he believes the negotiations will be completed within 60 days. Any agreement would need the City Council’s approval.

Tamargo would not answer questions about the specifics of the proposal while it’s being negotiated with the city. Mitchell said the proposal has not changed significantly from the original plan, made public in September.

The company said then that the project included about 97,161 square feet of retail space, 96,000 square feet of office space, 554 luxury housing units and a 1,060-space public parking structure.

The city has been focusing planning and financial resources for more than a decade on redeveloping the Bayside neighborhood.

When Bayside Village was being built in 2007, Joseph Cloutier of Rockport, the lead developer, billed it as an innovative option for college students. The idea was to provide an upgrade from dormitories but retain the college feel with features like Wi-Fi Internet access and resident advisers.

The building, with its multicolored facade and prominent location off Interstate 295, was seen as an important element in the transition of Bayside from an industrial area to a mix of residential and commercial properties.

But the opening of the complex in the fall of 2008 was marred by the rowdy behavior of some tenants. Police responded to nearly 60 calls at the building in a two-month period.

In addition, the project’s financing was based on rents that proved to be higher than the market could support. The lender, KeyBank, began foreclosure proceedings in 2010 against Bayside Village Student Housing LLC, which owed the bank more than $21 million.

Federated made the project work because it was not burdened with debt, said City Councilor Kevin Donoghue, whose district includes Bayside. Without the heavy debt load, the company could charge lower rents and fill the building with tenants, he said.

The City Council gave the original developer a $120,000 annual tax break, and later assigned it to Federated. The City Council will now vote on assigning the tax break to Blue Vista Capital Management.

Officials from Blue Vista Capital Management could not be reached for comment Wednesday.

Staff Writer Tom Bell can be contacted at 791-6369 or at:

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