Neither a Miami-based developer nor city officials was prepared to blink Monday in a staredown over a long-awaited, nearly $100 million development project in Portland’s Bayside neighborhood.

Federated Cos. threatened to sue Portland on Friday after the city informed the developer that it needs to bring the project back to the City Council because its contract to purchase nearly 3.5 acres of former industrial land owned by the city on Somerset Street had expired.

It’s a claim that Federated Cos. strongly contests, saying that city officials are retaliating against the developer for scaling down the project and looking to replace two of four apartment buildings with hotels. Federated says it has invested $2 million in the project and that a lawsuit could be necessary to protect its investment.

City staff on Monday said that the possible addition of hotels is a significant policy change that needs to be endorsed by the City Council, which has made housing a priority.

Staff took a closer look at the sales agreement after Federated Cos. inquired – but never formally applied – to convert two apartment buildings into hotels, a change that would result in a 41 percent reduction in housing units, according to the city’s communications director. Instead of 440 apartments, 260 apartments would be built.

City staff is waiting for Federated to file a request asking the City Council to renew the sales agreement.

However, Federated representative Patrick Venne said on Monday that “we have made our position clear.”

Greg Mitchell, Portland’s economic development director, defended the city’s position, saying the original sales agreement has always called for a “heavy” housing component, parking and first-floor retail.

The original plan called for 650-800 housing units before being scaled back to 440 apartments.

Mayor Michael Brennan declined to comment on Monday, citing the potential lawsuit. City Councilor Kevin Donoghue, who chairs the council’s Housing and Community Development Committee, did not respond to an email seeking comment.

“I’m disappointed where we find ourselves,” Mitchell said. “From a staff perspective, I’m still hopeful the project will continue and we’ll see significant investment in residential units down in Bayside.”

He added, “I think the market is still in need of more housing as evidenced by the other projects that are advancing.”

Venne, Federated’s senior project manager for the ‘midtown’ proposal, blames city staff for blocking progress on a project after it was approved by the Planning Board and City Council.

“Staff seems to be standing in our way with the brakes on and pointing the finger at us,” Venne said, stressing that rumors of Federated trying to sell the rights to develop the project and the land are untrue. “We’re not shopping this around. We’re committed to doing a quality project that makes sense for us.”

According to May 21 letter Federated sent to the city, an all-residential project has become risky, partly because several other market-rate apartment projects were approved and permitted while Federated’s project faced repeated delays. When it was first proposed in 2011, Federated was poised to develop the first substantial market-rate housing project in the city in nearly a decade.

While the city has seen several hotel developments since 2011, market research shows that the hospitality industry is poised to continue growing and that hotels also could provide demand for first-floor businesses in the midtown complex, the company said.

Federated noted that city officials had previously considered office and industrial uses for the site.

“We strongly believe a change in use will allow industry-leading, exciting and dynamic franchises to establish Bayside as a destination, while catering to the retail space below and therefore better supporting the project (and neighborhood) as a whole,” the company said.

Jessica Grondin, Portland’s communications director, said city attorneys have determined that the sales agreement expired 30 days after the appeals period ended for the most recent Planning Board approval, which occurred in late March. Under that interpretation, the contract expired on May 27.

But Venne said the city was “cherry-picking” the agreement to reach that conclusion. He said the 30-day period doesn’t begin until the project meets and receives staff approval for the dozens of conditions placed on it as part of the board’s approval.

Jeff Levine, the city’s planning and urban development director, said that process normally goes smoothly.

“We’ve been reviewing everything that gets submitted to us relatively quickly and we haven’t had a whole lot submitted from this development team since March,” Levine said. “If we get complete and accurate submissions, we can turn them around very quickly.”

Venne, however, said he has talked with Mitchell, the city’s economic development director, on a weekly basis and it’s unreasonable for staff to think Federated could move faster to file final plans that meet the Planning Board conditions.

Mitchell pushed back against the allegation that city staff have opposed the most recent iteration of the project, saying that Federated was allowed to take its revised project before the Planning Board earlier this year, which delayed other projects from moving forward.

“We’ve been working aggressively to get this project under construction,” Mitchell said.


The Planning Board and City Council agreed to rezone portions of the property to accommodate tall buildings.

In January 2014, the Planning Board approved a master development plan for the phased development, which was expected to occur over the next decade, as well as the site plan approval for one high-rise tower at Somerset and Pearl streets and a parking garage. The approval came after six board workshops and two public hearings, which divided residents.

Shortly afterward, a group called “Keep Portland Livable” appealed the decision on the basis that it did not comply with the city’s Comprehensive Plan. To avoid a long and costly lawsuit, Federated reduced the building heights to six stories (72 feet) and eliminated a parking garage.

“The lawsuit was not brought by the city against the original project,” Mitchell said.

Peter Monro, a co-founder of Keep Portland Livable, said the group helped rein in a project that did not comply with city’s Comprehensive Plan. Beyond that, Monro criticized the city’s sales agreement with Federated, because it lacks a requirement for affordable housing and good-paying jobs.

Monro said the city was now looking for a scapegoat.

“Greg Mitchell would love to pin the tail on the donkey of anyone else besides himself and the City Council,” Monro said. “I think the city has created its own problems by making a deal that would only be taken by a developer from Miami, and now they’re living with all the result of that. I have to suggest these were problems that were not brought about by Keep Portland Livable.”