The Zidell family’s dreams of transforming their 33 acres of South Waterfront property are on hold after the developers could not come to terms with the city of Portland on how much each side would contribute to public infrastructure at the site.

The impasse threatens to throw away years of work on the South Waterfront. The Zidells’ ZRZ Realty Co. proposed to build approximately 5 million square feet of residential, office and retail space on the west bank of the Willamette River.

All development and design work on Zidell Yards is halted, ZRZ Realty President Jay Zidell said Monday.

Talks with city bureaus fell apart over costs concerns, according to interviews with ZRZ and city officials. The construction of Zidell Yards would have required millions in local government spending to extend Bond Avenue through the site and help pay for parks and the Greenway Trail.

“We had one view of how that needed to be funded, and the city had a different view,” Zidell said. “At the end of the day, the city’s position required ZRZ to make a substantially greater investment that impairs the returns on the buildings to the point where we do not believe we could go to the capital markets and get the capital we need to do the buildings. It kind of collapsed on itself.”

The two sides mutually terminated a development agreement last week. It’s not clear where the South Waterfront goes from here.

“We don’t currently have Plan B,” Zidell said. “We’re picking up the pieces and figuring out what to do.”

The phased project would have remade a long-neglected former industrial area just south of downtown Portland that city leaders believe could be home to dense housing and commercial development.

ZRZ and Prosper Portland forged a development agreement in 2015 calling for the city to spend $23.7 million on public infrastructure in conjunction with Zidell Yards. After further study on development needs and private financing, ZRZ’s estimate of the city’s needed contribution grew to $53 million. That’s as high as the city could go, said Lisa Abuaf, development manager for Prosper Portland. And then the price tag went higher.

“We weren’t prepared for investment beyond the $53 million,” Abuaf said. “They did a tremendous amount of work really putting detail on the vertical development needs and private financing analysis together with the public funding contribution, and we couldn’t get to an agreement on what that share would be.”

The city’s inclusionary housing rules were not a major obstacle, Zidell said. “That was a minor consideration in what really happened,” he said.

The Zidells have owned the South Waterfront parcels for decades. The site was used for building and scrapping barges by Zidell Marine Co. The last barge was launched in 2017 as the family firm shifted its focus to property development.

Substantial work has been done on design and planning for Zidell Yards. Sasaki Associates, a firm based in Watertown, Massachusetts, and Shanghai, China, completed a detailed master plan for the property in 2017 on which Place Studio and West 8 Urban Design & Landscape Architecture also worked. SCB of Chicago and GBD Architects were engaged on building design. The Zidells also staffed up at ZRZ Realty, hiring experienced developers Thomas Henneberry and Sarah Zahn to guide the project.

The city remains open to the Zidells’ plans, Abuaf said. “We remain absolutely supportive of their vision,” she said. “Our lines of communication are certainly open.”

The decision to halt Zidell Yards could affect other major institutions in the area, including Oregon Health and Science University, a fast-growing employer and institutional developer, and the Oregon Museum of Science and Industry, which is pushing its own master plan across the river for a large-scale mixed-use development requiring new public infrastructure.

Regardless of the status of Zidell Yards, the city is committed to working on infrastructure priorities in the South Waterfront, including extending Bond Avenue and the Greenway Trail and providing affordable housing, Prosper Portland spokesman Shawn Uhlman said.

Zidell offered to meet with Mayor Ted Wheeler to discuss a way out of the impasse.

“Notwithstanding where we find ourselves today, I’d love to sit down with the mayor for both of us to roll up our shirtsleeves and figure out a way to put this back together,” Zidell said. “It’s just too big of a lost opportunity to the city to not figure out a way to get it done.”

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Zidell Marine Corp. will cease building barges at its South Waterfront shipyards next year.

The news was shared with employees Wednesday in a memo from Jay Zidell, the company’s president. Zidell Marine will remain open, and continue to lease barges, he said.

Hull 686, expected to be delivered around the second quarter of 2017, will be the last barge built by Zidell Marine. About 60 employees will be affected.

The decision comes against a backdrop of development in the South Waterfront District.

“This has been a difficult decision for me, particularly recognizing the impacts on you, and one that has come upon us faster than I was expecting,” Zidell told employees.

Tom Henneberry, the new chief operating officer of Zidell’s ZRZ Realty, is leading a master planning process for Zidell Yards.

“Momentum is shifting there for the family business,” said Kathleen Mazzocco, a spokeswoman for Zidell.

At the same time, demand for barges is decreasing as companies shift to larger barges that Zidell is not equipped to manufacture, Mazzocco said.

Jay Zidell was not available for comment, she added.

The Zidell family’s property in the South Waterfront totals 33 acres. It’s at the nexus of new development, including the Collaborative Life Sciences Building from Oregon Health and Science University and the Tilikum Crossing.

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The opening of the Tilikum Crossing has given the public a never-before-seen view of Zidell Yards, a massive open space along the west bank of the Willamette River. The public shouldn’t get too used to the view, though. ZRZ Realty Co. Inc., which owns the property, doesn’t plan on keeping it the same for very long.

On Monday, ZRZ submitted the designs for Block 4 and Block 6 at Zidell Yards to the Portland Design Commission for review. The commission will discuss the projects on Sept. 24.

Working with design architect LEVER Architecture and architect of record GBD Architects, ZRZ has come up with two office buildings for the sites. Block 4, which will be six floors and 132,000 square feet, will be situated on Moody Avenue across from The Emery, an apartment complex in Zidell Yards that opened in 2013.

Block 6 will be situated next to Tilikum Crossing, Bridge of the People. It will be five floors and 255,000 square feet.

Matt French, managing director of Zidell Yards, said the buildings will fill a void of open floor-plan office space that currently is lacking in Portland.

“The goal of what we’re doing here is to build a different type of office building,” French said. “The companies (looking for offices in Portland) are not looking for what’s available. What’s available does not meet their needs. They want to be in creative space. They want to be in very open, very collaborative space. They want to communicate and interact much easier. They don’t want to be in Class A space. The office market for that kind of stuff is so tight right now.”

At 33 acres, Zidell Yards is the largest plot of undeveloped land in the city. The recent opening of the light-rail Orange Line and the development being done in the area by Oregon Health and Science University have made the time right for ZRZ to begin a decades-long process of development, according to French.

“You can’t underestimate the impact of the Orange Line,” he said. “Combine that with what OHSU is doing. Those are huge, huge things.”

With the expansion that the Oregon Museum of Science and Industry is doing on the west bank and the Orange Line making OMSI just a hop, skip and a jump from the west bank, French said he believes the area around the Zidell Yards “will emerge as a new center of gravity for the city. A new city center, if you will.”

Block 4 will play off the surrounding areas of Zidell Yards, like The Emery, The Gantry food cart pod and the Portland Aerial Tram.

“It’s more about building on the context around it,” French said. “It really feels like it fits right there with the Emery. It’s nestled up against the Ross Island Bridge and the Emery. This is more about creating a little village out there, with the food carts and the tram. There’s an outdoor deck that looks out onto the Ross Island Bridge. And on the backside of this building, you’ll look down on the Emery.”

Block 6 is essentially two buildings that will be connected by a multi-level, glass-enclosed bridge.

“There’s no building like this in Portland,” French said. “Everywhere else in Portland has a tight, 200-by-200-foot grid. Which means pretty regular, square and rectangle types of buildings. Everyone who comes across (Tilikum Crossing) is going to look at this building.”

Each of the floors in Block 6 will be about 52,000 square feet, which will allow for huge open space floor plans that French believes health care and technology companies will find attractive.

“If you’re a 100,000-square-foot company, most buildings you’d have to locate across five floors,” French said. “That means there’s not cross pollination. It’s harder to communicate. Departments aren’t collaborative.

“(In Block 6), they would locate on two floors. There’s big common spaces in the middle. That’s one of the biggest competitive advantages, particularly for health care and technology companies.”

Because of the visibility of Block 6, French says his team is prepared for the fact that the Design Commission might focus more of its critique on that structure, rather than on Block 4. But he believes the project can stand up to the scrutiny.

“We earned a lot of credibility with them with The Emery. … I think these buildings match this level,” French said.

“We’ve spend a lot of time on these buildings,” he added. “These are very design-forward buildings.”

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After five years of planning work, the Portland Development Commission last month approved a development plan for Zidell Yards on the South Waterfront. Now initial design conferences are being scheduled with the city.

Last week, Phillip Beyl of GBD Architects filed paperwork for early design assistance with the city’s Bureau of Planning and Sustainability. Initial plans call for two office buildings, on Lots 4 and 6 of the 33-acre property. Kathleen Mazzocco of Clear PR said owner ZRZ Realty selected GBD to work in partnership with LEVER Architecture as the design team.

“Both buildings will be office buildings with ground floor retail,” she said. “We hope to have more information by early fall.”

The Lot 6 building will be 250,000 square feet, Mazzocco said, while the building for Block 4 will be 125,000 square feet. Both will have multiple stories and underground parking.

According to city records, the designers requested a pre-application conference on the simultaneous design and development of the two separate buildings to discuss design review and greenway review.

At last month’s PDC meeting, chair Tom Kelly called the development plan “historic” for the city. The plan calls for ZRZ to develop about 1.5 million square feet of “mixed-use, employment-oriented commercial and residential property” in the North Macadam Urban Renewal Area over the next 10 years. The development will eventually lead to use of approximately $23.7 million in tax increment financing for both public and private development in the URA.

The PDC board has already approved an intergovernmental agreement with the Portland Bureau of Transportation to pay up to $500,000 for preliminary design of improvements to Southwest Bond Avenue from downtown to the waterfront.

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The Portland Development Commission is planning to add slightly more than 45 acres to the North Macadam Urban Renewal Area, in hopes that the expansion will increase tax-generated revenue that can be used to finance development projects in the area.

The commission has released a draft report outlining the expected impacts – fiscal, physical and social – the expansion would have on the existing URA, which was established in 1999.

In June 2014, the PDC established an advisory committee of citizens and stakeholders who met five times to provide input on the proposed expansion area. The commission also met with neighborhood associations and the public at multiple meetings and open houses.

“The need is there now,” PDC spokesman Shawn Uhlman said. “PDC wants to impact things now, and by moving the amendment forward we can continue plans for developments with (Portland State University and ZRZ Realty).”

The proposed expansion includes land that the PDC and PSU have developed together, which will allow development to progress. The PDC is still in talks with ZRZ Realty to move forward on the South Waterfront development that will include part of the 33-acre Zidell Yards.

The original URA covers 447 acres and extends north and east (to the Willamette River) from the intersection of Southwest Boundary Street and Macadam Avenue, until just north of the Ross Island Bridge, where the western URA boundary extends to Naito Parkway, with another slight jog west to Southwest First Avenue. Southwest Montgomery Street was established as the northernmost boundary of the URA.

The expanded 45.12 acres is a contiguous area (approximately) bounded to the west by Southwest Fourth Avenue and to the north by Southwest Market Street.

The original URA was established to “enable redevelopment of the North Macadam area to fully utilize its potential as an employment center with the characteristics of a viable neighborhood, including adequate housing, infrastructure, transportation, and supportive businesses, amenities and services,” according to the 1999 final plan.

The new boundaries were established to enhance and continue those goals, according to PDC Central City Manager Lisa Abuaf.

“The boundary expansion, in many ways, has a close nexus with the expansion at PSU,” she said. “But it’s on par with the level of importance of moving forward with the South Waterfront affordable housing project.”

Abuaf said that if Portland City Council approves the expansion, the increase in URA properties will generate $47 million toward housing development and redevelopment over a 10-year period. Without the increase, Abuaf said the PDC has about $9 million for housing during the same period.

Though the increase in tax revenue would come from the North Macadam expansion, the dollars generated can be spent anywhere inside the URA boundaries, including the South Waterfront.

“We’ve designated a large amount in the first two years to get the first project started,” Abuaf said. “Certainly that first project is targeting Parcel 3.”

Parcel 3 is a two-acre, PDC-owned property at 2095 S.W. River Parkway. The PDC and the Portland Housing Bureau are working together to offer the parcel for development.

“The property has the potential for 400 units, and what we’re going to be looking for is proposals for a mixed-use, mixed-income project,” Abuaf said. “The solicitation will call for the project to have a minimum of 200 units, with 62 of those serving tenants making 60 percent or less of the median family income.”

In 2003, the Portland City Council set goals for the North Macadam URA that called for creating 479 affordable housing units. To date, 209 have been constructed.

The draft report estimates that the PDC will have $19 million available in fiscal years 2015-16 and 2016-17 for housing development.

“As soon as the amendment is approved we can move forward on the Parcel 3 development,” Abuaf said. “PSU is also waiting until the amendment is approved to get started. The funding isn’t there without it.”

Abuaf was among a group that on Thursday presented the draft report to City Council.

“There are a lot of details to work out,” she said. “At the end of the hearing they decided to come back in two weeks and decide how to proceed after that.”

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The city of Portland is gearing up to enter into a development agreement to construct up to 3.5 million square feet of office, retail and residential space – along with accompanying infrastructure to support it – in the South Waterfront District.

Construction on the first phase of development of the 33-acre parcel known as Zidell Yards – slightly south of the Marquam Bridge between Moody Avenue and the Willamette River – could start as soon as June 2016.

The Portland Development Commission‘s board on Dec. 11 received a draft of the agreement with ZRZ Realty, a subsidiary of Zidell Marine. Shawn Uhlman, spokesman for the PDC, said adoption of the agreement should come in January, after some slight content tweaks are made.

Matt French, managing director of ZRZ Realty, said via Kathleen Mazzocco of Clear PR that the holdup on an agreement is on the PDC’s end, and that he’s waiting until one is reached to make a statement to the media.

The draft agreement outlines three phases of project development, including construction of a new portion of Southwest Bond Avenue, which will run parallel to Moody Avenue and eventually extend from River Avenue south to Gibbs Street.

Phase one includes development at four locations, including one that will hold Oregon Health & Science University‘s Schnitzer Campus buildings two and three directly north of the Collaborative Life Sciences Building. The other three locations – identified as Block 1, Block 4 and Block 6 – will gain projects developed by ZRZ.

Block 1 includes The Emery – a $20 million, seven-story, mixed-use building completed in October 2013. A 90,000-plus-square-foot, mixed-use building directly south of The Emery is planned to complete Block 1.

Block 6 is slightly south of and adjacent to the South Waterfront/Southwest Moody Avenue MAX orange line station. The draft agreement indicates that ZRZ will construct a building or buildings with at least 250,000 cumulative gross square feet of commercial and/or residential space. If the city and ZRZ agree to terms, ZRZ will be obligated to begin construction on Block 6 by July 1, 2017.

ZRZ’s receipt of a building permit for Block 6 will trigger the start of the Bond Avenue Moody Connector Project, according to the draft agreement. Uhlman said the city has committed $8.4 million to that effort.

Block 4 will wrap up the first phase of Zidell Yards development. The property is directly across Moody Avenue from The Emery, adjacent to the Ross Island Bridge. Upon completion, the project is expected to inject at least 100,000 additional square feet of commercial, retail and residential space. If ZRZ and PDC sign the draft agreement as written, work on Block 4 will begin no later than June 30, 2025.

Phase two of the Zidell Yards project, according to the draft agreement, is slated to begin Jan. 1, 2018 and end June 30, 2025. During that time, ZRZ will construct buildings totaling 1 million gross square feet anticipated to include commercial (2,500 jobs) and residential (1,000 units) space. ZRZ will also design and construct the “Phase 2 Greenway” segment of the Willamette River Greenway. Plans call for this segment to stretch from the Marquam Bridge south to the Ross Island Bridge and west to Moody Avenue.

The draft agreement indicates that the third phase of Zidell Yards will begin on June 30, 2025 and end Dec. 31, 2035. In the agreement, plans for this phase are less detailed than the other two, but indicate a financial partnership between ZRZ and the PDC.

PDC Executive Director Patrick Quinton indicated to the board via a Dec. 11 memo that staff anticipates requesting formal approval of the draft agreement at the Jan. 11, 2015 staff meeting.

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Nine years have passed since NorthWest Ecosystem Services ecologist Paul Fishman started managing an extensive effort to clean up a brownfield in Portland’s South Waterfront District.

He still returns to the 30-acre Zidell Yards property to monitor native plantings reclaiming an area where ship deconstruction operations led to asbestos, lead, oils and other harmful compounds for years being dumped into the Willamette River and onto the bank. On a recent visit to the site, Fishman, who served as the Zidell waterfront cleanup project manager, showed a riverbank once marred by industrial use that now is in a more natural state.

“To me, this is beautiful,” he said.

The privately funded cleanup, led by site owner ZRZ Realty Co., was completed in 2011 to make way for mixed-used redevelopment on the riverfront property adjacent to the Zidell Marine Corp. shipyard on Southwest Moody Avenue. As the positive results become apparent, the project is gaining national recognition for innovative engineering techniques and serving as a model for remediation.

The Coasts, Oceans, Ports and Rivers Institute recently honored Vancouver, Wash.-based environmental engineering and planning firm Maul Foster & Alongi for its contributions to the cleanup with a 2014 Project Excellence Award in the large project category. The award is one of two given out annually by COPRI, a semi-autonomous institute of the American Society of Civil Engineers.

The judges for the award commented that the Zidell Yards cleanup was “a novel approach” to removal and containment of contaminants along the riverbank.

“The skill sets and techniques of the design team to accomplish the analysis and … design are impressive,” they added. “The efforts resulted in a successful mitigation of decades of military-related aquatic sediment and landslide contamination.”

Because of the complexities of the site, project engineers spent an extensive amount of time analyzing various factors, Maul Foster & Alongi senior engineer Erik Bakkom said. The result was three different designs for cleaning up and reforming different portions of the site based on the level of contamination and typography of the riverbank.

“All those things changed how we addressed the design,” Bakkom said.

Firm staffers worked closely with the Zidell Marine Corp. and other project team members to restore the contaminated site without disrupting its ongoing use as a barge construction facility. The worst contamination was removed and transported to a landfill. The rest was contained within an 11-acre cap that Maul Foster & Alongi staffers designed to prevent hazardous chemicals from leaching into the river. It also fits under the new Tilikum Crossing transit bridge.

“There was a lot of thought that even went into the design just of this pile of dirt,” Bakkom said.

During the cleanup, nearly 20,000 cubic yards of soil contaminated with industrial chemicals was removed from the riverbank in coordination with Tilikum Crossing construction nearby. The effort also involved removing from the river 2,200 treated wood pilings that formerly were part of a dock built in the 1930s.

The contaminated soil was replaced by barge loads of clean sand from the Columbia River and rock from a quarry near the town of St. Helens. The added sand and rock reshaped the riverbank to feature more a gradual slope instead of a steep vertical drop. To provide wildlife and habitat, approximately thousands of native shrubs were planted and larger rocks were replaced with gravel more hospitable to fish.

“We rebuilt this whole riverbank,” Fishman said.

The cleanup was officially completed nearly four years ago, but Fishman and Maul Foster & Alongi staffers for the next 10 to 15 years will monitor the site as it’s further primed for commercial and residential redevelopment. This includes ensuring efforts to create fish habitat in the river are working and that the cap is still preventing contaminated soil from leaching out. A couple of months ago, the site gained 20,000 additional plantings.

“Zidell is actively managing this project,” Fishman said. “You’ve got to take care of it.”

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Work was recently completed on The Emery, a nearly $20 million mixed-use project on Southwest Moody Avenue in Portland’s South Waterfront. The building is the first development at Zidell Yards and the first private project completed in the South Waterfront since the recession. The ZGF Architects-designed project features 118 apartment units over ground-floor retail space. The project’s developer was Project Ecological Development, and Lease Crutcher Lewis served as general contractor.

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A barge-building company’s 30-acre site along the Willamette River, slightly north of the South Waterfront District, is finally being cleaned up. After years of studies and discussions, crews are continuing to remove contaminants and cap others along a 3,000-linear-foot stretch of riverbank.

Today, a team will update Portland City Council on the project. A tight in-water work window and many permitting requirements challenged the project team, but the in-water work is finished.

“We’re very happy and relieved to be here,” President Jay Zidell said.

From 1926 to the 1960s, Zidell Marine Corp. performed various types of industrial work on its waterfront site. The company began building barges in 1968, and will continue to do so.

In 1987, the Oregon Department of Environmental Quality and the federal Environmental Protection Agency decided the site needed additional investigation because of its history of use. Over many years, a project was developed through a DEQ voluntary cleanup program. According to DEQ documents, the site was contaminated with metals, diesel, motor oil and lube oil; polycyclic aromatic hydrocarbons and highly toxic polychlorinated biphenyls also were present.

Crews first removed “human health hotspots” and “ecological hotspots” from the area above the river, project manager Paul Fishman said. This past summer, the project became more complicated.

“This year from May to November was a much larger project,” Fishman said. “We did everything in the river and the riverbank.”

Work in the Willamette River can be performed only during certain “fish windows,” to protect habitats. Additionally, the Zidell Marine Corp. team needed more than a year to gain project approval from the National Marine Fisheries Service. Other permits, including one issued by the U.S. Army Corps of Engineers under the Clean Water Act, presented challenges because of scope and complexity, Fishman said.

“Actual conditions of the river are different in each section of the 3,000 feet,” he said.

Contaminants were handled differently at various points in the river.

“In some areas we excavated contaminants and graded the bank to a more gentle slope,” Fishman said. Some contaminated sediment was dredged out as well.

In areas where crews didn’t remove contaminants, they “capped” the ground with sand and added heavy rock to protect the two-foot sand cap from waves, currents and boats. Other areas received a different kind of cap made of fabric that filters contaminants.

To avoid potential conflicts, the project team coordinated its work with crews constructing the Portland-Milwaukie light-rail bridge, Fishman said.

“Delays of one kind or another were a constant factor, in terms of how to avoid being delayed,” he said. “TriMet was under the same condition.”

Fishman said crews are working on ground above water to finish cleaning up contaminants. According to Len Bergstein, a consultant working for Zidell Marine Corp., the team now considers the cleanup work “substantially complete.”

Landscaping and some remediation will continue through next year, Zidell said. The barge builder will then be responsible for maintaining involvement in development over the next five years, to ensure that remaining contaminants aren’t disturbed, DEQ project manager Scott Manzano said.

“Beyond next year we will be planning for the ultimate redevelopment of the property,” Zidell said.

Those plans, announced previously, call for a large, multiuse-type development.

“To a large degree, the marketplace will drive what people are going to want down here,” he said. In the meantime, he added, “We’ll keep building barges as long as we have customers.”

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