First loan under Biden's transit-oriented development push goes to town north of Seattle

By Joy Wiltermuth

Interest is 'growing very fast' for loans, says Build America Bureau executive director Morteza Farajian

A multiuse construction project in Mount Vernon, Wash., has become the first recipient of a loan under the Biden administration's expanded push to fund transit-oriented development.

The city of Mount Vernon was awarded up to $26.8 million in low-cost financing to finish the estimated $53 million development, which includes a public library, community center, a commercial kitchen, computing space, electric-vehicle chargers and more.

The roughly 2.25% rate loan marks the first in a series of new transit-oriented development projects under the Transportation Department's Build America Bureau. The funding compares with the 10-year Treasury note's roughly 4.65% rate BX:TMUBMUSD10Y as of Wednesday, a base benchmark for financing real estate.

"This is the first of what we hope will be many TOD loans that will make vital resources more accessible to more people, especially historically overlooked communities," Transportation Secretary Pete Buttigieg said in a statement.

While the first loan doesn't include housing units, the White House in October launched a new effort to open up existing federal transportation funding for developers seeking to convert underused office buildings in cities, near transit hubs, into affordable housing.

The Biden administration expanded existing Department of Transportation funding programs that previously focused on rails and highways to include real-estate development near transit hubs. The DOT said the program has received requests for more than $12 billion in long-term financing, representing about one-third of the bureau's pipeline of projects to be financed.

"That number is growing very fast," Build America Bureau's executive director Morteza Farajian told MarketWatch on Wednesday, adding that a majority of funding requests include a housing component.

Real-estate industry groups and many elected officials have applauded the funding initiative, especially with downtowns littered with half-empty offices and the shortage of housing. Funding for new construction projects also has largely dried up since the Federal Reserve began hiking rates in 2022.

Still, aspects of the federal program, including the application process and timelines for approvals, have been difficult to navigate.

See: Office-to-residential conversions are facing obstacles under White House program, developers say

Farajian said adding real-estate projects meant largely starting from scratch in terms of building a template, but that the bureau also has been working with other federal agencies, the private sector and private lenders to modify, tweak and streamline the approvals process.

"This project was a little bit ahead of other projects," Farajian said of the Mount Vernon loan in terms of approvals. "Quite honestly, it can be a good example of others to follow."

Construction of the Mount Vernon project includes a half-city block facility within a short walk to the Skagit Station transportation center, a bus, rail and commuter hub about 60 miles north of Seattle. Construction is expected to be completed this summer.

-Joy Wiltermuth

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-01-24 1355ET

Copyright (c) 2024 Dow Jones & Company, Inc.