The Triangle Transit Authority might not have federal funding for a 28-mile regional rail system, but its planned partner still wants to proceed with developing the land surrounding the dozen station sites proposed for the system.

Tom Darden, CEO of Raleigh-based Cherokee Investment Partners, said Tuesday that the lack of funding needed to build the rail system hasn't dimmed his company's interest in creating high-density developments of homes, offices and stores around the proposed stations.

"We're moving forward irrespective of the federal funding situation," Darden said.

"There is going to be a system. We don't know how it is going to be funded. We don't know when it is going to be built."

While Triangle leaders figure out what to do next, TTA and Cherokee are looking to create a dense mix of transit-friendly developments around the station sites. But first they have to agree on a contract.

Any development would be configured to leave room for a rail station.

TTA and Cherokee executives say that developing the sites in advance of building the stations would be a first for a U.S. transit system.

Darden, a former TTA chairman and an ardent rail system advocate, contends that development could help the rail project get federal funding, by increasing the number of potential riders.

"Washington is very interested in seeing this kind of activity around stations," Darden said.

The Federal Transit Administration also is developing a test program to attract private investment in rail transit projects that don't qualify for federal funding amounting to 60 percent of the total project cost.

Since August 2005, Cherokee and TTA have been in talks to create a public and private development partnership. Such an agreement, which would have to be approved by TTA trustees, is still in the works, even though TTA withdrew its request for federal funding for the $810 million project this month. That decision came after the Federal Transit Administration said that the rail system wouldn't serve enough riders to justify the cost.

Cherokee's investment could be as much as $100 million, Darden said during a meeting Tuesday with editors and reporters at The News & Observer.

Some of the land near the station sites, such as a downtown Raleigh site previously occupied by Dillon Supply, already is attracting developers, Darden said.

Bill Kalkhof, president of Downtown Durham Inc., is eager for development to begin around a proposed station at the corner of Duke and Chapel Hill streets -- with or without a train system. Several abandoned buildings sit on the property. Nearby, developers plan to convert massive brick tobacco warehouses into hundreds of apartments.

"We don't think there should be any waiting for TTA to start developing," Kalkhof said. "With everything we've got going on here, it's not going to be acceptable to have these buildings sitting here continuing to deteriorate."

TTA owns land around the station sites that is valued at $28 million, said TTA lawyer Wib Gulley. The authority might acquire additional property if the rail project moves forward.

Under a draft agreement with Cherokee, that land would be TTA's initial equity investment in the partnership. Cherokee, which would have an option of up to five years to acquire TTA land for development, also intends to acquire additional property near the sites.

Cherokee would be required to create a master development plan for "transit-oriented development," with an aim of increasing housing, jobs and stores surrounding the station sites. The two parties would split the profits -- such as revenue gained from leases or from selling the land to other developers -- based on their relative investments at each location.

Carter Worthy of Raleigh, TTA board chairman, said that a share of the profits could provide a return on the taxpayer investment in the proposed rail line.

More density

Local governments agreed several years ago to allow greater densities around rail stations in anticipation of the proposed rail system. But given the current status of the rail proposal, that could change.

"There could be a reluctance at some of the train stations to layer in very high density ... if you do a traffic count that shows the roads are going to be overburdened," Ellen W. Reckhow, chairman of the Durham County commissioners, said at a TTA trustees meeting Tuesday.

Bus service might be added to serve new developments around the proposed rail sites while Triangle leaders weigh their long-term options. TTA said its work with Cherokee would not keep planners from exploring different transit types and routes.

"It's not in conflict with looking at other plans," Worthy said. She said TTA trustees could approve terms of an agreement with Cherokee at their Sept. 27 meeting.

(Staff writer Jack Hagel contributed to this story.)