Conn. tower financing R.I. model?

RISING ABOVE: A developer has begun construction on a $78.1 million renovation of Hartford’s former Bank of America building, after securing a public-sector financing package. / COURTESY BECKER AND BECKER
RISING ABOVE: A developer has begun construction on a $78.1 million renovation of Hartford’s former Bank of America building, after securing a public-sector financing package. / COURTESY BECKER AND BECKER

Providence doesn’t have a monopoly on former Bank of America office buildings.
The financial giant has shed a lot of office space in recent years and about 70 miles due west of Providence’s Industrial Trust building in Connecticut, Hartford’s vacant Bank of America tower rises an identical 26 stories above that city’s downtown.
Last week, a Connecticut developer began construction on a $78.1 million renovation of 777 Main St., Hartford’s former Bank of America building, after securing a public-sector financing package from a mix of five federal, state and quasi-state agencies.
The reluctance of government leaders to contribute to converting Providence’s vacant skyscraper has so far foiled the plans of owner High Rock Development, which is expected to make a new request for financial assistance to Rhode Island lawmakers as early as this week.
So why has Fairfield, Conn., architect and developer Becker and Becker Associates found financing for its residential conversion while High Rock and development partner Cornish Associates are still lobbying for support for the Superman Building at 111 Westminster Street?
A closer look at the Hartford project shows that previous tenant, building size and number of planned apartments aside, it’s a very different property from the Superman Building.
For one thing, Providence’s 86-year-old tower is much older than Hartford’s 47-year-old building, and the additional decades of wear and tear are showing at 111 Westminster St.
High Rock is currently suing Bank of America for deferred maintenance and neglect, while Becker and Becker President Bruce Becker described the condition of 777 Main St. as “very good,” even though it had gone unheated for three years after the bank left.
And while neither building was designed for people to live in, the midcentury, modern layout of Hartford’s tower, with uniform rectangular floor plates, translates more easily to housing than the tiered, art deco configuration of the Superman Building.
“The building floor plate is ideally suited for a residential conversion,” Becker said about 777 Main. “The easiest part of the project was design and construction.” While the 777 Main St. conversion is expected to cost $78 million, $45 million of that in hard construction costs, making 111 Westminster St. livable and rentable was pegged by Cornish at $114 million, with $82 million in construction costs.
High Rock also paid $33 million for the Superman Building in 2008, while Becker is paying $7.5 million for 777 Main St. after the previous owner, Grunberg Realty, paid $14 million for the building in 2006.
With both projects expected to result in similar numbers of apartments, 280 in Providence and 285 in Hartford, High Rock faces an uphill battle recouping that steeper upfront cost.
Collecting premium rents is the obvious avenue to try to make the numbers work, but that eliminates many of the public subsidies and financing options that Becker used on 777 Main St., which will reserve 20 percent of its units at below-market rates.
The $78 million financing package includes a $37.6 million first mortgage from the U.S. Department of Housing and Urban Development, a $10.2 million second mortgage from the quasi-state Capital Region Development Authority, a $7.5 million equity investment from the CRDA, a $3.9 million loan from the state housing department and $18.9 million in historic-rehabilitation tax credits ($14.4 million federal and $4.5 million state.)
Becker in an email said he had initially intended to make 777 Main half market and half affordable (targeted to households making 50 percent of the median income in the area), but Capital Region Development Agency preferred the 80-20 split as a condition of its investment.
At 80 percent market rate, 777 Main did not utilize federal affordable housing tax credits, which had been Becker’s initial plan and theoretically could contribute to a Superman Building plan.
So is High Rock considering affordable housing as part of the financing mix at the Superman Building?
William Fischer, spokesman for 111 Westminster, declined to comment pending the upcoming release of a new redevelopment plan.
But there are no indications at this point affordable housing is being considered. Richard Godfrey, executive director of Rhode Island Housing, the quasi-state lender most likely to finance large affordable housing developments in the Ocean State, said his organization has not been contacted by High Rock or representatives about financing affordable units.
In the case of the Superman Building, renovation costs are so high, Godfrey said, tax credits may not be enough to make the numbers work and high rents may be the only option.
“Something like 111 Westminster is probably a very expensive rehab per square foot, therefore you have to charge high rents to make it work,” Godfrey said.
At Providence City Hall, where city officials have been largely ambivalent to Superman Building redevelopment plans so far, there’s little sign affordable housing would be the key to increasing support.
Late last month a 15-member task force appointed by the City Council to look at economic development and the Superman Building endorsed a market-rate residential conversion of the building and recommended revamping the city’s property tax stabilization program to help support it.
In a report expected to be presented to the council in coming weeks, the task force recommended extending the length of property tax stabilizations from 12 years with the first three years frozen at current value, to 15 years with the first five years frozen at current value. After the first five years, the project’s tax bills would rise incrementally to reflect the value of improvements.
Alan Litwin, chairman of the task force and managing director at accounting firm Kahn, Litwin, Renza & Co., Ltd, said the group believed tax stabilizations were the most effective incentives available at the city level considering the limited funds available in the municipal budget.
On affordable housing, Litwin said the task force thought the rents High Rock has proposed appeared favorable to attracting skilled workers the city needs.
“We thought workforce housing would be best,” Litwin said. “To me [demanding affordable units] restricts the developer. He can chase those opportunities and we encourage that, but this is what we thought the city can do.” •

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