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Odd Couple

City, state offer package deal in effort to redevelop long vacant office space

By Greg Bordonaro

April 09, 2012

For years developers have talked about redeveloping the two vacant downtown Hartford office buildings on Pearl Street, envisioning the central location in the heart of the business district as a major draw to prospective tenants.

But plans to build everything from retail, office space and apartments to a hotel and luxury condos have never come to fruition as redevelopment costs and other issues ultimately scarred away interested investors.

Now the city is teaming up with the state to try to pursue a new strategy to finally get a project done.

In a move that aims to reshape the area near Bushnell Park and jumpstart a residential housing boom downtown, the city of Hartford and Connecticut Housing Finance Authority have put up for sale three significant, adjoining properties on Pearl, Trumbull, and Lewis streets.

The key to the deal is the upscale, 100-unit Trumbull on the Park apartment complex, which was built just six years ago for $38.5 million. That complex and its parking garage are being paired with the long-vacant office buildings at 101 and 111 Pearl St. as the city and state look for a developer to convert the properties into a residential or mixed-use project.

For the first time, all three properties are being marketed as a package deal, even though they are owned by separate interests.

That means it's an all or nothing proposition for prospective developers.

Officials say the new strategy aims to combine a positive cash flow apartment building and garage, with two empty buildings in need of a rehab in order to make redevelopment of the area more attractive to investors.

"Developers always want to control an entire block of a city and this proposal would allow them to do that," said David Panagore, the chief operating officer of the city of Hartford. "We think we are going to secure bigger interest."

Currently, a subsidiary company of CHFA owns about a 90 to 95 percent stake in the Trumbull on the Park apartment complex and 111 Pearl St. Developer Martin Kenny owns the remaining shares of those properties, while the city owns 101 Pearl St.

The request for proposal, which was issued March 26, doesn't specify the type of redevelopment envisioned for the vacant office buildings, but a residential or mixed-use project is the likely choice.

Panagore said he estimates that site could house up to 225 new residential units.

Developers have until May 2 to put in their bids for the properties.

The potential sale comes at a time when housing development proposals for downtown Hartford are coming in at a dizzying pace, as the city and state work together to try to revitalize downtown Hartford. Officials have said there is a need to add up to 4,000 residents downtown to breathe new life into the area and stir more retail activity.

Residential redevelopment projects are now being discussed at the former Clarion Hotel, the vacant Bank of America building at 777 Main St., the Capitol Center building on Asylum Avenue, and a state-owned office building on Clinton Street near The Bushnell. Meanwhile H.B. Nitkin Group is working on obtaining financing for a ground-up residential development at Front Street.

The adjoining buildings at 101-111 Pearl St. have been in the cross-hairs for redevelopment for years, but no plans have ever come to fruition.

The properties have an interesting history.

The 12-story, 100,000 square foot building at 101 Pearl St. was erected in 1965 and served as the Connecticut corporate headquarters of Fleet Bank. In the mid-1990s the building was transformed into a police substation, and also housed a police museum, the Hartford Guides program, as well as the Hartford police academy.

The city has tried but failed on several occasions to spur private redevelopment on the building. Several developers, including Kenny, Carlos Mouta, David Nyberg, and Sanford Cloud Jr. have pitched plans to build everything from retail, office space and apartments to luxury condos, but no deal has ever come to fruition.

One of the issues in the past has been remediation costs. The building has asbestos and cleanup costs in 2006 were estimated to be about $2 million, a price tag that scared away a New York development company from transforming the building into 33 super-sized condos.

The seven-story, 75,000-square foot office building at 111 Pearl St. has been vacant since 1987, and was at one point slated to be knocked down and converted into a 59-story office tower, which would have made it the largest office building in New England. That plan fell through after the real estate crash in the late 1980s and early 1990s.

CHFA and Kenny bought their respective stakes in the property in the early and mid-2000s, with the hope of converting it into owner-occupied housing, but that never materialized either.

Kenny was the brainchild behind the successful Trumbull on the Park apartment complex, which was constructed in 2006 and is 99 percent occupied. The property includes a 603-space adjoining parking garage, 88 residential units in the nine-story building fronting Trumbull Street, and an additional 12 residential units located in two, low-rise buildings on Lewis Street.

The property also has retail space that is home to Quiznos and Salute restaurants and the Perfect Cut hair salon.

It's not clear how the sale would impact Kenny, or if he is interested in taking over the development of all three properties. He declined to comment on the story.

Kenny is working on a $35 million project to build a 230-unit luxury apartment complex in Glastonbury.

Some realty sources say they are skeptical of the idea of packaging all three properties in a single deal, particularly matching a market-rate fully-occupied, upscale residential complex with two vacant buildings that would require a significant capital investment for a conversion.

Dealing with multiple government agencies could also pose a challenge, realty sources say.

But Panagore said a package deal gives the city and state their best shot at attracting a major developer to the project. He did say the two vacant Pearl Street buildings would require remediation and other significant improvements, but "the bones of the building are solid."

Dara Kovel, who is the chief housing officer of the Connecticut Housing Finance Authority, or CHFA, said it has taken awhile for the city and state to get on the same page in terms of determining the future of all three properties.

CHFA's subsidiary entity Trumbull Center-CHFA has been the equity owner of its two properties since 2002, so it has held onto the vacant Pearl Street office tower for a decade.

Kovel said two factors are driving the decision to sell now. One is the city's and state's renewed focus on bringing more residential housing downtown. Also, CHFA is trying to purge its real estate portfolio.

The quasi-public agency has put two other commercial properties it owns in New Britain and Simsbury up for sale as well.

"Ultimately we are not in the business of owning real estate," Kovel said.

The city and state are looking for prospective developers who have experience in redevelopment, owning and managing properties, and who have the financial wherewithal to make a project happen. The RFP asks interested bidders for a broad outline of a redevelopment plan and how they might finance it.

Kovel wouldn't elaborate on what the state's involvement might be in providing funds to get a project done. But there is a good chance prospective developers would be looking for local, state or federal help.

Public-private partnerships could be on the table, Kovel said, but once CHFA sells its properties, the agency will be out of the picture. It will be the Malloy Administration that takes the reins from there.

She said they hope to have a sales agreement finalized by the end of the summer.

Reprinted with permission of the Hartford Business Journal. To view other stories on this topic, search the Hartford Business Journal Archives at http://www.hartfordbusiness.com/archives.php.
| Last update: September 25, 2012 |
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