The fate of a former thread factory in Willimantic may hold clues to the future of Hartford's Colt Gateway development
By Daniel D'Ambrosio
July 10, 2008
The Town of Windham is having about as much luck turning the former home of the American Thread Company in Willimantic into an economic driver for the town as Hartford is having developing the old Colt firearms factory into retail and residential space—in other words, very little.
After more than a decade of turmoil and failed development efforts, a bankruptcy court auction last Thursday of Windham Mills, the 100-year-old home of the thread factory, drew no competitors to the $5.5 million offered by Connecticut developer Tom Briggs of Loch View LLC. But the sale was blocked by a consulting firm representing some 74 investors who put up more than $6 million to help develop the property.
Todd Hansen of Platinum Financial Trust in Greenwood, Ind., moved to block the sale because the price won't even cover what he says is owed his clients, the individual investors who in some cases forked over their retirement funds.
"I could make it a long fight," said Hansen. "I can tell you the minimum number we're owed is $5.2 million back in November 2004. That was a debt undisputed in bankruptcy filings. That number there's no negotiating on."
Hansen's clients aren't the only ones who stand to lose money on Windham Mills. The proceeds from the sale don't come close to recovering the money the state and others have invested in the site. The Department of Economic Development (DECD) alone spent $25 million to clean up pollution on the site. In addition to the debt still owed to DECD, put by bankruptcy trustee Lou Testa at $17 million, the Town of Windham is owed about $2.2 million, including back taxes.
Several companies have set up shop in Windham Mills, but the building remains mostly empty. Hansen says he took the first mortgage on the property off the hands of Colt Gateway developer Robert MacFarlane, who has been struggling to turn the Colt building in Hartford's South Meadows into a mixed-use development.
MacFarlane's Homes for America Holdings (HFAH), based in Yonkers, N.Y., got involved in the Windham Mills property in 2004 after the original developer declared bankruptcy. At first, MacFarlane was seen by locals in Windham as a white knight, riding in to revive the stalled development—much as he was initially seen in Hartford as the savior of Colt. In the end, however, HFAH failed to move Windham Mills forward.
"What happened is [HFAH] had the property for 18 months under a [development] plan and could not fulfill the obligations," said Testa. "The state and town [of Windham] moved to have a trustee appointed to sell the building at the highest or best value."
MacFarlane, who calls Windham Mills a "lovely site," says he forfeited his first and second mortgages on the property to Platinum when his lender, Las Vegas-based USA Capital, went bankrupt itself. But MacFarlane said he spent about $500,000 of his own money on a third mortgage on the property he doesn't expect to get back.
Hansen, whose clients put up the money USA Capital loaned to MacFarlane, says he's just trying to get their money back, for a flat fee of $300,000.
"I have a duty to get everything I can to protect [the investors] and maximize what they get back," Hansen said.
But Testa says his duty is to the long-suffering Town of Windham, which has been looking to the site for a shot in the economic arm for more than a decade.
"That was the most important thing, to move this along from an economic development perspective," Testa said.
USA Capital, now in the throes of bankruptcy, also backed MacFarlane's Colt project in Hartford. And as the Advocate reported May 1, one of the lender's principals has been charged with fraud by the U.S. Securities and Exchange Commission for investing in Colt at the same time he was loaning the project money. MacFarlane has not been implicated of any wrongdoing in that investigation.
Mike Littieri, community development director for the DECD, agrees with Testa that Windham's interests need to come first.
"Basically we want to see a developer come in and move this project forward, making it a tax-producing property for the Town of Windham," said Littieri.
While acknowledging the state has poured some $25 million into rehabilitating Windham Mills, Littieri said the DECD expected to be paid back only about $7.5 million. But it probably won't even see that.
"It's not like money wasted," he said. "You saw the improvements done there for a public purpose."
Attorney Doug Skalka of the New Haven law firm Neubert, Pepe & Monteith, where Testa also practices, said this week that all the parties involved in Windham Mills tried, but failed, to reach a "global resolution" last week after Platinum Financial blocked the sale to Loch View.
The hearing in bankruptcy court has been continued until next Tuesday, said Skalka, and in the meantime Platinum and the other creditors will continue to talk, but if they reach no agreement, it will be up to the bankruptcy court judge to settle matters.
Anyone hoping the Colt factory will one day form the heart of a dynamic new National Historic Park in Hartford should take note of the Windham Mills fiasco. By all accounts, unraveling the interests of Colt investors will make the mess in Windham look like child's play.¦