Newton, Mass.-based Northland Investment Corp. purchased Hartford’s Goodwin Square Hotel & Office Tower in September.
While prices and activity in residential real estate slowed down this year, commercial real estate professionals got a pleasant surprise in 2005 as they saw steadily increasing prices and more transactions than expected.
This year also saw increased investment in downtown Hartford – a trend that began in earnest in 2004 – and casino growth coupled with job cuts in southeastern Connecticut.
“The big trend has been on the sales side,” said Bill Fenn, New Boston Fund’s vice president of asset management.
Fenn, who works for the Boston-based firm that has invested heavily in Connecticut properties over the past few years, attributed the increases in prices over the last three years to a decline in capitalization rates. The activity has been due to low interest rates and the availability of money, he said.
And there is still a lot of capital out there, said Dale Reese, New Boston Fund’s vice president and regional director for Connecticut.
Downtown Hartford has been the recipient of much of the investment in the state. September saw Newton, Mass.-based Northland Investment Corp. – a company that has already invested heavily in Hartford – make a landmark deal with the purchase of the Goodwin Square Hotel & Office Tower. The company bought the building for $41 million from New Goodwin Square LLC, an entity controlled by Boston-based AEW Capital Management.
Northland Investment Corp. also is developing Hartford 21, a 1 million-square-foot mixed-use project that will feature a 34-story apartment along with stores and restaurants. The development is located downtown and will replace the Hartford Civic Center. The company holds several other properties in and around downtown Hartford.
The Goodwin Square structure is an office building and luxury hotel in downtown Hartford. The 30-story property consists of 330,901 square feet of Class A office space; a 124-room hotel; a 302-space, above-ground parking garage; and an adjacent land parcel where 18 additional cars can be parked. At the time of the sale, the property was 83 percent occupied by legal, financial services and health care companies such as Pepe & Hazard, Halloran & Sage, Ernst & Young, The Hartford and U.S. Bancorp.
Ups and Downs
September was a big month for other activity in Hartford, as well. The 409-room Marriott Hotel Downtown opened next to the Connecticut Convention Center, which had recently been completed. The hotel and convention center are part of citywide developments intended to revitalize the community’s downtown area and turn Hartford into a city where people are on the streets and in restaurants and retail establishments 24 hours a day.
The $271 million convention center, which is located on the Connecticut River, is the centerpiece of Capital City Economic Development Agency’s efforts, and is attached by a corridor to the Marriott.
The summer, overall, was full of activity for commercial brokers. Two shopping centers – the New London Mall and the Capaco Center in Wethersfield – closed for just over $40 million each.
There was also activity in Bridgeport, where New Jersey-based Hampshire Partners Fund VI bought the office building at 1000 Lafayette Blvd. for $22.5 million.
All commercial product types did well, according to Reese.
“All product types have really floated,” he said.
Office space started taking off in the late 1990s, and residential properties are also doing well. New Boston Fund invested in its first Connecticut residential property in 2005. The company bought a 226-unit apartment complex in Middletown, called Windshire Terrace, for $26.25 million. The purchase represented the company’s first residential investment in Connecticut, although it historically has developed and owned apartment buildings elsewhere.
Reese said he also has noticed industrial properties doing well, although manufacturers expressed concern over the state’s cost of doing business in a survey released by the Connecticut Business and Industry Association in November. Manufacturers who responded to the survey said the state government needs to do more to help Connecticut businesses remain competitive in the global marketplace. Fifty-seven percent of respondents to the manufacturing component of the Survey of Connecticut Businesses said that lowering the cost of doing business should be the top priority of the state government.
The past year was one of ups and downs for some regions of the state, especially southeastern Connecticut. The Navy’s submarine base in Groton was fingered as a possibility for closure in May. The closure would have cost jobs and left the region with a large tract of unused land, much of which would have likely been a brownfield. But in September the announcement was made that the sub base would be saved.
The summer also saw the probability that southwestern Connecticut would be home to new movie studios and a theme park diminished after New York-based Utopia Studios’ and the town of Preston’s memorandum of understanding expired.
Utopia was negotiating with the town to build the studios and park on a 470-acre piece of land once used for a state mental health hospital, but when the town asked for more information on the $1.6 billion project and did not get it, it allowed the memorandum to expire. The project is still up in the air.
The latter half of the year held more mixed news for the region. In November, Foxwoods Resort Casino in Mashantucket announced it will build a $700 million, 2 million-square-foot addition, which is expected to provide another 2,300 jobs, a development that will help the area’s housing market as inventory is slowly growing.
But that news was followed by the announcement that 2,400 jobs at Groton-based submarine builder Electric Boat Co. are at stake, and that the company could eliminate half its workforce in coming years. Most of the 2,400 jobs will be cut from the shipyard in Groton, but 500 to 600 will be cut from its facility in Rhode Island, according to the Associated Press. Decreases in contracts to make Navy submarines and a policy that has the Navy doing repair work at its own shipyards were pinpointed as reasons for the cuts.
