New Jersey-based developer Martin Kelly plans 650 apartments in project that takes advantage of an Opportunity Zone to help revive Windham's Willimantic section. Image courtesy of Martin Kelly.
For over a generation, a vacant former college dormitory and crime-ridden hotel have been high-profile reminders of Windham’s status as Connecticut’s third-poorest community.
Following a settlement this month brokered by Attorney General William Tong, the properties could become the cornerstones of a $100 million development bringing approximately 650 privately-financed, market-rate apartments to the downtown Willimantic section.
“When you hit bottom, there’s only one place to go and that’s up,” said Jim Bellano, Windham’s economic development director. “This piece is the game-changer. Anything that was incomplete on Main Street is going to be complete when this comes in.”
The April 30 agreement resolved a logjam that pitted the federal Opportunity Zone program against state historic preservation regulations. It allows the infamous Hooker Hotel, built in the early 19th century by Seth Hooker and more recently known as a haven for drug activity and prostitution, to be demolished. The former Nathan Hale Hotel building, vacant since the late 1970s, would be rehabilitated as 150 apartments. And New Jersey developer Martin Kelly agreed to acquire a pair of neighboring properties for additional apartment buildings.
Windham’s economy thrived in the 1800s as textile manufacturers tapped into the Willimantic River as a source of power, but the town’s fortunes declined in the 20th century. Factory jobs departed and the downtown’s real estate declined, while poverty and crime flourished. An award-winning Hartford Courant investigative series in 2002 and subsequent “60 Minutes” report dubbed the city once known as “Thread City” with an unflattering new nickname: “Heroin Town.”
Typically, developers rely on historic tax credits and low-income tax credits to complete financing packages for affordable and mixed-income housing projects in such neighborhoods, to bridge gaps between building costs and anticipated rents. But competition for the tax credits is fierce and can take years to secure, Bellano noted.
The 2018 federal Opportunity Zone program provided a new path to real estate investment in designated census tracts including downtown Willimantic. The program enables developers to defer or eliminate capital gains taxes on redevelopment of properties in blighted neighborhoods, with no requirements for affordability components.
That was the strategy pursued by developer Kelly when his Hawthorne, New Jersey-based RUC Holdings I purchased the Hooker and Hale buildings in January, Bellano said. The purchase price was $185,000, according to town property records.
But preservationists objected to Kelly’s plans to demolish the buildings and the state Historic Preservation Office intervened, citing both properties’ inclusion on the National Register of Historic Places and location within Willimantic’s Main Street Historic District.
In the meantime, Windham’s representatives in Hartford, Rep. Susan Johnson and Sen. Mae Flexer, filed legislation exempting Opportunity Zones from the historic protection guidelines in Connecticut’s designated distressed communities with populations of 30,000 or less.
As a part of the compromise brokered by Tong’s office, Kelly agreed to finance the project privately and to rehabilitate two buildings owned by the Savings Institute Bank & Trust at 789 and 803 Main St. as part of the development. Kelly was unavailable for comment.
Testimony provided at a public hearing in March indicated that the Hooker Hotel’s condition was so severely deteriorated that preservation was not feasible, Bellano said.
Kelly has submitted a conceptual drawing for the overall development but not filed any formal plans, which will be subject to review by the town’s planning and zoning commission.
In a statement, Historic Preservation Council Chair Sara O. Nelson said the compromise benefits all parties.
“The information presented at our meeting indicated an extremely difficult set of circumstances with a complicated dynamic between the municipality, the property owner, and the public trust,” Nelson said.
