A Hartford developer wants to reposition a financially-distressed downtown apartment complex with a substantial microapartment component, seeking to restore the property to profitability and meet market demand for smaller units.
Lexington Partners is proposing to create 60 additional apartments on the Temple Street property near Constitution Plaza, mainly by breaking up 42 units into 96 apartments including microunits averaging 475 square feet.
“These unit sizes fit very well with the demographic that works best in downtown Hartford: people 32 and younger who are looking for urban living,” said Martin Kenny, president of Lexington Partners.
The property contains a pair of rental buildings. The 78-unit Lofts at Main & Temple is an 8-story building that was converted into housing following the closure of Sage-Allen’s flagship department store in 1990. The 42-unit Temple Street townhouses, located in three 4-story rowhouse-style buildings, would be converted into 96 apartments, including 84 microunits. That would be accomplished primarily by breaking up two-bedroom units into one-bedrooms and studios, Kenny said.
“Microapartments have proven to be the most popular from a unit type standpoint in downtown Hartford,” Kenny said, estimating average rents at $2.50 to $2.75 per square foot.
Helping Hand from CRDA
After receiving assistance from the Capital Region Development Authority that should enable it to acquire the property, Lexington Partners will seek additional funding to bridge gaps in its redevelopment financing.
The current property owner, Elizon Db Transfer Agent, acquired the property through foreclosure on March 29. The CRDA recently approved a conversion of a $5 million loan to the development team into equity that will be used to acquire the mortgage on the property, which could happen as soon as next week, Kenny said.
That will enable the developers to apply to CRDA for up to $3 million in financing to augment its equity and debt package for the redevelopment, he said.
CRDA Executive Director Michael Freimuth said the agency’s board has held off approving additional financing until the developers demonstrate they’ve lined up the rest of the funding sources.
“Assuming that comes together, they are eligible to apply for [CRDA financing],” Freimuth said. “My board wasn’t ready for that before with all of the moving pieces. We’re a gap funder, so we want to see the other funding sources in place. The question is: can we get as much private money as possible?”
CRDA funding would provide an additional benefit: it would make the project eligible for a substantial property tax reduction. Hartford is Connecticut’s only municipality with a split commercial and residential assessment structure. Residential properties are assessed at 70 percent of value, which is half that of commercial properties.
Because CRDA-backed projects are classified as residential, developers would receive a discount on property taxes that would enable them to obtain more favorable mortgage terms, Freimuth said.
Other upgrades to the property would include a renovated courtyard between the rowhouse buildings, a fitness center and dog park, Kenny said.
A previous owner had partnered with The University of Hartford on filling many of the Loft units with student housing between 2005 and 2014.
