Bank Gets Behind Colt Project

Gives Commitment To Convert Armories

March 27, 2005
By JEFFREY B. COHEN, Courant Staff Writer

The developers of the Colt Gateway project have a commitment from Sovereign Bank for a $28 million mortgage, one that would allow them to begin work to turn two armories into apartment and business space, they said.

"We still have to close, but a commitment letter like this takes a long time to get," said Robert A. MacFarlane, a principal with Homes for America Holdings Inc. On Wednesday, his company got a commitment letter from the bank that includes $18 million for the south armory and $10 million for the east armory - the building visible from the highway beneath the blue onion dome, he said.

"We were very fortunate to meet with Sovereign Bank. They are familiar with historic buildings," he said.

Together, the two Hartford buildings make up more than 70 percent of the complex's remaining unrestored square footage, he said.

Once the official closing on the mortgage happens in the next month, work will begin on the south armory no later than May, he said. When that building is complete, roughly eight months later, work will begin on the east armory, he said. Upon completion, the two buildings will have up to 300 loft apartments and roughly 100,000 square feet of commercial space, MacFarlane said.

"We try to be very supportive of signature real estate projects that are major linchpins in the economic revitalization of the communities we serve," said Kevin Flaherty, a market president for Sovereign Bank.

This is not the bank's first venture into large city projects: It has provided a $17.5 million loan to develop the retail half of the G. Fox building, as well as a $10 million loan for the former SNET building at 55 Trumbull St., Flaherty said.

"All around Hartford, there is strong economic development," said Sovereign Bank vice president Richard Staples, who worked on this project as well as the G. Fox and SNET building deals. "The prices have moved now so that Hartford is a favorable and attractive place for investments."

"You come here from other markets and you can look and see the potential," Flaherty said.

In addition to confidence in Hartford, though, the bank said it has confidence in MacFarlane's company.

Looking at the developer's projects nationwide, Flaherty said, "They execute beautifully. ... Their track record is pristine."

The cost of the entire project is roughly $110 million, MacFarlane said - with tax credits and grants adding up to more than $30 million, about $60 million in mortgages, and about $20 million in private equity, he said.

MacFarlane's company is in the early stages of applying to the city for $6.6 million in tax increment financing.

As part of the application for tax increment financing, the developers must show that without the assistance "the project in question could not reasonably be expected to move forward," according to the city's policy.

"To the extent that there's progress, it's a very positive sign," said Mark K. McGovern, acting executive director of the city's economic development commission. "It's very good news, and it certainly bolsters their application to the city for [tax increment] financing."

In this case, the "tax increment" is the difference between what the Colt property is worth in property taxes today and what it will be worth in taxes when the renovation project is complete. Under a tax increment finance plan, the city agrees to issue $6.6 million in bonds and gives the proceeds to Colt Gateway. The city would pay off the bond debt using 50 percent of the higher amount of taxes it collects on the completed project. The remaining 50 percent would be accepted as tax revenue.

MacFarlane said the mortgage commitment is an important step for the complex.

"This is very important because they are the two largest buildings on the site," he said.