Hartford Business Journal

6 HARTFORDBUSINESS.COM | FEBRUARY 6, 2022 DEAL WATCH economic conditions and making sure that we're vetting those out and our customers … are on the same page and comfortable with the project moving forward," he said. Matthew Purtell, KeyBank's head of real estate capital for New England and Washington, D.C., said his board wants to cut back on a real estate loan port- folio that, like most banks, "has grown exponentially." CRDA program will allow deep-pocketed benefactors to loan money to Hartford development projects By Michael Puffer mpuffer@hartfordbusiness.com C orporations and other bene- factors will soon have a new way to lend dollars into pet housing and other development projects in Hartford. The Capital Region Development Authority has lent out about $150 million for private development projects over the past decade, like the $12 million it granted to RMS Cos.' nearly completed 270-unit apartment building next to Dunkin' Donuts Park. RMS needed $13.5 million from CRDA, but the agency wasn't able to deliver the final $1.5 million. At the time, Stanley Black & Decker and Cigna Corp. stepped in to fill the financing gap. Unfortunately, that corporate support had to dodge a conflicts- of-interest minefield, according to CRDA Executive Director Michael Freimuth. It was a big headache but also inspiration. Believing deep-pock- eted corporations or other entities would probably like to support Hartford housing and redevelop- ment projects, CRDA worked with state and local officials to create a streamlined process. Language was inserted into the General Assembly's budget imple- menter bill in 2022, Freimuth said, and the proposal underwent a state ethics review. The result is a clear process that allows benefactors to loan money to CRDA-affiliated projects in Hartford without unintentional conflicts. It is now known, for example, that any CRDA board member affiliated with a potential contributor cannot simply abstain from votes when that contribution or associated project is discussed. Instead, they need to recuse themselves from the discus- sion entirely, or "leave the room," as Freimuth puts it. Freimuth hopes to begin the new program in February. If would-be investors express interest in lending to a specific development, the agency will release a request for proposals and advertise the oppor- tunity on its website, Freimuth said. There will be a "six-figure" minimum investment, Freimuth added. Investors will feed their cash into the CRDA lending program, which bears interest. The benefit for investors is that CRDA handles all of the "grunt work" of vetting projects, setting terms and servicing the loan, Freimuth said. "An individual investor who wants to marry their dollars and invest in a neighborhood could marry them up with ours," Freimuth told the CRDA Michael Freimuth is the executive director of the Capital Region Development Authority. HBJ PHOTO board. "The only kicker on that is their terms are pretty much going to be our terms. If we get 3%, you aren't getting 6%." Lenders can be pretty confident of seeing their money back, Freimuth said. The CRDA has only lost money on one deal, a $5.2-million loan that went belly up after a primary lender in 2021 foreclosed on the Red Lion Hotel, which was partially converted into apartments. A rendering of the Concourse Park apartment development planned on the site of the demolished Showcase Cinemas multiplex in East Hartford. RENDERING | CONTRIBUTED "This year, in 2023, we are being very disciplined in who we lend money to," Purtell said. KeyBank continues to lend but has increased its underwriting standards. Today's loans also come with a 60% or 65% loan-to-value ratio, he said. That means borrowers need to put more equity into developments. KeyBank is also subjecting borrowers to "a lot more scrutiny," looking at how much liquidity and cash equity they possess, as well as the strength of their existing portfolio, Purtell said. Purtell said a lot of developers with shovel-ready projects are pausing until the second-half of 2023, hoping for better interest rates. "A lot of developers are mothballing projects because they don't make sense, they just don't pencil right now," Purtell said. "And they are asking towns to give them a little more time to go forward."

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