Hartford Business Journal

6 HARTFORDBUSINESS.COM | JUNE 26, 2023 Deal Watch Honeycomb Real Estate Partners Director of Development Stephen Caprio (left) and Managing Partner Lewis Brown at the West Hartford Inn. Honeycomb is transforming the declining property into a modern affordable housing development. HBJ PHOTO | MICHAEL PUFFER Market Pivot Facing higher construction costs and interest rates, some developers turn to affordable housing projects By Michael Puffer mpuffer@hartfordbusiness.com L ewis Brown, principal of affordable housing developer Honeycomb Real Estate Partners, expects to launch a $26 million transformation of the run-down West Hartford Inn into 44 affordable apartments this fall. The Farmington Avenue project is moving forward in a well-to-do area of West Hartford that's already seeing numerous new market-rate and luxury apartment developments. A stone's throw to the west, developers Brian Zelman and Avner Krohn are partnered with Rich and Zach Korris on a roughly $20 million effort to build 48 market-rate apartments. To the south, New York-based Continental Properties is building an amenity-rich project with 172 luxury apartments on the former West Hart- ford Children's Museum site. "There are a lot of market-rate apartments that are coming online," Brown said in a recent interview. "That's why we felt this particular property at 900 Farmington Avenue was going to be perfect for afford- able. With all of the high-end luxury and market rate coming out of the ground, there was a need for affordable apartments." Brown, who has had a hand in building about 10,000 affordable housing units since 2005, could be getting some new company in the affordable housing space. Soaring interest rates and construc- tion costs, along with historic levels of state funding, have some of the biggest names in Connecticut's multifamily development sector moving to add affordable housing to their portfolios. Brown, for example, is in talks with Zelman, Krohn and well-known Hartford developer Martin Kenny, of Lexington Partners, about potential projects. While they declined to share further details, the traditionally market-rate apartment developers did discuss the forces incentivizing their newfound interest. Krohn said fast-rising rents have increased the need for affordable housing at a time when construction of market-rate units has become "extremely chal- lenging" due to higher interest rates and materials costs. He said these pressures are shrinking the number of market-rate projects that make financial sense. "We are looking at opportunities where a market-rate project wouldn't make sense, but where it would make sense for an affordable or mixed-rate project," Krohn said. Krohn isn't exiting the market-rate space. He said he's advancing a pipeline of about 500 market-rate units. But adding affordable proj- ects to the mix will help him keep busy, and allow his company, Jasko Development, to retain its roughly 20-person construction team. "Anybody who is successful as a developer is opportunistic," Krohn said. "... Me, Marty (Kenny), we run construction in-house. We both have big staffs to keep busy. If there's less opportunity, what you don't want to do is lose staff members. So, (you try to figure out) how to bridge this time, until the market resets." Differing business models Lexington Partners' InnoConn Construction Management arm has been retained by Honeycomb for construction at the West Hartford Inn site. Honeycomb is also partnered on the project with Simsbury-based affordable housing developer Vesta Corp., Avon-based investor Corridor Ventures, and architect Joseph Vincent Vallone of Westport-based Vallone Ventures. The redevelopment is being funded by debt through the Connecticut Housing Finance Authority (CHFA) CT HOUSING FINANCE AUTHORITY MULTIFAMILY DEVELOPER LENDING RATES • Construction loan – two years, tax exempt at 5.13% • Permanent Loans – 5.6% to 6.28% • $810 million will be available for affordable housing development and supportive housing programs in Connecticut's fiscal years 2024 and 2025 budget Marty Kenny

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