Hartford Business Journal

www.HartfordBusiness.com May 22, 2017 • Hartford Business Journal 11 Authority (CRDA), the quasi-public state agen- cy whose roots date to 1998 to spark revitaliza- tion of Hartford first, followed by the region. CRDA has had measurable success in its core mission of presiding over the creation of some 3,000 downtown living units — it's halfway there. But its ever-growing plate has been filled with many more responsibilities, some say too many. In addition to housing, it manages the state's money-losing Hartford area entertainment/ convention venues; oversees 16,600 garage and outdoor parking spaces, plus a central utility plant housed inside the convention center to heat and cool not just that huge building but most of Adriaen's Landing, including the Mar- riott Hotel and the Connecticut Science Cen- ter; oversees the state's investment in the New Haven Connecticut Open tennis tournament; and coordinated and oversaw the rehabilita- tion of a pair of Hartford office towers the state acquired to relocate several state agencies — 450 Columbus Blvd. and 55 Farmington Ave. All of that not only adds to the complexity and responsibilities for fulfilling its mission, observ- ers say, but has exposed CRDA to public criti- cism over plans for a $250 million makeover of the XL Center. "The workload grows exponentially,'' said Michael W. Freimuth, a former Stamford eco- nomic-development director who has been CRDA's first executive director since 2012. "The tasks and responsibilities grow just about every year." Seeded with two separate $60 million capital infusions, CRDA since its inception has leveraged that money into $373 million in assets on its books against liabilities total- ing $149.7 million, according to its fiscal 2016 annual report. Both are up from a year earlier. Freimuth has a staff of 11 who handle everything from underwriting and vetting redevelopment projects, to ensuring vendors are paid and the lights stay on at the Conven- tion, XL and tennis centers and The Rent. But CRDA's primary focus and function, he said, is serving as a "bridge lender'' to developers' commercial projects that, over time, are intended to pull more "feet'' into downtown to live or work. Also, by repurposing the city's inventory of underused, blighted commercial buildings, CRDA and its supporters want to lift downtown real-estate values, enhancing not only inves- tors' portfolios but also the city's ability to lever- age those higher values into more tax revenue. The city and CRDA got good news in Janu- ary, when Hartford's 2016 grand list showed a 10 percent gain in value. Complex deals Of the dozen Hartford housing deals CRDA co-funded, some were among the most compli- cated Freimuth says he's ever been involved in. Not only is bank financing and investors' equity included, but some required a patchwork-quilt of funding from state and federal historic-build- ing and affordable-housing tax credits. Others required state funding to remediate toxic chem- icals/materials from buildings and grounds. Hartford's exorbitant commercial property tax rate — 74.29 mills — along with high con- struction and other costs make it difficult for developers to finance city developments using only private funds, which is where CRDA steps in as a "gap financier,'' Freimuth said. "We're the delta between what it costs to build the product and what it's worth," he said. "We'll be successful when that delta disappears.'' The Capitol Lofts, a $36 million conversion of the former Hartford Office Supply build- ing at Capitol Avenue and Flower Street into 112 apartments, required eight fund- ing sources — banks, tax-credit issuers and CRDA's co-investment — to get done. At the April 26 grand opening, Fre- imuth quipped to the assembled crowd, including Hartford Mayor Luke Bronin, who also sits on CRDA's board, that Capitol Lofts was the result of "three years of arguing and one year of building.'' Complexity hasn't stopped CRDA from pur- suing new deals, nor has it slowed developer- borrowers' repayment on existing ones, he said. One of CRDA's early office-to-apartment conversions, The Spectra Boutique apart- ments in the former Sonesta Hotel site in Constitution Plaza, has fully repaid its $2.05 million loan from the agency, Freimuth said. Landlord for The Grand On Ann apartments, 209 Ann Uccello St., has repaid a portion of that project's $4.5 million CRDA debt. CRDA uses collections to fund more redevelopment. Spectra's landlord is close to acquiring a pair of derelict downtown buildings, 101-111 Pearl St., that Freimuth says would be rede- veloped into 258 apartments. The State Bond Commission on May 11 approved $15.5 million in funding to CRDA for the conversions. CRDA Chair Suzanne Hopgood said the agency's staff and its 12-member board, seat- ed with municipal and corporate/academic leaders, plus the heads of four key state agen- cies — all deserve credit for focusing on CRDA's mission and finding ways to close on the hardest, most complicated deals. Hopgood, a business consultant who at one time oversaw a multibillion-dollar real estate portfolio at Aetna, says Freimuth is the best dealmaker she's ever seen. "He knows what the numbers are,'' she said. "He knows the dynamics of each deal." Bronin is one of two municipal appointees on CRDA's board. East Hartford Mayor Mar- cia Leclerc is the other. "CRDA's investments and expertise have been the most important public contributions to Hartford's downtown revival in decades,'' Bronin said. "CRDA's success has played a huge role in attracting new investment to the city, and without CRDA I don't think we would have seen UConn move downtown or the Goodwin Hotel reopen." Leclerc says her town east of the Connecti- cut River looks forward to the agency under- writing and spurring development there, espe- cially along its historic Silver Lane commercial corridor that has seen better days. Pratt & Whit- ney's multimillion-dollar headquarters expan- sion is underway, while plans are shaping up for an outlet shopping mall adjacent to The Rent. But for CRDA's efforts, Leclerc said, "Hart- ford would not be as far along" in its redevel- opment as it is. CRDA's mandate to develop the Hartford region includes that it assist any one of the city's contiguous towns with economic development — but only if they ask for it. So far, East Hart- ford, Newington and Wethersfield have done so. Entertainment overseer Senate Republican Pro Tem Len Fasano (R-North Haven) says few argue that CRDA has a vital hand in Hartford's economic/ cultural redevelopment. But overseeing XL Center, The Rent, convention center and New Haven's tennis center is burdensome for the agency and too costly for the state, he said. Fasano said he'd like the state to cede some of its entertainment operations — and the mil- lions in annual operating subsidies that go with them — to private hands and he's been one of the loudest voices opposing a CRDA-backed plan to spend $250 million in taxpayer funds to completely renovate the XL Center. He also noted that, as state assets, the quar- tet yield no direct tax collections to their host cities, beyond levies on visitors' food and bever- age purchases and hotel rooms. The state off- sets some of that tax-revenue loss with annual "payments in lieu of taxes,'' or PILOT. However, the state's mounting fiscal woes have clouded its ability to sustain those payments. On top of $600,000 a year the state pays CRDA to operate the XL Center, the state also plugs all annual operating deficits the 38-year-old facility incurs, Fasano said. "We can't afford it anymore,'' he said. In the year ended last June 30, overhead for all four buildings, plus costs tied to Hartford's aging Church Street parking garage, contrib- uted to CRDA's $5.6 million operating loss. Just recently, CRDA began soliciting potential private partners/investors willing cover part of the renovation costs for XL and other properties. Freimuth says the idea of private financ- ing for the XL is worth "exploring.'' Meantime, the legislature's Finance, Revenue and Bonding committee has approved spending a scaled-back $75 million over two years on the XL, but it's not clear if that will have broader sup- port in the full General Assembly. n CRDA'S roots go back decades New Britain attorney-lobbyist Brendan M. Fox knows well the role that the Capital Region Development Authority is playing to help revitalize Hartford. He was executive director of CRDA's predecessor, the Capital City Economic Devel- opment Authority (CCEDA), established in 1998 by then- Gov. John G. Rowland and state lawmakers. In 2012, law- makers changed the agency's name to CRDA and widened its focus to include the seven suburban communities con- tiguous to Hartford. CCEDA's charge was wholly different and focused on the development of "six pillars,'' but in some ways, they were the same, Fox said. CCEDA laid the foundation to launch Front Street, which at that time included just the Hartford Marriott Downtown and the state-financed con- vention center, the latter managed by CCEDA, same as CRDA does today. Plans for Front Street retail spaces with housing above were just ideas at that time. Downtown apartments — 262-unit Hartford 21 and 78-unit The Lofts at Main & Temple — were launched under CCEDA. What CCEDA achieved in 14 years and what CRDA has accomplished since qualify as "a tremendous success,'' said Fox, of Gaff- ney, Bennett & Associates in New Britain. – Gregory Seay Capital Region Development Authority Select Financials 2016 2015 Combined facilities' operating revenues* $39.2M $37.1M Total operating revenues $46.7M $46.6M Combined facilities' operating expenses $38.6M $37.9M Total operating expenses $52.4M $50.5M Income (loss) from operations ($5.6M) ($3.9M) * I N C L U D E S X L C E N T E R , R E N T S C H L E R F I E L D , C O N N E C T I C U T C O N V E N T I O N C E N T E R , C O N N E C T I C U T T E N N I S C E N T E R S O U R C E : C A P I T A L R E G I O N D E V E L O P M E N T A U T H O R I T Y 2 0 1 5 - 1 6 A N N U A L R E P O R T Doubts about CRDA's full plate from page 1 Brendan M. Fox, attorney-lobbyist Suzanne Hopgood, serving a second term as chair of the Capital Region Development Authority, credits leadership for its success. 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