Condo project to become rentals
But developer of downtown Hartford plan says it’s not because of the market
Four years ago, Jose Ramirez saw the signs of a nascent revitalization in downtown Hartford as hundreds of new apartments were coming on the market, and he believed it was time to test the market with the first condominium project in more than a decade.
Ramirez still thinks there is demand for homeownership downtown. But it just won’t be with his eight-unit conversion on the top four floors of an old hotel, then rooming house at 289 Asylum St.
The $1.7 million project is going rental instead — and will likely start leasing later this summer — after the state revoked historic tax credits, financing that was key to the success of the condominium development.
The project, in the same building as t he former Gionffrido’s restaurant and later, Mayor Mike’s, had been beset by both construction and financing delays.
The state says Ramirez missed a critical Dec. 31 construction milestone for obtaining the previously approved credits, a contention disputed for months by Ramirez.
Last week, t he state Department of Economic and Community Development made its final ruling, denying $207,000 in credits.
“There’s still an opportunity for a play in the future to possibly sell these condos to generate economic development,” Ramirez said. “We have to lease up so we can satisfy debt obligations at this point, be able to pay the mortgage.”
Future options might include “rent-to-own” lease contracts.
Ramirez stressed that it was not a matter of demand by condo buyers, noting he had at least three seriously interested.
“I don’t believe this particular project’s stumble is a reflection of the ‘condo market’ per se,” Michael W. Freimuth, executive director of the Capital Region Development Authority, said, in an email. “I don’t think its a particularly strong market for a variety of reasons, not the least of them being how the national secondary market places a high performance hurdle on condos generally.”
CRDA’s board of directors voted last week to restructure its $450,000 low-interest loan for apartments, rather than condos.
Unless a condo development is more than 50 percent owner-occupied, investors won’t purchase the mortgages on the secondary market, making banks reluctant to lend because mortgages would have to be held on their books, increasing risk.
As a result, banks might not lend at all or require 20 percent or higher down payments, out of reach for most borrowers. The environment also can lead to more cash transactions and declines in values and resale prices.
Ramirez, however, had secured a commitment from United Bank to hold mortgages for the first five units on their books until a majority was sold.
“Achieving some new homeownership model for Hartford and its neighborhoods is necessary, and we’ll continue to pursue it,” Freimuth wrote.
The Hartford Community Loan Fund, which approved a $850,000 loan for the project, said condos are being sold in downtown Hartford.
“Our loan committee had evidence of a market so that’s not a question,” Richard Staples, the fund’s loan officer, said, “Our staff is supportive of the project and the project developer whether it would be condos or apartments.”
Ramirez, a Trinity College graduate, and his investors have seen their equity investment rise by nearly $370,000 to $443,000. Ramirez said he had expected a 20 percent return on the investment. Now, that has dwindled to less than 1 percent.
The 1,200- square-foot condos were expected to sell at between roughly $240,000 and $275,000. The tax credits ensured a profit on the project as the condo units were sold. Without them, Ramirez was forced to consider apartments to generate funds to make payments on the loans that had financed the project.
David Kooris, deputy commissioner at DECD, said the decision revoking the credits wasn’t an easy one.
“It is never our intent not to fund projects that have been awarded tax credits,” said Kooris, who is also a CRDA board member. “But the state statutes have strict parameters about meeting deadlines.”
“We did everything we could to make this work,” he added.
Both CRDAand the loan fund praised Ramirez as a young, talented, hardworking locally based developer.
In a 2017 interview with The Courant, Ramirez said he was encouraged because he saw Hartford on the same kind of upswing t hat his old neighborhood in New York — Washington Heights — saw, beginning in the 1980s. Ramirez sensed it as early as 2004 while a freshman at Trinity, amid an early wave of apartment construction.
Ramirez returned to Hartford two years after his 2008 graduation from Trinity. He dipped a toe in the real estate business, buying two three-family houses in the city, one in the North End near the Swift factory and the other in Barry Square.
The condominium project proved far more complex. The late 1800s brick structure had to be legally divided condos.
A ninth condo, the former restaurant space, stayed under the ownership of the previous owner of the entire building, Asylum Street Cooperative LLC. A dispute, which now has spilled over into court, arose over Ramirez gaining access to the storefront to install an elevator.
Ramirez said the 289 Asylum project was a learning experience. He said he found he needs t o be t alking to decision-makers in the both state and city government more frequently and making sure the conversation is directed at the right, high-level person. Ramirez said the conversations also may take weeks, not days to schedule.
“We would take another chance on Hartford,” he said.