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January 20, 2023

CRDA program will allow deep-pocketed benefactors to loan money to Hartford development projects

Photo | HBJ File CRDA Executive Director Michael Freimuth.
By Michael Puffer

Corporations and other benefactors 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 minefield of conflicts-of-interest, according to CRDA Executive Director Michael Freimuth.

Michael Puffer | Hartford Business Journal
An exterior shot of the 'Pennant,' a 270-unit apartment building in the larger North Crossing development in downtown Hartford.

It was a big headache but also inspiration. Believing deep-pocketed corporations or other entities would probably like to support Hartford housing and redevelopment projects, CRDA worked with state and local officials to create a streamlined process. 

Language was inserted into the General Assembly’s budget implementer 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 favored 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 discussion entirely, or “leave the room,” as Freimuth puts it.

Freimuth hopes to begin the new, as of yet untitled, 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 opportunity on its website, Freimuth said. There will be a “six-figure” minimum investment, Freimuth said.

Investors will feed their cash into the CRDA lending program, which bears interest. 

The benefit for investors will be the ability to support favored projects with cash that will eventually find its way back to them, while 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 board Thursday. “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 was lost after a primary lender foreclosed on the Red Lion Hotel, claiming the Morgan Street property in 2021. 
 

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