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Updated: September 4, 2019

State takes $25M loss on key downtown Hartford apartment redevelopment

HBJ Photo | Joe Cooper The Lofts at Main & Temple in downtown Hartford has been sold.
By Gregory Seay, Greg Bordonaro

A heavily subsidized downtown Hartford apartment project that was part of the city’s “six pillars” economic-development plan has fallen into foreclosure and forced the state to take a nearly $25 million haircut on its original investment, the Hartford Business Journal has learned. 

The holder of a pair of mortgages secured by downtown Hartford’s The Lofts at Main & Temple apartments and adjacent parcels has been suing to foreclose on the collateral since March, court files show.

Elizon DB Transfer Agent LLC, of Greenwich, is suing in Hartford Superior Court, 18 Temple Street LLC, the entity for whom two loans, totaling $42.6 million, were issued over a decade ago, filings show.

The Connecticut Housing Finance Authority (CHFA), which originated the loans and still services a pair of smaller, related notes, and the state Department and Economic and Community Development, are co-defendants in the March 22 foreclosure lawsuit.

According to the suit, CHFA on June 30, 2004, granted 18 Temple Street LLC -- whose principal was longtime Hartford developer/landlord Marc Levine, who died last October -- two secured loans: one originally for $15.95 million; the other, for $9.35 million. There also exist two smaller loans that are not part of the foreclosure action totaling $5.4 million issued from the former Capital City Economic Development Authority, predecessor to the Capital Region Development Authority.

The two larger notes, the suit says, were issued to construct, and are secured with, a key apartment development in the city’s ambitious six pillars plan, which also led to the construction of the Connecticut Convention Center, Hartford Marriott Downtown and Connecticut Science Center.

The properties listed in the lawsuit include 884-908 Main St., former home to the Sage-Allen Department store, now site of the 78-unit Lofts at Main & Temple apartments; and 29 Temple St., where 42 student townhomes were built.

HBJ Photo | Joe Cooper
The Lofts at Main & Temple include 42 student townhomes.

Those loans have had a troubled history, court records show. One or both were modified at least seven times over a 13-year period starting in 2005. One loan modification, in May 2005, included CHFA increasing the first loan from $15.9 million to $30.5 million so that the developer could erect the student housing, which included 42, four-bedroom townhomes. 

That loan was increased again to $34.1 million in Dec. 2006, court records show.

Hazim Taib, CHFA’s chief financial officer, said that once it became clear that Levine’s partnership was struggling to keep current on the notes, CHFA decided to sell them off. It did so, he said, via a competitive bid process in which Elizon DB Transfer emerged the winner and purchased the notes last Nov. 18, the suit states.

At the sale, there was $33.3 million and $9.3 million still outstanding on each mortgage, Taib said.

CHFA sold the pair to Elizon for $18.25 million, meaning the quasi-public housing finance agency took an approximately $24.5 million loss on the loans.

By last Christmas Eve, both mortgages were in default, and Elizon said in its suit that it negotiated a one-month forbearance pact with 18 Temple, forestalling foreclosure.

One month later, on Jan. 31, the forebearance had expired and Elizon said it sent the borrower a Feb. 19 “demand letter,’’ declaring its intent to call the full debt due and payable, the suit said.

Elizon had asked the court in March to, among other things, allow it to immediately foreclose on, and take possession of, the downtown properties securing the debts.

18 Temple Street’s attorney declined comment.

It’s not clear why The Lofts at Main & Temple property has experienced such financial difficulties, but developer sources say the property was overleveraged and the townhouses did not prove popular. However, the main apartment units have seen occupancy rates well into the 90-percent range, sources said.

A new development plan

The Lofts at Main & Temple and adjoining townhomes are now in the redevelopment crosshairs of a new development group that recently proposed a $100 million makeover of the Pratt Street retail corridor, extending to Main Street.

The Pratt St. developers, which include Shelbourne Global LLC, Hartford landlord Martin J. Kenny, of Lexington Partners LLC, and city parking magnate Alan Lazowski, of LAZ Parking, are trying to buy the notes from Elizon so they can take ownership of the properties to convert the student housing into micro apartment units and remodel and add more units to the Lofts at Main & Temple.

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2 Comments

Anonymous
September 18, 2019

Let Laz and Shelbourne take it completely private and they may make it work.

Anonymous
September 18, 2019

Public/private partnerships have been a losing cause not just here in Corrupticut,but everywhere.Developers now go into business just to get government money,then pay themselves and relatives until it runs dry.Then ask for more and score again from their friends in state houses.

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