Thomas Breen photo
Beacon CEO Kovel: Seeking tax relief.
The 300 State St. lot, soon to house 60 apartments?
A Boston developer has revived previously-approved plans to construct a new 60-unit apartment building atop a State Street surface lot — and is seeking a local tax abatement to help cover the costs of restricting 48 of those apartments to affordable rents.
That planned new development is detailed in an Aug. 19 letter and tax abatement application sent by Beacon Communities CEO Dara Kovel to the Board of Alders.
In that application, Kovel describes how Beacon plans to develop the surface parking lot at 300 State St. into 60 units of newly constructed, mixed-income rental housing.
The project would include 12 units reserved for renters earning no more than 30 percent of the area median income (AMI), 24 units for those earning no more than 50 percent AMI, 12 units for those earning no more than 60 percent AMI, and 12 units left at unrestricted, market-rate rents.
An accompanying table of estimated rents per unit shows rents as low as $489 for a studio, $503 for a one-bedroom apartment, and $593 for a two-bedroom apartment for the most deeply discounted, 30 percent AMI apartments. The estimated market-rate rents go as high as $1,400 for a studio, $1,800 for a one-bedroom, $2,200 for a two-bedroom, and $2,500 for a three-bedroom.
“This true mix of incomes will not only serve extremely low and low-income families but will work to promote economic integration and expand housing opportunities for households at every income band,” Kovel wrote in the proposal.
“This is a strong project with a supportive component, consistent with Beacon’s mission-driven focus on affordable housing and the value of place in the Ninth Square,” city Economic Development Administrator Michael Piscitelli told the Independent by email. “The project financials are still under review at this time but it’s really important to recognize that market interest remains strong even with many other projects underway.”
Beacon is looking for a 20-year tax abatement that would limit local property taxes on the project to $600 per apartment per year, or $36,000 per year for the whole building.
Beacon Communities
Estimated rents for 300 State.
The planned new development would increase Beacon’s already outsized footprint in the Ninth Square. Last year, the company purchased the nearby 335-unit, mixed-use Residences at Ninth Square for $65.2 million, and has been steadily investing in reviving that complex’s residential and commercial spaces.
Earlier this year, Beacon bought the 300 State St. lot from Greenwich-based investor Joseph Cohen for $2.5 million. Beacon also purchased four adjacent commercial buildings at the corner of Chapel and State Streets for $6.4 million from Cohen.
Cohen first won site plan approval from the City Plan Commission in December 2018 to build a six-story, 60-unit apartment building atop the State Street lot. At that time, Cohen planned for the project to consist entirely of market-rate apartments.
He then held on to the undeveloped lot for a year and a half before flipping it to Beacon for nearly $2.1 million than her and his business partner purchased it for in 2005.
Beacon’s proposed development does not include any commercial space, keeping with a trend among downtown landlords and developers of eschewing hard-to-fill groundfloor retail space in lieu of more apartments.
Instead, the project is slated to include such “common amenities for residents” as a fitness center, laundry facilities, resident service offices and “space for provision of wellness services.”
Kovel wrote that 20 percent of the overall housing units in the development will be “restricted as permanent supportive housing units serving vulnerable populations and will provide services in areas such as financial literacy programs, job education training, and technology education program.” An additional 10 percent of the overall units will be fully accessible for renters with physical disabilities.
Beacon Communities Director of Development LeAnn Hanfield told the Independent Thursday afternoon that the “vulnerable populations,” for the purposes of this project, include “persons who are socioeconomically disadvantaged and typically experience higher risks of poverty and exclusion. Permanent supportive housing is a specific set-aside that will combine housing assistance and supportive services to address the needs of chronically homeless individuals.”
Local Tax Abatement Requested
The Beacon-owned State Street surface lot.
Kovel wrote in her local tax abatement application that the project would be Beacon’s first development of new affordable units in the city. The company has previously acquired and renovated affordable housing at Monterey Place in Dixwell and at the Residences at Ninth Square.
She wrote that Beacon is looking to finance this new development in part with 9% Low Income Housing Tax Credits (LIHTCs) as well as “soft debt” from the state Department of Housing. Beacon plans to apply to the state for those 9% tax credits this November, and expects to hear back in Spring 2021 about their potential award.
In addition to the state tax credit support, Beacon is also seeking a $600-per-unit local tax abatement deal.
“Assembling a feasible financing structure to support affordable development requires local economic support and allows the project to secure state and federal subsidies,” Kovel wrote.
“This is especially true in the production of new affordable units, where the cost to produce is higher than preservation projects, and because restricted rents cannot support enough debt to successfully finance production, as is the case in traditional market rate deals. Restricted rents also restrict revenue for the long term and thus do not generate cash flow comparable to traditional market rate deals.”
If Beacon is awarded the state tax credits it’s applying for, she wrote, the project will enter into an Extended Low-Income Housing Commitment that will keep the 48 units restricted at affordable rents for at least 40 years.
Beacon estimates that the total development cost of the project is just over $26 million, with total “hard costs” coming in at around $16.6 million and the remainder comprising of architecture and engineering fees, surveying, environmental engineering, legal fees, financing costs, real estate taxes and insurance, and other “soft costs.”
Kovel wrote that, pending local and state financial support approvals, Beacon plans to begin construction in mid-2021 and complete conustrction in late 2022.
“The tax relief sought through this application represents a critical piece of the financial transaction that will allow thisimportant affordable housing development to move forward.”
Beacon’s proposed affordable housing development would be located a few blocks from where the Norwalk-based Spinnaker Real Estate Partners plans to build a new seven-story, 200-unit apartment building at Orange Street and George Street as part of the first phase of its redevelopment of the old Coliseum site. That project’s site plan was slated to be discussed at a special meeting of the City Plan Commission on Wednesday night.
That meeting was canceled 30 minutes before its scheduled start time, and the site plan public hearing has been pushed to Oct. 21. One of the most hotly contested aspects of that proposed development among Downtown and Wooster Square neighbors is whether or not that project will have enough affordable apartments. The developer has committed, per its agreement with the city, to set aside 20 percent of the apartment complex’s housing units at rents ranging from 50 to 100 percent AMI.
Kudos to them for building actually affordable housing for folks who live in New Haven.