Stamford, Conn. – Developers did so well with the first condominium project in decades in this old mill town that they’ve already started work on a “sister project” almost exactly like the first.
Residents moved into the 92-unit Mill River House in downtown Stamford last November. Now the planned condominiums at the second project, Adams Mill River House, which will include 60 units, are pre-selling for an average of $400 per square foot, similar to prices in the previous project. The development team – a joint venture between individual developers Paxton and Ray Kinol and Hannah Real Estate Investors, a Stamford development company – has even more plans. Their pipeline in Stamford now totals 450 units of housing.
The hard cost of constructing the 145,000-square-foot Mill River House came to $19 million, or $131 per square foot. For that relatively affordable price, the developers managed to create an architecturally distinctive project overlooking a park.
“I wanted to do an exuberant 19th-century tower,” said Seth Weinstein, principal with Hannah Real Estate Investors. The copper roof of Weinstein’s tower recalls the brick mill buildings of Stamford’s industrial past, most of which were torn down in an “urban renewal” period in the 1960s.
Developers paid extra to install round windows that cost $1,000 apiece but let light into the stairwells. Each of the building’s four stories also includes a $100,000 common room for the residents. Weinstein said these details, though expensive, will help the developers’ reputation in the long term. “We think it has value,” he said. “We do a lot of business in Stamford.”
Positioning Mill River
Still, old-fashioned flourishes aren’t enough to draw buyers in an automobile-centric age, so Weinstein made sure to include enough parking: 165 spaces for 92 condominiums, even though the city only required one and a half spaces per unit.
Above its one story of parking, Mill River House includes 61 two-bedroom and 31 three-bedroom condominiums, ranging from 1,000 square feet to 1,750 square feet.
Stamford requires any new multifamily construction to make a percentage of its units affordable to residents earning a variety of incomes. The percentage varies depending on where in the city the project is located: at Mill River House it’s 12%.
The development created the first affordable condos in downtown Stamford. One of the units was priced at a little more than $200,000 to make it affordable to a buyer earning up to 60% of the area median income (AMI), five were priced at $185,000 for buyers earning up to 50% of AMI and another five targeted buyers earning up to 25% of AMI and were priced at $87,000.
The market-rate units sold for an average of $350,000 apiece. But even though the affordable units sold for effectively half price or less, the city doesn’t provide developers with any subsidy or tax abatements to help pay for this affordability.
“It takes a big bite out of a developers’ pro forma,” Weinstein said. But he looks on the brighter side. “You could call it taxation without representation – affordability without compensation,” he said. “But you get to build in a beautiful city. It’s part of the cost of doing business.”
Plus, Weinstein appreciates being free of the constraints that come with most government programs that subsidize affordable housing.
Because of these affordability restrictions, the $26 million project was also able to take out a $25 million construction loan with very favorable terms from Citibank’s Community Development Group, a unit of Citigroup.
“We were able to somewhat reduce our interest,” Weinstein said. The rate floated at 190 basis points over the London Interbank Offered Rate.
Citibank could also make a loan that covered 95% of the cost of the project, largely thanks to the affordability requirements. The bank’s underwriters were also impressed with the strength of the development team and the fact that more than 60% of the units were pre-sold. The value of the 1.5-acre site had also increased substantially since the developers bought it for $5 million.
“They always say I buy in the wrong place,” Weinstein said. “And it always turns out to be the right place.” Of course, much of this extra value came when the developers had the property rezoned to allow high-density residential buildings – which the city was relatively happy to provide thanks to the project’s affordability restrictions.
Looking to the future
Mill River House also won support from the community because of what the project replaced: an abandoned Oldsmobile dealership whose roof had caved in. Cleaning the site required digging out two leaking, underground gasoline-storage tanks and removing tons of oil-soaked dirt.
The developers have already bought several neighboring single-family rental homes and started demolition at the site that will become Adam’s Mill River House. Until recently, the homes had been illegally overcrowded with poor families. “There were piles of health violations tacked to the door,” Weinstein said.
Homebuyers have already snapped up 48 of the 60 condominiums. The $4.7 million in purchase-and-demolition loans were provided by Citigroup, and construction financing for the property will soon be finalized, the developers said. The project is expected to be finished in the spring of 2007.