Real Estate: Green Gamble
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The list of green elements is impressive by any measure: new Energy Star appliances, high-performance insulated windows and high-efficiency heat pumps with smart programmable thermostats and energy-use remote programming for each apartment; an on-site 400-kilowatt fuel cell that produces clean, renewable power; elevators that capture and reuse their own energy; heat-and- cool-air exchangers on the roof; and electric car-charging stations in the garage. According to Becker, the units will produce half the carbon footprint of equivalent conventional apartments.
360 State is one of just three LEED (Leadership in Energy & Environmental Design) Platinum projects—the highest rating from the internationally recognized green-building certification system—in the state.
Yet for all its ecological correctness, the development does not skimp on amenities: On the ground floor, 24/7 concierge service, food-delivery desk, bike storage, a business center with printers and meeting rooms, and guest suites available for nightly or weekend stays at prices comparable to rates at nearby hotels. The sixth-floor terraced garden and lawn are spacious enough for outdoor games, a heated outdoor pool and sundeck. Indoors on the same level are a residents’ lounge, fitness center, private yoga studio, library, screening room and children’s playroom.
In keeping with the building’s crunchy appeal, the ground-floor retail space is to include a bicycle shop and a hybrid organic/traditional food market modeled after the City Market co-op in Burlington, Vt.
The real question raised by 360 State Street is not how green it is, but how the developer found the backing for an estimated $180 million project and then pressed on with it as other big building projects in the state fell by the wayside.
As both architect and developer, Bruce Becker, a Yale School of Architecture grad, was able to work the plan until it became manageable. Putting his proposal against six other firms, Becker+Becker first of all won the Shartenberg site for $1. But it came with some expensive baggage—ultimately, some $3.5 million in environmental cleanup costs, plus settlement of old parking agreements from an adjacent development. In return for the lot and other subsidies, the city required that a minimum of 10 percent of the units be affordable housing, which meant lower overall rental income.
To offset the gap between income and projected construction costs, Becker worked with the state to obtain about $2 million in affordable trust fund money from the Department of Economic and Community Development and another $2 million in home funds, also administered by the DECD but funded by the U.S. Housing and Urban Development agency. To qualify, the developer has to provide affordable units and meet certain design standards. “That funding,” he says, “basically made up the gap between the market rents and the targeted affordable rents.”
The firm also received a $1 million grant from the Connecticut Clean Energy Fund to help pay for the fuel cell and is working with United Illuminating in Hartford to obtain subsidies to help pay for the energy-efficient technologies and equipment. It is also looking for below-market sources of financing, like The Co-operative Loan Fund of New England, to help launch the food co-op.
The primary source of funding for 360 Main Street, however—some $150 million, or 80 percent of the project’s costs—comes from Kennedy Associates Real Estate Counsel, LP, real estate investment advisers, on behalf of the Multi-Employer Property Trust, a fund of pension funds that includes construction unions’. Members of some of those unions found jobs on the project.
“The project had the firm support of a number of constituents, including the city of New Haven and state of Connecticut through conveyance of land and various subsidies,” says David L. Antonelli, principal senior vice president at Kennedy, adding that his firm views rental apartments as a relatively low-risk asset class. “I wouldn’t necessarily want to invest in a speculative office building at the onset of a downturn in the economy, or in New Haven for that matter, but in the rental-apartment market, the typical downside scenario is that rents and occupancy decline somewhat for some period of time before recovering. Also, we didn’t see much in the way of competition; it was an opportunity to capitalize on unmet demand for new, high-quality rental housing in New Haven.