Category: Creative Financing
Project: Mechanics & Farmers’ Bank Redevelopment
Project Location: 930 Main & 114 State St Bridgeport, CT 06604
Status: Completed and Occupied (2014)
Cost: $18,500,000
Description: This is the reactivation of Historic Building in a downtown Transit-oriented
development (TOD) area that utilized a Mixed-Use program and Mixed-income Housing
components. The Mechanics and Farmers Bank Building is a 40,000 square foot historical building
located on Main Street and features oversized columns across its marble, granite and brick façade.
The adjoining building on State Street is a non-historical building of 20,000 square feet.
The two properties are located in Bridgeport Downtown South Historical District. The City had
taken title to the vacant properties which needed significant work and issued an RFP in 2009 and
Forstone Capital became the successful bidder. After acquisition, Forstone located an anchor
tenant for the project and created a $18 million historic renovation project with mixed-use
programming. Project consists of 20,000 SF feet of commercial office space for the architectural
firm of Fletcher Thompson, 2,000 SF retail space and 30 units 1-bedroom mixed-income housing.
The redevelopment plan connected the two properties into a single project that respected the
historical nature of the bank building while creating modern layouts in the rest of the project.
The result is an impressive renovation of the old bank building that retains the historical fabric of
property while seamlessly connecting it to other modern areas in the project. Visitors to Fletcher
Thompson will find the architects working in the historical front portion of the project and notice a
traditional massive bank vault door that leads to modern offices complete with meeting space, video
conferencing rooms and back office functions. Exiting the back office area from the south side one
enters the lobby residential space that opens on to State Street.
Community Needs Addressed: Approximately 20 years ago, the Downtown Bridgeport area was
experiencing disinvestment, resulting in vacant and underused buildings. One of the more
prominent vacant buildings in the area was the Mechanics and Farmers Bank on Main Street. This
masonry and stone neoclassical style building had been vacant for 25 years and during the winter
months would become a target for those seeking shelter.
In the last 10 years, various stakeholders worked together to reinvent the downtown commercial
corridor that included updated zoning and infrastructure improvements. The reconfiguration of the
Commuter Rail Station that included the relocation and expansion of the City’s main bus terminal to
better serve the downtown area was 1 block way from the Mechanics and Farmers Bank. And
directly across the street from the bank was then renovated historic Mclevy Green park which was
now becoming a hub of cultural and social activity for the downtown area that includes summer
concerts, ethnic celebrations; and public art events.
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Creative Financing
Mechanics & Farmers’ Bank Redevelopment
The Mechanics and Farmers Bank Redevelopment project addressed a number of the following
downtown area needs :
x
x
x
x
x
Reactivation of an historic property in the heart of the downtown area
Bringing office business back to Bridgeport: Fletcher-Thompson -a nationally renowned
architectural firm, returns following a 10-year stay in Shelton, CT
Creation of 30 units of workforce housing 1 block from the bus and train station
Addition of retail space on the Main Street directly across from the historic park
Adaptive reuse of the historical structure that helps create the additional density needed for
other retailers to emerge in this area
Benefits and Outcome: Residential living downtown, prior to the last decade, was primarily limited
to a low-income housing co-op and two high-rise senior complexes. A daytime population of
approximately 10,000 and nighttime population of 2,400 proved challenging in attracting retailers
that served both the populations.
Downtown Revitalization was recognized as the first step in the city's re-emergence two decades
ago.
Early efforts focused transportation infrastructure and streetscape improvements. Efforts have
shifted the revitalization of the Main Street corridor itself with the intent of attracting residences and
businesses into the downtown area. The Mechanics and Farmers Bank Redevelopment project
was one of the early City supported projects coming out of the 2007 vision of the downtown area.
The project was not only a catalyst for the 12 redevelopment projects in the downtown area at
various stages of construction today; it has also become a model for a number of projects that
followed.
New construction or substantial rehabilitation of existing structures in Downtown Bridgeport can be
challenging due to achievable market rents. Many of the projects here cannot be financed using
conventional debt and equity products and need more innovative approach to close the gap. NDC
was a collaborator on the Mechanics and Farmers project and worked on the development of a
more robust capital stack that included lower cost funding sources targeted to specific parts of the
project. Part of challenge of reactivating older historical structure is the real estate tax burden and
its affect on debt underwriting. NDC advised developing a tax PILOT solution based on the
Effective Gross Income of the project. This allowed increases in the real estate tax that would not
be disruptive to the debit structure. This PILOT solution has since been incorporated into 4 other
redevelopment projects in the downtown area.
Project Collaborators: When Forstone Capital, LLC acquired the property from the City of
Bridgeport, its main objective was to stabilize the property as it did not have a specific tenant for the
property. Although that is typical of many historical brownfield properties the partnership and
collaboration that followed is not.
The architectural firm of Fletcher Thompson, Inc was in the market for commercial space and in its
discussions with Forstone Capital looked at the Mechanics and Farmers Bank Building as an
opportunity to create a signature location. Fletcher Thompson, Inc would become both the anchor
tenant and the architect firm for the project.
As historical tax credits alone would not have been sufficient to address the environmental
remediation and developmental issues, Forstone Capital and the City of Bridgeport made a
commitment to partner together on the project. The City engaged the National Development
NDC Academy 2015
Creative Financing
Mechanics & Farmers’ Bank Redevelopment
Council to advise it on the financial challenges and explore the financing and tax options. This led
to the expansion of the collaborative partnership that would include Webster Bank, N.A., the U.S.
Environmental Protection Agency (EPA) and the Connecticut Department of Economic and
Community Development (DECD).
What Makes Your Project Unique? : The project’s redevelopment cost of $18.5 million was more
than double the fair market value estimate of completed project which was $7.8 million. To offset
this differential, the developer sought to utilize multiple funding sources from private, City, State and
Federal entities. The goal was to create a capital stack that could address specific projects needs
including historic renovation, brownfield remediation, and housing affordability. In addition to
developers’ equity, deferred developer fees and private bank financing; specialized low cost funding
sources were sought out and included State of CT DECD CHAMP (Competitive Housing Assistance
for Multifamily Properties) Loan, State DECD Brownfields Loan, City/EPA Brownfields Revolver
Loan ($400k), Federal Historic Tax Credit Equity, and State Historic Tax Credit Equity.
The City utilized NDC to review financial options and assist with fine tuning the capital stack so the
additional new components would not Impact funding covenants of other funders on the project.
With the assistance of NDC the City also looked at innovative ways to structure real estate taxes on
the project. Project is located within the City Enterprise Zone and as such there is an ‘as-of-right
tax’ assessment deferral up to 100% through the seventh year. Although favorable in early years,
even with the seven year deferral, expiration of the benefit causes debt coverage ratios and
developer returns to become unfeasible. To support the project an alternative 10 year PILOT was
structured based upon a formula of 10% of Effective Gross Income. Project pays higher taxes in
the early years than it would under the ‘as-of-right tax’ program but pace of tax increase is more in
line with the rate of inflation and anticipated growth of the income stream. Taxes remained in place
during construction.
Organization’s Name: City of Bridgeport
Website: http://www.bridgeportct.gov/
Main Contact: Frank Croke
Email: [email protected]
Phone Number: 203-576-7221
NDC Academy 2015
Creative Financing
Mechanics & Farmers’ Bank Redevelopment
NDC Academy 2015
Creative Financing
Mechanics & Farmers’ Bank Redevelopment
$
$
$
$
$
Contingency
AlE
Soft Costs
Capitalized Developer Fee
Transaction Costs and Reserves
Version: October 2014
Project Name:
Project Contact:
Submission Category:
Total Uses of Funds $
$
$
Construction
Other
$
Acquisition
Use
Uses of Funds
18,510,914
150,000
1,891,616
2,531,007
771,875
625,000
469,233
11,122,183
950,000
Amount
$
$
$
$
$
$
$
$
18,510,914
1,421,636
1,523,334
2,214,000
3,176,944
800,000
400,000
3,500,000
5,475,000
Amount
Total Uses = Total Sources
Total Sources of Funds $
Deferred Developer Fee
Developer Equity
State Historic Tax Credit Equity
Federal Historic Tax Credit Equity
City Brownfields Loan
State DECD Brownfields Loan
State of CT DECD CHAMP Loan
Webster Bank First Mortgage
Source
Sources of Funds
PROJECT SOURCES & USES OF FUNDS
NDC Academy 2015
Creative Financing
Mechanics & Farmers’ Bank Redevelopment