Fort Trumbull Developers See Opportunity in New LondonApril 29th, 2022 | by 18squared
The developers of a 203-unit apartment complex in the Fort Trumbull area see New London as an opportunity.
So does federal tax law.
A Thursday webinar, hosted by the state Department of Economic and Community Development, touted the project as the largest in the state so far to take advantage of federal Opportunity Zone tax incentives authorized in 2017 to bolster low-income communities.
Construction of The Residences at Fort Trumbull is underway on the Howard Street site. Parcels on the 80-acre peninsula, which also is home to Fort Trumbull State Park, have been vacant since they were cleared for development in a move by the city that led to the 2005 landmark U.S. Supreme Court decision in Kelo v. City of New London on the use of eminent domain.
Pfizer’s former research and development headquarters — the catalyst for the city’s plan to jump-start economic development in the area more than 20 years ago — is now occupied by Electric Boat.
Jason Rudnick, principal of the New Haven-based commercial real estate development company RJ Development + Advisors LLC, told the virtual audience of at least 40 people that his firm for years has viewed New London as an overlooked area with potential.
The tax incentive wasn’t the reason his firm was attracted to the area, according to Rudnick. It was the influx of industry and the increasing number of workers with not enough places to live and spend their money in New London.
“It was the city itself,” he said. “It was that opportunity.”
He pointed to growth at Electric Boat, Lawrence + Memorial Hospital, the State Pier construction project and the resulting possibilities in areas like the wind industry.
The federal government in 2018 approved 72 opportunity zones in Connecticut, including three in New London. That means investors can realize significant federal tax incentives if they re-invest unrealized capital gains into development projects in those distressed areas.
The law allows investors to take profits from earlier projects and put them into an opportunity fund within 180 days. Depending on how long they keep their earnings in the fund, taxes can either be deferred, reduced by 10-15% or eliminated completely at the end of 10 years.
In 2019, a previous developer interested in the property dropped plans for what was then pitched as a $30 million project after two years of negotiations with the city’s development arm and attempts to find a financial partner. Rudnick said he took over the project “to see it through.”
At the end of that same year, Rudnick’s firm sold property it had been developing as a hotel in New Haven to a national chain for construction. The New Haven Independent, reporting that Rudnick and business partner Yves-Georges Joseph II got $2.8 million for the sale, described the New Haven site as part of a stretch that was razed during mid-century urban renewal to make way for a highway that never came to be.
The firm used the proceeds from the sale to form its Opportunity Zone fund, Rudnick said. The incentive also makes it easier to lure other investors.
Included in the RJ Development portfolio are several commercial buildings and the 160-unit College & Crown, billed as a “premier luxury multi-family rental apartment development in downtown New Haven.” Those units, ranging from studios to two-bedroom units, are being rented for $2,010 to $2,368 per month.
Rudnick could not be reached by press time for more details on the New London project.
In addition to The Residences at Fort Trumbull, plans are in place for two four-story buildings — a 100-unit apartment complex and 100-unit extended stay hotel — on land in the Fort Trumbull peninsula sold earlier this year to Optimus Construction Management by the city’s development arm for $750,000.
Meanwhile, nearly 7 acres of city-owned land on the peninsula have been approved for a $30 million community center. Designs are being drafted for the facility, including a two-court gymnasium, eight-lane pool, indoor track, workout and games rooms and a wing of the building dedicated to the headquarters for the city Recreation Department and its associated programs.
Critics of the community center plan argue the city is using prime real estate better suited for a taxpaying entity. Some have said the location indicates a focus on new residents rather than the city’s existing youth population, who may not be able to access the site as easily.
New London Green Party member Frida Berrigan — a former mayoral candidate who also serves as the leader of the New London chapter of a grassroots group focused on permanently affordable housing — is among critics wary of the gentrification of the city.
Berrigan this week was one of the hosts of a Southeastern Connecticut Community Land Trust event titled “Homeownership in New London: History of Racist Barriers & How to Build Equity Now.” She did not attend the Opportunity Zone webinar.
“What the people of New London need is homes,” she told The Day. “Not apartments with luxury fixtures.”
She said projects going forward with a large number of smaller, higher-priced rental units and extended stay apartments rely on the transitory nature of big corporations that are subject to boom-bust cycles over the years.
The question revolves around what it takes “to build a truly local economy that’s sustainable and that works for the people who are going to live here, whether or not General Dynamics and L+M and a handful of other big corporations are here,” she said.
Berrigan’s vision for the area would recognize its natural beauty and history through a mix of homes, apartments and businesses where people “can put down their roots,” she said. Many of the ideas were outlined in a 2011 study by the Yale Urban Design Workshop.
She also pointed to the recommendations of the city’s affordable housing plan, released last month in draft form for approval by June in accordance with state law.
Among numerous strategies outlined in the 62-page document is a call for increasing affordable homeownership opportunities, especially for communities of color and those impacted by urban renewal. It also recommends a diversity of housing types, particularly family-sized units.
“In my mind anyway, it doesn’t check a single box on that very long checklist of what’s really needed,” she said.
Rudnick, during the question-and-answer portion of Thursday’s webinar, said all the apartments will be sold at market rate as part of the focus on supporting the workforce of the city’s largest employers.
“This was not meant to, nor developed, to be affordable,” he said.
But he said 30% of another project he’s working on outside of New London is made up of affordable units — and he would be interested in collaborating with the city on that kind of project in the future.
The state considers units affordable when, through subsidy or deed restrictions, residents of a household making 80% or less of the area median income don’t spend more than 30% of their income on rent or mortgage payments. The area median income for New London is $71,950 for three-person households, and $63,950 annually for 2-person households.
He said affordable housing developments take the cooperation of all facets of the community, including government officials, residents, financial institutions and the developers.
“Everybody’s got to play ball,” he said.