December 4, 2017
Commercial Real Estate

Hartford’s high taxes chase e-commerce vendor to suburbs

Photo | Contributed
Photo | Contributed
Businessman Joseph Sullo purchased 24 Maple St., Wethersfield.
Gregory Seay

While the Hartford-East Hartford region is in the running for a second headquarters for one of the world's largest online consumer-goods retailers, Hartford's oldest and largest e-commerce vendor of restaurant equipment is moving some of its operations out of the city.

Joseph Sullo, owner-manager of Classic Restaurant Supply in Hartford and its e-commerce affiliate, RestaurantSupply.com, recently paid $2.175 million for a Wethersfield industrial building at 24 Maple St. and another $440,000 for a pair of houses fronting the building, to relocate and expand his online-fulfillment operations. Colliers International brokered the deals.

Classic Restaurant Supply currently operates from a showroom-distribution facility at 312 Murphy Road, in the city's South Meadows.

The reasons Sullo lists for deciding to relocate the fulfillment portion of his Murphy Road operation to the suburbs — high property taxes, a dearth of talent — underscores some of the ongoing challenges the Hartford region and Connecticut face in trying to lure Seattle e-commerce giant Amazon's second headquarters.

Sullo said a $750,000 makeover is underway on 24 Maple St., the 85,000-square-foot home of a former candy wholesaler, including converting its oil-fired boiler to natural gas and installing mezzanine racks and conveyor systems. Once complete next spring, it will fulfill Classic's online customer orders for restaurant hardware and accessories via RestaurantSupply.com.

Classic Restaurant Supply is not affiliated with Restaurant Depot on Weston Street, in the city's North Meadows.

Into the new Classic Restaurant Supply facility in Wethersfield Sullo said he will also consolidate his existing, smaller fulfillment center on Holly Drive in Newington. Sullo said the Hartford showroom will stay. Classic generates about $40 million in annual revenue, he said.

The two Wethersfield houses he bought occupy a corner of the Maple Street site on which Sullo said he plans to open one of his Artisanal Burger Co. restaurants within two years. Manchester is home to one.

In all, 40 people will work at the planned Wethersfield facility, so Sullo said he is preparing to hire another 20 to 30 people. However, he said it's hard to recruit workers who are not reluctant to work in Hartford.

On top of that, Sullo said the tax burden on approximately 1 million square feet of real estate he owns in the city forced him to look outside for space. The mill rate in Hartford is 74.29 vs. 39.77 in Wethersfield. He said he will pay less than $1 per square foot in taxes on the three buildings and 6 acres he acquired in Wethersfield vs. more than $2 a square foot if they were in Hartford.

Sullo is also currently suing the city after losing his appeal over the tax assessment on at least one of his properties on Locust Street, in the city's South End. The city's 2016 revaluation led to a 20 percent increase in commercial property values in Hartford, which prompted higher tax bills for many landlords.

"Hartford is getting impossible to do business in,'' he said. "The business environment is unfriendly."

Sullo noted that this year's talk of a potential bankruptcy filing by the city has injected a measure of uncertainty for which landlords and entrepreneurs — even prospective hires — find unsettling.

"We don't know what the future holds,'' he said.

For those reasons, he said he doubts that Amazon would choose the Hartford region over dozens of other U.S. urban and suburban clusters also in the chase.

Sullo said 85 percent of Classic's sales are from 600 miles or more beyond the city, eroding his ties to the region. He said he also is searching for a Nevada location for another RestaurantSupply.com fulfillment center that, when combined with the Wethersfield site, will allow him to ship to his e-commerce customers anywhere in the U.S. within 48 to 72 hours.

Don Chapman, Hartford's director of community and small business development, said Sullo never reached out to his office and he was unaware of Sullo's expansion plans. Chapman said he understands the frustration the city's high mill rate causes property owners like Sullo.

But if Sullo had alerted the city to his plans, Chapman said Sullo may have been eligible for a tax abatement and other incentives available for business investments in the city above $500,000.

"We're approachable,'' Chapman said. "We're always open.''

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