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August 9, 2022

Amid office market struggles, downtown Hartford’s Stilts Building faces foreclosure

COSTAR Hinckley Allen's Hartford office is in the Stilts Building at 20 Church St., downtown.
By Greg Bordonaro

One of the major Class A downtown Hartford office towers owned by landlord Shelbourne Global Solutions is facing foreclosure, reflecting the struggles of the city’s office market coming out of the pandemic. 

Wells Fargo Bank in June filed a foreclosure action in Hartford Superior Court against an affiliate of Shelbourne alleging the Brooklyn, New York landlord has failed to make payments since February on a $31 million mortgage for the 420,000-square-foot-property at 20 Church St., better known as the Stilts Building.  

In May, after several missed mortgage payments, Wells Fargo sent a letter to Shelbourne demanding full repayment of the mortgage’s outstanding $25.7 million debt.

The foreclosure process is still in the early stages and could be resolved pending negotiations between Shelbourne and the mortgage holders. 

Shelbourne Managing Member Ben Schlossberg told the Hartford Courant that his team has been working diligently with lenders to try to resolve the issue and that they are confident they can stabilize the building, which has an estimated vacancy rate of less than 20%.

“Shelbourne remains fully committed to Hartford and all the other various projects that we are currently working on and involved with,” Schlossberg told the Courant.

The Stilts Building was the first property Shelbourne purchased in downtown Hartford for $44.4 million. As part of the deal, it took out a $30.8 million mortgage with a 4.53% interest rate and April 6, 2023 maturity date. Shelbourne has had the biggest impact on downtown Hartford’s commercial real estate market over the past eight years.

Since 2013 it has bought hundreds of millions of dollars in real estate downtown — including major class A office towers — becoming the center city’s most dominant landlord.

Its portfolio includes the iconic Stilts Building; the blue-windowed office tower at 100 Pearl St., purchased in 2015 for $36.9 million; and the Metro Center at 350 Church St., purchased in 2015 for $36.9 million.

The downtown Hartford office market has taken a hit from the pandemic, which has made many employers downsize their office footprints as they adjust to a hybrid workforce, where employees come to the office a few days a week and work from home on others. 

Class A buildings in downtown Hartford had a 20.1% vacancy rate at the end of the first quarter, according to CBRE. The overall office vacancy rate in downtown Hartford at the end of March was 17.9%. 

Besides its dominant office space holdings, Shelbourne has been branching out to other property types.

It plans to redevelop a portion of the former 12.5-acre Fuller Brush manufacturing campus in Hartford at 3580 Main St., into 153 market-rate apartments. That effort gained momentum in July, after the State Bond Commission approved a $5.5 million low-interest rate loan for the project. 

In June 2021, Shelbourne and Waterbury-based Axela partnered to acquire downtown Hartford’s Red Lion hotel for $22 million, with plans to convert the remaining guest rooms into market-rate apartments.

Finally, Shelbourne is also one of the partners in the ongoing mixed-use, $100-million redevelopment of Hartford’s Pratt Street corridor, which will add hundreds of new or refurbished apartments.

More recently, Shelbourne has been trying to find creative ways to bring people back to downtown Hartford. It created a new marketing video to promote the city and is offering significant discounts and perks, including lower parking rates and discounted apartment rents, for new office tenants.
 

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