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Developers signed on to build at least 300 apartments on the former Showcase Cinemas site in East Hartford don’t expect to finalize financing by a Sept. 30 deadline, setting them up for a $30,000 monthly penalty under their agreement with the town.
However East Hartford Mayor Michael Walsh says he will exercise his authority under the town’s agreement with developers Avner Krohn and Brian Zelman to push back the deadline to April 30.
The move is an acknowledgement of rising economic challenges, trust in the good faith of the developers and a continued desire to see the project realized.
“At the end of the day, we want this built,” Walsh said. “It is good for the community. I don’t want to be punitive at this juncture. I want to encourage them to continue to do this project.”
Walsh said he acknowledged the financial markets have shifted greatly since 2022, when the town first agreed to sell the 25-acre site off the Silver Lane commercial artery and provide $10 million in local and state funds to support a project with costs expected to be well over $100 million.
Jasko-Zelman I, the limited liability company used by Krohn and Zelman, originally promised to build 360 apartments and secured land use approvals that would have allowed up to 477 units. The project promised to bring attractive, market-rate apartments in a complex with many amenities to an area the town is working hard to revitalize.
Amid higher or rising interest rates and construction costs, East Hartford’s Town Council agreed in March to reduce the required number of apartments to 300. Krohn and Zelman say they still intend to build 402.
The town has agreed to sell the property for $1 and arranged $10 million in local and state financial aid to facilitate the highly antiicpated development.
“I’m forgoing being punitive because the market in February of 2022, in terms of banking, was extremely forgiving,” Walsh said. “The market they are facing now, with interest in the 7% and 8% range, along with inflation – for this project to be viable we have to meet them halfway and I don’t think $30,000 a month is the right signal.”
Zelman, reached Thursday, acknowledged challenges but still expressed a high degree of confidence the project will be ready to move forward by the spring, if not sooner.
Zelman said the project’s size made it challenging to secure financing even before changes in the capital markets over the past year. A project of this size is too big for lenders with whom Zelman and Krohn have relationships. The partners are now exploring breaking the effort up into two pieces that would be financed separately.
Financing is not the only challenge.
The town is still working through local building permit approvals and the developers are still working through needed permits from water and sewage provider MDC, Zelman said.
The complex requires complicated water hookups and the MDC is seeking assurance there will be no damage to a major water main passing through the building site, Zelman said.
Zelman said he is “fairly certain” the project will move forward, noting he and Krohn continue to spend on predevelopment activities. That cost has nearly reached $3 million, he said.
While some lenders have been hesitant about tackling such a large-scale project in the Greater Hartford area, Zelman said, they are very willing to lend on smaller scale projects led by him and Krohn.
“We are investing serious money,” Zelman said. “The town and (the Capital Region Development Authority) have made serious commitments to this. I am told by those throughout the process this is no reflection on us at all, it’s just the size of the project in the marketplace we are in.”
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