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September 4, 2023 Deal Watch

Fairfield father-son development team makes big bet on increasingly popular single-family housing rentals

HBJ PHOTO | STEVE LASCHEVER Father-and-son development team Robert (left) and Bard Kligerman in front of their recently completed $25 million “Grand Luxury Homes” rental community in Granby.

Over nearly 50 years in the real estate business, Connecticut Realty Trust Chairman Robert Kligerman has prospered in areas overlooked by others.

It worked for him in the early 1970s, when Kligerman was a young broker focused on office properties on the periphery of New York City, which turned into a surprise success.

In the early 1980s, Kligerman and his wife, Dana Hammond Kligerman, bought their first apartment property in struggling East Harlem. Working with a partner, Kligerman would later amass a portfolio of 150 properties focusing on long-neglected parts of the city.

For the past 40 years, Kligerman has found success buying, renovating and running distressed multifamily properties, first in New York City, and later in Bridgeport and West Haven. In 2009, he founded Connecticut Realty Trust with one of his sons, Bard.

The partners say out-of-state investors have become increasingly interested in buying distressed multifamily properties in Connecticut in recent years, driving up costs and forcing them to try new strategies, including a growing focus on building duplex and single-family home communities, specifically to rent.

The Kligermans’ first foray into upscale new construction came in 2020, when Connecticut Realty partnered with Krown Point Capital on a $33.3 million purchase of the recently completed, 130-unit Grand Luxury Apartments in rural Granby. The purchase from Danbury-based Upstream Properties closed as pandemic restrictions began to set in.

“That was a relatively nerve-wracking experience, trying to close on the biggest acquisition of my career during the COVID shutdown,” said Bard Kligerman, CEO of Connecticut Realty Trust. “It turned out to be one of the best things that ever happened to us.”

The Grand Luxury Apartments were 47% occupied at closing, but quickly filled as the pandemic-fueled influx of residents to Connecticut drove a housing boom.

The real deal sweetener was an option to purchase 35 neighboring acres, which had been approved for development of 50 large single-family homes. Bard Kligerman, Krown Point Capital principal Reggie D. Kronstadt — son of a longtime Kligerman family friend — and investor Kevin R. Wang, of KRW Realty Advisors convinced local land-use officials to modify the approval to allow 23 duplex-style houses and 19 single-family homes in a new rental community. 

The roughly $25 million “Grand Luxury Homes” project in Granby wrapped in early June, and the units were fully leased as of early August.

The three- and four-bedroom units rent for $3,400 to $4,500 a month. The complex includes a pool, clubhouse, dog park and other communal amenities.

“It’s been fantastic,” Bard Kligerman said. “The reception to the product had been better than we expected, considering this was our first ground-up development.”

In May, Krown Point, Connecticut Realty and Wang broke ground on a 90-unit rental development on 35 acres in Bloomfield. There will be 12 duplexes and townhouses built in four- and six-unit buildings.

Portions of the $31 million development are expected to be ready to rent in the second quarter of 2024, with the remainder completed by August 2025.

Connecticut Realty Trust, Krown Point and Wang plan to break ground on side-by-side rental communities of 49 single-family houses and 57 duplexes (114 units total) in East Granby early next year. Bard Kligerman estimates about three years for construction, with a rough project budget of about $50 million to $60 million.

Upscale multifamily

It’s an impressive array of projects for a company that, until recently, focused exclusively on rehabbing distressed apartments. The father-and-son team said the move to the more upscale market was prompted by competition.

Bard Kligerman said he noticed a significant uptick in out-of-state investment in distressed Connecticut multifamily housing beginning around 2009. Suddenly, it seemed “the whole world” wanted to operate in that space.

Per-unit costs virtually doubled, upending the financial model, he said.

“It got crazy,” Bard Kligerman said. “It got untenable, and it forced us to pivot.”

The Kligermans first turned to converting distressed condominiums to apartments. In 2011, Connecticut Realty bought 48 of 60 units in a condo building on Atlantic Street in Bridgeport. They looked for condo complexes that were majority-owned by investors, so that few lenders would offer a mortgage to would-be buyers of the individually-owned units.

That strategy would eventually allow them to take control of the entire property. It took five years to purchase the remaining 12 units.

Bard Kligerman said the overall acquisition cost was about $2.5 million.

The Atlantic Street building was in an advanced state of decline, with broken windows and walls. Connecticut Realty has invested nearly $2 million more replacing the brick façade and roof, renovating units, repaving the parking lot, fixing drainage and performing other repairs, he said.

“The goal is to make it a place any one of us could live in,” Robert Kligerman said.

Bard Kligerman said Connecticut Realty has since transformed two more Bridgeport condo buildings into apartments in a similar process. One has 89 units and another 18.

For the moment, however, Connecticut Realty has its sights set on building additional upscale multifamily projects. It is considering locations in Fairfield and New Haven counties, hoping to diversify its geographic portfolio and minimize risk, Bard Kligerman said.

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