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November 15, 2021 Deal Watch

From Belarus to New York, apartment developer Klaynberg makes big bet on Hartford

Photo | Contributed Joseph Klaynberg’s Wonder Works Construction development firm has built or renovated 559 apartment units in downtown Hartford since 2016.

Joseph Klaynberg and a partner have added or renovated 559 apartments to Hartford’s downtown over the past decade, making him one of the city’s busiest developers.

Those investments took a hit in 2020, as COVID-19 pushed occupancy rates in Klaynberg’s “Spectra” apartments below 80%. Klaynberg’s partner – New York-based Girona Ventures, led by Jeffrey Ravetz – sold its half-share of four downtown Spectra buildings amid the downturn.

But Klaynberg says Hartford’s promise is far from tapped and is pursuing several new developments.

“I believe so much in Hartford,” Klaynberg said. “I said: ‘No, I am staying,’ I’m not leaving Hartford; I plan to do more.”

That determination and drive has fueled Klaynberg’s success. He has a history of seeing and seizing opportunity.

In 1979, Klaynberg decided to leave his native Belarus for America, seeking an escape from anti-Semitic discrimination. He was chief engineer of a 200-employee construction company at the time.

Klaynberg traveled to Austria, then Italy as he waited for his visa application to be processed. He had a master’s degree from the Moscow State University of Civil Engineering but took jobs as a construction laborer in order to eat. At 25, Klaynberg arrived in America with the equivalent of $140 in his pocket and again took a job as a construction laborer.

In seven years, Klaynberg worked his way up to a junior partner with a New York-based construction company. Then, in 1987, he launched Wonder Works Construction Corp. with four employees.

Today, he has 80.

Current pipeline

Although the pandemic has brought setbacks to many businesses, Klaynberg has been able to hold his own.

Last year, Klaynberg’s partner – Girona Ventures – sold its half of the Spectra Hartford apartment buildings to parking mogul Alan Lazowski and prominent developer Marty Kenny. Occupancy rates in those buildings have since rebounded to above 96%, Klaynberg said.

Wonder Works is pushing ahead with several new Hartford development proposals, this time without partners.

Klaynberg plans to purchase two city buildings – a decommissioned city firehouse on Pearl Street and a former municipal building across from City Hall on Main Street – by the end of this year.

Wonder Works negotiated a $360,000 price for the firehouse and $425,000 for the municipal building. The company will pay another $160,000 over five years for a parking lot behind the municipal building.

Klaynberg’s designs call for 41 apartments in the municipal building and 40 in the firehouse. The projects’ combined development costs are estimated at $17.1 million.

Klaynberg said he intends to build an apartment building of up to 120 units on the parking lot behind the municipal building, with hopes to break ground in 2023.

He also recently submitted a proposal to the city to purchase a former city school at 110 Washington St., and remodel it into 70 loft-style apartments.

“We’ve been interviewed by the city but not awarded the project yet,” Klaynberg said.

Wonder Works’ Spectra Plaza development in Constitution Plaza converted a former hotel into modern apartments.

Local assists

Klaynberg and Ravetz completed four projects in Hartford with combined development costs of $105.9 million since 2016. But Klaynberg’s company and most of its work is rooted in New York.

Wonder Works has completed 17 developments at a combined cost of more than $773 million in New York since 2016, the company said. Klaynberg said he retains an ownership stake in about half of those projects.

Wonder Works and Girona Ventures got their start in Hartford in 2012, buying a long-vacant, 250,000-square-foot hotel on Constitution Plaza for $500,000. It was remodeled into 193 apartments in a $23.6 million project that wrapped in 2016.

Wonder Works and Girona subsequently remodeled two decaying Pearl Street office buildings into modern apartments. They also purchased and remodeled the former Trumbull on the Park apartment building.

Klaynberg said he was drawn to Hartford by bargain prices. Lower purchase prices resulted in development costs of about $250 per square foot in Hartford versus $800 in New York City, he said.

State and local governments have come through with loans, tax credits and tax breaks. Beyond that, officials have been extraordinarily accommodating, Klaynberg said.

“Everyone was assisting in a great way,” Klaynberg said. “The mayor when we came here for the first time – Mayor [Pedro] Segarra at that time – actually drove us around the city, showing us everything. It was really impressive.”

Klaynberg is bullish on Hartford’s prospects, despite mixed signals coming out of COVID-19.

Wonder Works’ Spectra apartments include modern amenities and views of downtown Hartford.

Klaynberg said he still sees empty city buses, but restaurants have reopened, and apartment occupancy rates have rebounded.

Retail spaces within Spectra buildings are also beginning to fill.

A fitness studio has signed a lease for one of three retail spaces in one apartment building at 111 Pearl St. Another tenant has signed a letter of intent to put a coffee shop and liquor store in another.

Michael Freimuth, executive director of the Capital Region Development Authority (CRDA), said Klaynberg was “an early pioneer” for the Capital City’s downtown.

“He kind of set the mark, showed people how it could be done, that it could be done,” Freimuth said. “He was part of the team that came in early. In one sense, his importance lies in seeing the opportunity early.”

The CRDA has lent $18.1 million to projects involving Wonder Works since 2016 and is scheduled to oversee $10.6 million in city redevelopment funds scheduled to assist in redevelopment of the firehouse and municipal building.

Since its creation by state lawmakers in 2013, CRDA has lent out $137 million to help finance the creation of 2,375 apartments in Hartford’s downtown, Freimuth said.

Occupancy in those apartments dipped to “the mid- to high-80s” last year, Freimuth said, but has since rebounded to above 90%.

There were roughly 1,000 apartments in downtown Hartford before CRDA’s launch, and there are about 400 more in various stages of planning or construction, Freimuth said.

But there is still plenty of room to grow.

“We think we need about 5,000 to start driving retail and restaurants,’’ Freimuth said. “So, we are still, by that math, about 1,500 units shy of reaching that threshold.”

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