Bijou Square Downtown Bridgeport 1
Bijou Square A Public-Private Partnership (P3) Private Investment, Vision, Capacity, and Tenacity Kuchma Corporation Public Resources Subordinated Debt Community Development Financial Institutions Housing Development Fund Community Capital Gap Funding (state and local) CHFA City HOME CDBG Other incentives Phase in taxing through state enterprise zone program 2
Bijou Square Market Transformation Mix of Adaptive Reuse and new construction Mixed-use (getting the right mix) Restaurants Professional offices ( creative class ) Cultural Space Open Space Preserving character of historic buildings Recreating the market and creating a sense of place Working off asset base of downtown Nearby Train Station Downtown workforce Underutilized Parking garage 3
Real Estate Challenges Development Cost > Fair Market Value Conventional Financing (Debt and Equity) is a function of cost, not value Result is funding gap Approaches for filling funding gap Equity raised through state and federal credits Subordinated debt Tax abatements that increase borrowing capacity Grants 5
Financial Imbalance Phase I 6
Solution for Real Estate Imbalance Federal Tax Credits Dollar for Dollar credits against federal taxes to investors Tax credits available to investors Tax Credit developments must demonstrate public benefit 2 tax credits used for Bijou Rehabilitation (Historic) Tax Credit New Markets Tax Credits 7
2 Types of Tax Credits Bijou Square Rehabilitation Tax Credit (RTC) Historic Tax Credits For historically significant buildings 20% one-time credit for investor Used for Bijou Square and 3 other development in CBD New Markets Tax Credits (NMTC) Commercial tax credit designed to attract private investment in low and moderate income areas 39% credit over seven years NMTC used as valuable resource in Bridgeport 4 transactions in CBD Over $35 million in private investment with 2 credits in Bridgeport CBD 8
RTC Impact on Bijou Square 9
NMTC Impact on Bijou 10
Solution Summary 11
Getting the Buildings Occupied Plenty of initial tenant interest in Bijou Real estate only as successful as the strength of the tenants and the ability to get tenants in buildings Challenge is capital access for tenants for Working Capital Tenant Improvements Credit challenges Collateral and cash flow Inherent risks of small business loans 12
Resources for Small Business Tenants Community Capital Fund A local CDFI (community development financial institution) 10 loans on Fairfield Ave. Two Boots (tenant improvements) Antinozzi Associates (working capital) Eperne Restaurant (tenant improvements) City of Bridgeport CDBG 13
323 Fairfield: Phase II
323 Fairfield Avenue 84 Units of housing 10,000 SF of ground floor retail space Hugely important for downtown Bridgeport First newly constructed private building in Bridgeport CBD in over twenty years Change perception 15
323 Fairfield Initial Financial Structure For-sale residential condos Conventional Debt/Equity Split to be taken out by residential sales proceeds and small longterm commercial mortgage on retail space Initial Lender pulled out Other interested lenders followed suit Difficult to access construction loan for residential condos Virtually unavailable in marketplace Lenders lost confidence in project s ability to sell units As a result, convert development from for-sale to rental 16
Cont. Problem Original FMV as Condo = $24 million Adjusted FMV as Rental = $15 million Huge cost/value differential Cost ($24 million) value ($15 million) Debt a function of value, not cost 17
Final Structure 18
Bijou Square Wine Shop
New Robinhood Cleaners
Moda Studios
Melt Market & Cafe
274 Fairfield Ave
166 Elm St
260 Fairfield Ave