Case Study

Multi-Credit Spinning Gold Into Food

8 min read

Old Hartford factory becomes jobs and health generator

Financing complex community development projects can take a lot of time and a whole lot of funding sources. The Swift Factory renovation in northeast Hartford, CT is a good example, at eight years and counting in development and more than a dozen money sources, including three kinds of tax credit allocations.

Groundbreaking took place last month and construction will continue through next year as the former gold leaf factory, started in the 19th century, gets transformed into a jobs generator for a distressed neighborhood. A food theme among its new tenants will actually mirror the property’s use as a farm way back in the day.

Though no actual gold is involved now, a long list of participants are hoping there will be metaphorical neighborhood gold at the end of this project’s rainbow.

A brochure from the project’s developer, Community Solutions Inc. (CSI), lists no fewer than 15 different interim and permanent financing partners, with a total of $33,946,974 raised. These include State and Federal Historic Tax Credits and New Markets Tax Credits, at about $24.5 million of the total. The project also was financed through many grants and loans.

According to a fact sheet on the deal by the Massachusetts Housing Investment Corp. (MHIC), a lead member of the financing team, three community development entities provided New Markets financing: MHIC itself ($11.3 million); the National Trust Community Investment Corp., ($10 million); and Boston Community Loan Fund, ($3 million). MacRostie Historic Advisers LLC, Washington, DC, helped CSI in obtaining Historic Tax Credit money, which totaled about $8.5 million through both federal and state programs.

Tax credit investors included US Bancorp Community Development Corp. and New England utility Eversource, according to MHIC. MHIC and Boston Community Loan Fund (BCLF) provided bridge loans. Multiple state and federal agencies provided debt financing or grants, and many groups and even an individual provided philanthropic support.

Deborah Favreau, chief development officer at MHIC, summed up the financing complexity this way during a presentation on the project at a National Housing & Rehabilitation Association conference this past summer: “three state agencies, three federal agencies, three tax credits, three foundations, three CDEs, a CDFI, US Bancorp, and National Grid.” (National Grid is a United Kingdom-based utility serving the northeastern United States.)

She summarized the neighborhood as having a population of 24,000, a poverty rate of 40 percent, 30 percent unemployment, a life expectancy ten years lower than neighboring West Hartford, and having just 38 percent of residents with a high school degree.

The project is creating 225 construction jobs and 150 permanent jobs, according to the MHIC.

Food as the Economic Generator
The need for community revitalization is clear.

According to CSI, northeast Hartford suffers from a very poor economy and unhealthy lifestyles. Health outcomes are dire, with high levels of diabetes, infectious disease, obesity, cardiovascular and respiratory disease. The Swift Factory project (called M. Swift and Sons Co. while it was operating) is intended to take both of those things on, by providing jobs for local residents and by locally grown food and other food projects.

Food-oriented tenants for the 82,000-square-foot facility will include Bear’s Smokehouse BBQ, using 14,000 square feet of space to produce spices and condiments for use in the company’s restaurants, FreshBox Farms, a hydroponic lettuce producer using 37,000 square feet of space and a food business incubator using 4,500 square feet. There will also be office space of 10,000 square feet.

Patrick McKenna, Community Solutions’ senior project manager, said the nonprofit decided not to develop housing on the site after extensive consultations with community residents after they acquired the property in 2010. (The gold leaf factory, started in 1887, had closed its doors in 2005 after being run by five generations of the Swift family).

“The community was concerned with disinvestment, public safety and jobs. New housing was not top of the list,” he said.

“How do we improve public safety? People need jobs to get them off the streets,” said McKenna. “Unemployment a few years ago was about 27 percent in the neighborhood. We wanted to try to figure out an industry that we could bring into the building that would employ people in the neighborhood.”

After some study and concluding the area was a food desert, “We settled on food and food businesses as the economic engine for the factory.”

McKenna said CSI thought the food industry would create entry-level jobs that would work for local residents. “We wanted jobs to be accessible to the neighborhood,” he said. He noted that Bear’s, a local restaurant chain, has about 75 percent Hartford residents in its employee base. The chain recently raised its minimum wage to $15. They plan to operate a commissary kitchen at Swift Factory to provide “sauces for their restaurants, and wholesale distribution through supermarkets and online.”

FreshBox plans indoor farming of lettuce for sale to markets in the region. Two houses on the property will be renovated as well. One will be a community space focused on art. The other will be focused on health, McKenna said.

“It’s a really complicated project,” said Albert Rex, Northeast partner at MacRostie Historic Advisors. “With this many building types (five brick industrial buildings and two houses) and the potential different uses, we had a lot to work through.”

Golden Quirks
Working in gold engendered a few unusual effects at Swift Factory, he said. Windows were tinted to prevent curious passersby from peering in and to prevent thieves from planning to steal the precious metal. Employees were vacuumed to recover any gold that might have fallen on them during their shifts.

“The family that owned the Swift Factory actually pulled up all the floorboards down to the subfloor and put them in their kiln and melted them and walked away with $250,000 of gold from all the gold dust over the years,” Rex related.

One complication proved to be environmental concerns that had to be ironed out to get historic credit approvals. “Some unusual uses of solar energy can be difficult from a Park Service approval perspective. They don’t want to see things on a roof,” Rex said. “So we’re putting the solar in at an angle so it’s not really visible from the public way.

“Also, there’s some geothermal component to the project. They’re pulling out every kind of potential sustainable energy to make this project as cost effective as they can and to make an opportunity to create jobs within this very, very poor neighborhood.”

Funding Quirks
Having so many financial firms and government agencies in the mix made for some difficulty, Rex said. “The attorneys and accountants on the job really had to work hard to make these pieces come together. I’ve seen a lot of different structure charts over my career, but this thing looked like a circuit board from a 1950s radio. It was really a testament to the lawyers and accountants and owners to use all these different funding sources.”

Swift Factory proved to be a project many people are passionate about. Boston Community Loan Fund, for instance, stepped up multiple times, according to its president, Michelle Volpe.

“Our earliest involvement was we provided a predevelopment line of credit to Community Solutions to move the project forward to construction. We provided $3 million in NMTC allocations. We also provided the bridge loans to bridge some of the different equity sources to the project, including Historic Tax Credit Equity, and we provided leveraged debt, construction and mini-permanent,” she said.

“We’re all in. We love the project.”

Volpe said, “We were very excited about the deeply engaged community process that Community Solutions engaged in. It was part of a broader strategy with a broader set of partners that were all aligned around this, including a HUD Promise Zone, and the health focus that included area hospitals and health centers.

“It was a very ambitious project and we felt the sponsors did a fantastic job of identifying and overcoming the sets of hurdles that one faces in a project like this, including getting the building substantially preleased before closing.”

The BCLF president agreed with Rex on the occasional hair-pulling properties of the deal. “At one point during the closing process, the team of attorneys declared this was the most complex transaction they had ever worked on. Pairing all the different sources of equity and debt proved to be enormously complex.”

Story Contacts:
Patrick McKenna, Senior Project Manager
Community Solutions
[email protected]

Albert Rex, Northeast Partner
MacRostie Historic Advisors
[email protected] 

Michelle Volpe, President
Boston Community Loan Partners
[email protected]

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.