A Hartford, Conn., trophy property has caught the eye of a big money investor from Boston. Stop us if you’ve heard this before.
Newton-based CommonWealth REIT recently finalized its purchase of CityPlace I in downtown Hartford, for $99 million. The move comes less than a year after Northland Investment Corp., also based in Newton, watched as its Goodwin Square mixed-use development in Hartford fell into foreclosure – the third Northland property in Hartford in two years to succumb to foreclosure, after Metro Center and CityPlace II.
In the late 1990s and into the early part of last decade, Northland invested heavily in Hartford, becoming the city’s largest commercial landlord and talking loudly of the kind of revival befitting a city long-dubbed “New England’s Rising Star.”
But as the recession took hold and Hartford’s downtown vacancy rates rose, the city’s star fell. Northland has since cut its losses leaving its Insurance City portfolio to largely whither on the vine.
Enter CommonWealth, which is now keen on making – in the words of Christopher Ostop, executive vice president for Jones Lang LaSalle (JLL) in Hartford, the firm that brokered the CityPlace I deal – its own “big bet” on downtown Hartford.
Yes, CommonWealth is gambling with better odds than Northland. CityPlace I boasts a long list of stable, long-term tenants. The full building stands as a rare bright spot in an otherwise gloomy downtown market that produced a 30 percent vacancy rate for much of last year.
The deal also gives CommonWealth an inside edge should it ever decide to pursue ownership of CityPlace II, located adjacent to the bigger property.
But still, CommonWealth risks falling prey to the same kind of hubris that sunk its Newton neighbor in Connecticut’s capital city.
One has to wonder why, after owning the building since its construction in 1983 and seeing it through a number of ups and downs and a pricey renovation, CityPlace I’s sellers decided to cut and run now.
Then again, at $112 per-square-foot, the purchase price represented downtown Hartford’s most expensive commercial property deal since the heady days of 2007. Perhaps the sellers knew something we didn’t and decided to sign before CommonWealth reconsidered the wisdom of signing a 2007-level deal in 2012.
CommonWealth also has to hope its deal sets a new base level in the city upon which future transactions can build, in turn building value for their property.
“I think it’ll definitely raise awareness in the investment community nationally and internationally that people are willing to do business in Hartford,” Ostop told Banker & Tradesman. “I think it clearly says that Hartford is a secondary city that should be seriously looked at.”
But Ostop also may have said it all when he called Hartford a “secondary city.”
When serviceable properties in primary cities like Boston and New York can still be had for a relative song, attracting more investors to a place like Hartford – or, for that matter, places like Worcester, New Bedford, Lowell or Lawrence, cities with very little ammunition with which to help attract new corporate tenants – is a tough sell.
In the end, there is no escaping the fact that these kinds of smaller, secondary urban centers don’t just come back because a developer says so.
So, while notable, one large transaction does not a recovery make – not in Hartford, not in Worcester (pinning its hopes on City Square) and not in New Bedford (how long has a waterfront revival been talked up in the former whaling capital?). What these cities need is their own brand of home-grown vision and leadership, plans to make the cities attractive again to both residents and the companies they will ultimately support.
And that’s something no Boston investor can hope to bring with them across Interstate-90 or down I-84.
