Boston-based WinnCompanies hopes to redevelop vacant mill buildings into 600 new rental housing units at Malden Mills in Lawrence in a deal that would also allow the bankrupt Malden Mills company to repurchase the property and preserve 1,200 jobs.
When a major Boston developer proposed a plan to help a Lawrence businessman recapture control of bankrupt textile manufacturer Malden Mills Industries with the creation of 600 new rental housing units, more than a few local officials were willing to listen.
With virtually no new market-rate housing construction in the pipeline, the infusion of a new mixed-income rental housing development in this former mill city would be a major boost to the region. But questions about whether the region has the market to make such a project a success will surely be asked in coming months.
At the end of September, Malden Mills Chairman Aaron M. Feuerstein announced that with backing from the WinnCompanies, a Boston-based developer and manager of a diverse portfolio of properties across the country, he could buy back the textile company and preserve more than 1,000 local jobs. Under the plan, Winn would bring $100 million in financing to the table to acquire and build housing in vacant mill buildings as well other financing. To do that, Winn is hoping to utilize an assortment of federal and state tax credits.
Some local business and community leaders who are supportive of new housing development in the region took notice. But they are cautious about getting too excited about a project they believe will be difficult – but not impossible – to pull off.
“Any housing, particularly new housing or renovated housing, is good for this area. There’s a big need for it,” said Paul Miller, president and chief executive officer of Lawrence Savings Bank in North Andover.
Lawrence, considered one of the most economically depressed cities in Massachusetts, has approximately 25,600 housing units, the majority of which – more than 16,000 – are renter-occupied, according to information from the latest U.S. Census. The median household income in the city, at about $28,000, is well below the state’s $50,502 median household income. Median rents are about $536, according to the 2000 U.S. Census, and the average rent for a two-bedroom apartment can range anywhere from $750 to $900, much lower than the average rents found in surrounding communities.
Cautioning that it’s too early to speculate on the feasibility and impact such a project would have in the community, bank president Miller said a such a large housing development, like the one Winn is proposing, would only work if it’s the right fit for the city. “You can’t have million-dollar apartments in the city of Lawrence. It’s got to fit the demographics of the city.”
The current apartment vacancy rate for the Lawrence market area – which includes neighboring North Andover, Andover and Methuen – is slightly higher than most of other regions of the Bay State, according to a third-quarter report compiled by the Northeast Apartment Advisors in Acton that looks at occupancy in Class A, B and some C properties. In Lawrence, specifically, five mostly Class A and Class B apartment complexes totaling 806 units have an average vacancy rate that stands close to 10 percent, according to Northeast Apartment Advisors.
Currently, no new market-rate housing developments are scheduled to go on line in the city. In the region, rental housing is in the pipeline for the next three years in Methuen, Andover, Haverhill, Merrimac, Georgetown and Amesbury. Two projects in Methuen, a 164-unit development built this year and a 280-unit project scheduled to be ready in 2005, are both being developed by the national firm Archstone-Smith. Most of the projects will include some affordable units.
In the last decade or so, there have been a few rental developments that feature market-rate units. Museum Square, a project that involved the conversion of an old warehouse in the heart of the Canal Street Historic District into a mix of 176 one- and two-bedroom apartments, emerged in 1989. In more recent years, River Pointe at Den Rock Park in South Lawrence, a development featuring 174 apartments with rents as high as $2,025 a month, and Jefferson on The Park, a 240-unit development, have been built near the Andover line.
Community-based groups have focused almost exclusively on creating affordable housing in Lawrence.
“Generally, rents will not support new market-rate construction in the city of Lawrence and that’s why you see nothing in the pipeline,” said Tom Meagher of Northeast Apartment Advisors.
‘Striking a Balance’
However, with heavy federal and state subsidies – like tax-exempt bond financing and tax credits – reducing the project cost, such a large housing proposal could work, according to Meagher. In addition, with the economy on the rebound and with some economists predicting significant job growth in the Bay State within the next two to three years, demand for additional rental housing could be strong.
“The trick in a city like Lawrence is striking a balance between the housing needs of the current citizens of the city, a number of who have low incomes, with the benefits of bringing in folks with moderate incomes or higher incomes to broaden the economic mix of the city,” said Clark Ziegler, executive director of the Massachusetts Housing Partnership Fund.
MHP, which has provided financing for several projects done by Winn, has expressed interest in possibly providing financing for the Malden Mills project. “It’s conceivable that we will play a role in this,” Ziegler said last week.
The WinnCompanies is hoping to build a mix of units that would be affordable for low-income residents and units that would be rented to higher-income renters. For example, the affordable units would be reserved for those earning a median income of less than $40,000 for a family of four. Rents for those units would range from $725 a month for a one-bedroom apartment to $825 for a two-bedroom unit. Rents for the market-rate units would cost more, but would still be in the “three-digits,” not four-digits, according to Larry Curtis, managing partner of Winn.
In an interview last week, Curtis said Winn wants to do the project for three principle reasons – one of them being that the city of Lawrence has never been the recipient of a flood of state resources.
“Lawrence has been greatly underserved from a competitive funding view,” said Curtis. He also noted that the company wanted to help Feuerstein – who is well known for his commitment to the community – keep jobs in the city. Feuerstein earned praise from local, state and national leaders when he continued to pay workers’ salaries and health benefits after a major fire in the mid-1990s at Malden Mills. He rebuilt the mill, which makes lightweight fleece used in blankets, military outwear and medical devices. But the company suffered through declining sales and with huge debts mounting was forced into bankruptcy two years ago.
“This is the real estate equation helping the business equation,” said Curtis. “It becomes more than a housing deal. It’s an economic development deal.”
Curtis said while he hasn’t done any comprehensive marketing study, he believes that most of the apartment vacancies that exist right now are in the higher-end market-rate units and that the vacancy for the more affordable units is much lower. Winn is hoping to attract not only Lawrence residents, but people from nearby communities like Methuen and North Andover.
“We think this is a chance for a wonderful redevelopment,” said Curtis. “This particular location is an excellent real estate location. It’s right on the Methuen line. These are beautiful historic mill buildings and there’s easy highway access.”
But some question whether people with moderate to higher-incomes from neighboring communities will be drawn to the new housing units in Lawrence.
Long Road Ahead
Debra Fox, director of real estate development for Lawrence Community Works, a community development corporation, said there’s definitely a need for housing in the city.
“There is a real housing crisis in the region and additional housing development in Lawrence would be positive,” said Fox. “There’s been very little new development in general in Lawrence.”
The CDC is in the process of finishing 17 affordable rental units in the North Common neighborhood of the city that will be available by the end of the year. Fox said 300 applications were received for those units. A three-bedroom unit, including heat, will be rented for $675 a month. In the past two years, the group built four two-family homes that were sold.
However, the CDC has never ventured into producing market-rate housing. “We have looked at doing mixed-income housing,” she said. “We’re not sure there’s a market [for that] yet.”
Recently, the CDC, in a partnership with neighbors, business owners and mill building owners, pushed for a rezoning overlay district in North Common. The rezoning, the first major zoning change in 50 years, will allow developers by right to undertake residential development projects in space that was previously restricted for commercial uses.
“I think similar planning is going to be needed to create the zoning that they [Winn] need to make that project a success,” said Fox.
And Fox said that Winn must include the neighborhood in its plans. “If this is going to work, this is going to have to be carefully and thoughtfully planned with a lot of input from the neighborhood and residents,” said Fox. “They will need to go through an extensive neighborhood planning process to make it a success.”
Other more immediate hurdles remain. The creditors must still approve the acquisition price of the business, according to Curtis. In the next week or so, Winn will be meeting with them. Winn will also have to go through a complex and competitive application process to win financing – including low-income tax credits, historic building tax credits and tax-exempt bond financing – a process that can take up to a year.
And there are the regular risk factors that come along with any large-scale real estate development – increases in construction, operating, fuel and other costs that will make the project more challenging.
But if any company can make a project like this happen it is Winn, according to housing experts. Winn has a track record of obtaining tax credits and making residential real estate projects a success in Massachusetts and across the country.
“It’s hard to think of a better company to be taking on a project like this than Winn,” said Ziegler, who noted that Winn not only has a “great reputation” as a developer, but also has solid experience in property management.
“They have had a very substantial role in property management and have managed nonprofit properties in urban locations,” he said.
Just two years ago, Winn won national recognition for turning around Mission Main in Roxbury, a distressed and crime-ridden public housing project. Winn undertook an extensive rehabilitation plan to create 535 new housing units and 10,000 square feet of community facilities at Mission Main.
Curtis hopes that the same kind of energy can be transported to Lawrence so that the new housing provides an economic stimulus to the entire neighborhood.
If Lawrence needs an example closer to home, then a project that Winn has undertaken in Lowell might have to do. Winn is in the process of converting the historic Boott Mills in Lowell into high-end apartments. “This [Malden Mills project] is the sequel,” said Curtis.
