Trinity Financial will soon do what few developers have pulled off recently: they’ll take a large project vertical, building into the teeth of a credit crunch and a brutal economic downturn.
The Boston-based firm is preparing to break ground on the first phase of their Hamilton Canal project in Lowell. The 15-acre site currently consists of vacant land and industrial ruins; city officials believe the $800 million redevelopment project will link Lowell’s commuter rail station with the city’s emerging downtown. Downtown Lowell has seen the addition of 1,600 market-rate residential units over the past decade, and city planners believe Trinity’s Hamilton Canal development will spur further growth in the surrounding neighborhood.
“This is really our signature economic development project,” said Adam Baacke, Lowell’s director of planning and development. “It’s an opportunity to literally transform the gateway to downtown Lowell.” Trinity expects to break ground on the project this quarter.
“It’s right in the middle of the city, and when you drive by, the first thing you see is this lot of vacant land and a severely deteriorated mill that’s generously called a building,” Baacke said. “It’s an obvious sign of decline in a post-industrial city. But when you get past that, Lowell is everything that’s right about how to revitalize a post-industrial city.”
Baacke added, “Other opportunities will be catalyzed by this project, but in its absence, there will be no investment.”
Lowell An Attraction?
“There’s something extremely attractive about building in Lowell,” said Abby Goldenfarb, Trinity’s project manager for the Hamilton Canal. “There’s a genuine feel. It’s not contrived. The mills, the canals – it’s a place people will want to live and locate their companies. We wouldn’t want to be anywhere other than Lowell.”
The 10-year, $800 million project calls for the construction of 700 residential units, 400,000 square feet of commercial space, 50,000 square feet of retail, and $45 million in public infrastructure improvements.
It’s an ambitious plan years in the making, and it presents sizable risks to both Trinity and the city.
Lowell used EPA and DEP funds to perform some environmental cleanup work on the 15-acre site, but given its industrial past, planners are treating the area as a brownfield. Even so, the city appraised and sold the site as if it were clean. If Trinity needs to perform additional environmental mitigation, the cost of that work will come off the top of the land purchase price. The city also bankrolled the construction of the parking garage that will serve the project’s first phase, because “the market is not yet strong enough to support 100 percent of the cost of structured parking by the developer,” Baacke said.
Trinity, meanwhile, is responsible for sourcing funding for the project’s $45 million public infrastructure bill. Legislators secured a $10 million funding authorization in the state’s most recent transportation bond bill, and Trinity is chasing a number of state and federal funding sources. Those sources include federal stimulus funds and the menu of state infrastructure funding mechanisms. Gregory Bailecki, the state’s secretary of housing and economic development, recently held up Hamilton Canal as a strong candidate for stimulus dollars. However, if public grants and bonds can’t cover all the project’s infrastructure needs, Trinity is on the hook for the unfunded portion.
The Plan
Hamilton Canal’s first phase consists of two historic building renovations. An old manufacturing facility will be renovated into 50,000 square feet of commercial space, and the severely dilapidated Appleton Mills building, a 19th century textile factory, will become 130 units of artist live and work space.
Trinity is moving forward with the first phase now for two reasons. The poor condition of the Appleton Mills building and the commercial site, known as the Freudenberg building, make them necessary first steps. The rest of the $800 million buildout couldn’t move forward if the two existing structures weren’t addressed first.
“Nothing would be able to be built without this first phase,” Goldenfarb said. “It looks like a bomb was dropped on it. It’s a 1.9-million-square-foot, mixed-use site, and the first phase is instrumental.”
Moreover, the buildings’ pressing physical needs, especially at Appleton Mills, means Trinity needs public funds to make the redevelopment economically feasible.
“There’s a tremendous premium associated with the condition of the building,” Baacke said.
That premium is turning out to be a bit of a blessing. It steered the building’s redevelopment program toward affordable artist housing, opening up a number of avenues for equity financing.
The bulk of construction financing on the $58 million residential project will come from private tax credit equity, with another $6 million coming from low-interest affordable housing loans from the state. Discussions with a number of additional equity investors are ongoing. This is allowing Trinity to keep its reliance on debt financing to a minimum.
“It’s a complicated mixed-finance project, but that’s what we do at Trinity,” Goldenfarb said. “Having the state behind the project has been instrumental in getting it to this point.”
The developers tapped 17 financing sources for its mixed-income Carruth development at Dorchester’s Ashmont Station.
Arts Driving The Deal
Trinity is currently close to inking a deal with an unidentified local tenant interested in purchasing the whole of the Freudenberg commercial building, making that piece of the project a build-to-suit, rather than a speculative venture. The artist residences target a niche Lowell has been driving for the past decade, Goldenfarb said, and will seed demand for the rest of the master plan’s buildout.
“It’s arts as a driver of economic development,” Goldenfarb said.
Beyond the project’s first phase, both Trinity and the city are confident the work they put in before breaking ground will pay dividends in the remaining construction schedule. The city and the developer spent a considerable amount of time on up-front planning, writing the project master plan from scratch.
“We jumped into it knowing that the master plan, creating zoning, would take significant amount of time,” Goldenfarb said. “What’s attractive is, from beginning, we were able to work with the city to shape the end result.”
That planning resulted in what Baacke said is the state’s first form-based zoning code written on a municipal level.
“It much more strongly regulates form, and as a trade-off, there’s less emphasis on use,” Baacke said.
He believes the code will speed building once the economy rebounds, because it permits flexible uses as of right.
“If commercial is strong and residential is weak, the developer can emphasize commercial. The developer doesn’t have to try to carefully time the market, and guess about market trends. There are minimum requirements overall, but the code allows flexibility as far as where they can go.”
