HARTFORD — A sale of The Millennium apartment tower for delinquent property taxes has been averted just days before a planned auction, but the owner, downtown Hartford’s largest commercial real estate landlord, has a new problem: a move to foreclose on three, historic buildings planned for renovation on Pratt Street.
Shelbourne Global Solutions LLC, of Brooklyn, N.Y. purchased the buildings at 57, 65 and 75 Pratt St. in 2019 as part of a larger plan to convert old office space into apartments and revitalize storefronts on the south side of the street in the heart of downtown.
But the lender on the purchase, the former owner of the buildings, is seeking to foreclose on the properties, arguing, in court papers filed May 26, that the loan matured in March. By not paying off the balance of the $3.6 million loan, Shelbourne is now in default, according to court documents.
The move to foreclose is in its earliest stages but comes as downtown’s Pratt Street has shown significant strides in revitalization. The goal is to transform the brick-lined street — open only to pedestrians and with its cool, historic architecture — into an entertainment destination and create a “live, work, play” vibe.
In optimistic sign, potential Hartford buyers look at two key downtown properties.
Brian S. Cohen, an attorney representing the lender and former owner, Jonathan S. Cohen, trustee of the Samuel Cohen Trust, said, in a statement, that the foreclosure action “concerns important properties on downtown Hartford’s historic Pratt Street.”
“We look forward to proceeding with litigation to enforce our client’s rights under the loan documents,” Cohen said.
According to the court documents, Shelbourne’s limited liability company in the purchase, SGS 57-75 Pratt LLC, had agreed to move up the maturity date from 2024 to 2023.
Benjamin Schlossberg, Shelbourne’s managing member, said that decision came because Shelbourne had anticipated moving ahead much quicker with conversion of the upper floors of the buildings to either apartments or commercial loft space.
“This a foreclosure brought on by maturity,” Schlossberg said, in an interview. “We haven’t been able to move forward with our plans because we have to the finalize some complicated building and related issues with the city and state codes.”
“And we’ve asked the mortgage holder to accommodate that, and we hope to negotiate a favorable resolution for all parties,” Schlossberg said.
The city, which is investing pandemic-relief funds along Pratt Street in the Hart Lift storefront revitalization program, had no comment on the foreclosure filing.
Schlossberg said the three buildings targeted by the foreclosure — and a fourth that the company owns on the same part of Pratt Street — were always planned as part of a later phase of redevelopment on the street.
Shelbourne remains bullish on the prospects for Pratt Street and the city overall, Schlossberg said. Occupancy in the apartment conversions at 99 Pratt and 196 Trumbull streets, in which Shelbourne is a partner, are now topping 95%. Rents also are trending higher, about 15% higher than initially forecast, Schlossberg said.
Schlossberg declined to comment on speculation that Shelbourne is close to acquiring the office building at 242 Trumbull St. from Newton, Mass-based Northland Investment Corp.
The building, while taking a Trumbull address, forms much of the north side of Pratt Street. The upper floors of office space at 242 Trumbull — now partially vacant — are seen as having potential for conversion to residential rentals.
Northland put the building, located across from the XL Center, on the market a year ago.
Since it began acquiring commercial space in downtown Hartford in 2014, Shelbourne also owns or is a partner in four office towers, including the iconic Gold Building on Main Street.
Shelbourne is still working through a foreclosure filing on another of those towers, 20 Church St., the “Stilts Building,” Schlossberg said.
Seeking new financing for office and other commercial properties has turned particularly tough amid rising interest rates. Tougher underwriting has resulted from rising office vacancy rates as corporations shed space as more of their employees work from home.
Weighing a potential sale
The Millennium apartments at 50 Morgan, which recently has drawn attention for the mural on its southern side facing I-84, owes nearly $1 million in delinquent property taxes.
In a statement, the city’s corporation counsel, Howard Rifkin, said: “The tax deed sale of 50 Morgan St. was postponed because the owners are in negotiations to refinance the project and are expected to close sometime in the early fall this year.”
“That will allow for the repayment of all real estate taxes and interest owed the city, as well as the completion of the conversion of the building to residential units and the reconstruction of the parking garage, and keeping progress going on that work is in the city’s best interest,” Rifkin said.
The auction, including several dozen properties around the city, is scheduled for Monday at Dunkin’ Park.
Schlossberg said the conversion of the entire, 18-story former hotel is expected to be completed by the end of this year. Shelbourne and its partner in the project, Axela Group of Waterbury, are weighing a potential sale.
The Millennium was the location of a long string of struggling hotels. A first attempt at converting the top floors to apartments ended in a foreclosure, swallowing up $5 million in public funding.
Shelbourne and Axela bought the building out of the foreclosure for $22 million with plans to convert the rest of the building to apartments in an $8 million project. Soon after the purchase, the partners found their project costs soaring, pushed higher with major repairs needed in the underground parking garage and rising construction costs touched off by the pandemic.
The conversion is now expected to cost more than double, at about $19 million, Shelbourne said.
Kenneth R. Gosselin can be reached at [email protected].
