Defunct Land Deal Back In Play

A builder is a step closer to getting a second chance to construct a residential building on a Chapel Street lot — as long as he agrees to include four affordable apartments this time.

That’s the deal that the city is looking to strike with Shneur Katz, who owns a vacant parcel at 1198 Chapel St.

The governing board of the city’s anti-blight agency, the Livable City Initiative, voted last week to authorize the city to draft a new version of a land disposition agreement (LDA) with Katz to build 24 apartments on the lot with four of the units guaranteed to be rented at affordable rates for at least 20 years. The apartments are expected to be studios and one-bedrooms.

The renegotiation offered a glimpse into what could happen with a series of defunct LDAs that the city is looking to revive. It also could be one strategy to chip away at the growing dearth of affordable housing in the city, particularly downtown.

The city has about 16 defunct agreements under which city-owned property was sold under an agreement that a buyer would build a project or the land would revert back to city control. Ten of those agreements are with private developers like Katz for projects that were never completed because of the Great Recession.

Of those 10, only three of those LDA were for large-scale projects. Those three deals’ developers are Chapel Lofts II LLC., LaSaraghina LLC. and Beulah Land Development.

Katz, who leads the Chapel Lofts II partnership, bought 1198 Chapel St. in 2005 for about $80,000 with the intention of building nine condos above two retail spaces. Two years later, the real estate market tanked and the project was never built. (He did build apartments in the building next door.)

Now that the market in the city’s downtown has rebounded and the zoning in that part of the city has changed to allow denser development, Katz has signaled his interest in apartments instead of the nine condos. But he would need an amendment to his original LDA to erect a building with first-floor retail and 24 apartments above.

Members of the LCI board initially balked at the city’s proposed plan for giving developers a second chance — a plan that would have allowed the developer to proceed without penalty or specific public benefit. There had been some consideration for making the developer pay the difference between the original sale price and its current market value.

The 1198 Chapel St. property is now estimated to be worth about $300,000. The city could have gone after the difference between the original sale price and the current appraised value — minus the taxes paid over the years — and could have gotten maybe $140,000 to $150,000, city Economic Development Administrator Matthew Nemerson estimated.

He said initially he and LCI Executive Director Serena Neal-Sanjurjo asked Katz to write the check for that money. But Katz wasn’t as keen on that idea. The city didn’t want to sue Katz. Ultimately city officials reasoned that it would be more beneficial long-term to taxpayers to get a viable project built.

Nemerson said the LCI board’s concerns sent his team back to the drawing board, and the idea to attach a public benefit like affordable housing as part of the condition for amending an LDA was born.

“Your questions in fact … created a public policy opportunity,” Nemerson told the board Wednesday. ​“My bet is that we will get far and away more than $150,000.”

At its monthly meeting last Wednesday, the LCI board voted to take the first step toward a project finally being built at 1198 Chapel St. LCI will draft an amendment that allows Katz to build 24 apartments instead of nine condos with the condition that four of those apartments be set aside to be rented to households earning no more than 80 percent of area median income, or $70,480 out of an $88,100 benchmark for a family of four. Those four apartments are to be set aside to be rented at that rate for a period of 20 years. Additionally, Katz would have to adhere to the city’s rules for hiring New Haven residents and minority contractors.

Evan Trachten, LCI acquisition and disposition coordinator, said that Katz will receive no financial assistance from the city to supplement the affordable housing component of the proposed new development.

Neal-Sanjurjo said that Katz will also have to adhere to the timelines and performance measures that are now standard in all LDAs. Once all the legal language is hammered out, the proposed deal will come back to the LCI board for a final approval. Then it also will have to be approved by the Board of Alders.

Nemerson commended the commission for raising the questions that resulted in a new way forward for some of the defunct LDAs. There ultimately could be a different option for Beulah Land Development. Nemerson said the property at 328 – 350 Dixwell Ave. has, in fact, decreased in value.

“I believe your asking these questions has resulted in a public policy result, so that’s good. That’s why we have these commissions and all this input is needed,” he said.

Hope For 433 Chapel St.

Real estate developer Peter Chapman of LaSaraghina LLC, commended the board too. He was in attendance at Wednesday’s meeting and spoke about why he never built his project. He also got a glimpse of what he might expect for his own ideas about reviving his long-defunct LDA.

Chapman owns a six-story building at 433 Chapel St. that sits on a 30,000-square-foot lot, and has a 5,000-square-foot footprint. Chapman purchased the building, which is at the corner of Hamilton Street, from the city in 2002 with plans of creating 14 apartments above a street-level commercial space. Years of delayed development and political troubles thwarted his first attempts to rehab, and then to sell, the building. Chapman now seeks to build 23 apartments above the commercial space that he envisions as a café or microbrewery.

Chapman is looking to put in four two-bedroom apartments on each of the top four floors, and four one-bedroom apartments and one studio apartment on the second floor. Each of the two-bedroom apartments would be a little over 1,000 square feet, and each of the one-bedrooms would be about 700 square feet. The bottom floor would house two more apartments and a commercial space.

Three or four of those apartments, should he get his LDA amended, will likely have to be set aside as affordable units. And he is amenable to such an arrangement.

Nemerson said 433 Chapel St. is valued at about $550,000. When there was an offer on the table to sell it, the property could have gone for about $920,000, which Nemerson characterized as ​“aggressive” and ​“Brooklyn prices,” for that time. He estimated that now it’s worth about $750,000. Again, the city’s not looking to take Chapman to court. It wants him to build his project because it will help jumpstart what Nemerson called an emerging ​“Wooster Square East” neighborhood on the east side of I‑91.

Chapman said the building is empty now. His business office and the bike shop that were in the building moved out when there was a possibility of a sale. He said he has been unsure about how to proceed.

“I was stuck between a rock and a hard place to nobody’s fault,” he said. ​“It has been a rather frustrating experience but I am really encouraged that everybody is sitting at the table and trying to help and talk about it.”