BENNINGTON — If the redevelopment of the Putnam Block is to succeed, it will need a significant amount of investment from this community, one of the planners told the Select Board Monday.
It was announced last week at a press conference that Bennington Redevelopment Group LLC, a group made up of local companies, colleges, the hospital, and a bank, along with a number of individuals, has agreed to purchase the Putnam Block, sometimes called the Greenberg Block, at the Four Corners, pending a 90-day "due diligence" period involving environmental assessments, title work, and the like.
The hope is that revitalizing the block with a mix of businesses and housing will produce a "domino effect" that extends to the rest of the downtown.
Bennington County Regional Commission Assistant Director Bill Colvin told the board Monday that the financing plan being put forward is not the traditional sort, that it involves a combination of public and private funds. Traditional investment models do not work in these types of situations.
The model being used here has been used in other places, notably St. Albans and Brattleboro. In every other case around Vermont, the state itself was an anchor tenant. That's not the case here, Colvin said, meaning the bigger investors such as Southwestern Vermont Health Care, Bennington College, and Southern Vermont College, will be key players.
This won't come together overnight, he said. If all goes well, it will be three years before the block is redeveloped. That includes an 18-month pre-development phase — following the 90-day due diligence window — and an 18-month construction phase.
Those are the phases visible to most people on the street, he said. The other phases – a five and a half year operation phase followed by a three-year refinance phase – will be largely unseen.
Part of the funding will come from New Market Tax Credits.
"The New Market Tax Credits are tax credits which are eligible in certain census tracts around the country to encourage economic development where it's not otherwise possible through traditional models," Colvin said. "Downtown Bennington is smack-dab in the middle of a census tract which is eligible for New Market Tax Credits."
Those tax credits come with some requirements, including one that will require most of the renovated space to be leased commercially.
"The property has to be operated on a rental basis throughout that time, everything there has to be leased. None of this property will be sold for ownership for a minimum of seven years," Colvin said. "...the property has to be at least 60 percent commercial occupancy and we need to be making enough money to pay the bills."
About 40 percent of the total cost will come from the New Market credits and Historic Rehabilitation Tax Credits.
The total investment required will be approximately $20 million, and perhaps as much as $30 million if a lot of new construction is required. Colvin used the Brooks House Project in Brattleboro as an example, saying, "the investors put $24 million into that property to end up with a building that is worth slightly less than ($8 million). That's the model that it will take to do this type of development here. We expect to invest two and a half to three times the ultimate value of this property."
Banks will only lend on the final value of the property, and even then at only 75 to 80 percent.
That leaves the tax credits and various forms of investment from the local community to make up the difference.
He said there are five ways the community can contribute:
This includes those involved with Bennington Redevelopment Group LLC, the ultimate owners of the project. Colvin said the group is not averse to taking on more "leaders." The money they've invested is subject to risk, he said.
Near the end of the 18-month financing phase, the group will be seeking to raise about $1 million in investments from the community. Colvin said this project will allow people with IRA funds to direct up to $25,000 of their own IRA towards this project.
Private loan or guarantee
"We are hoping to raise enough equity so when we go to banks we'll be able to get non-recourse financing so there are not personal guarantees involved. We're not sure we'll be able to secure non-recourse financing; if not there will need to be some type of loan guarantees," said Colvin. "In the Brattleboro example, a community member who was not one of the five original investors put his house up as collateral in order to secure a loan to make sure that project happened."
People can make tax deductible donations to Southwestern Vermont Health Care, Southern Vermont College, or Bennington College and have them directed at financing this project, said Colvin
"The key to all of this is going to be finding the tenants that will occupy these spaces for the next 10 years and beyond," said Colvin. "Without critical, committed tenants this project doesn't happen." He said the group is currently looking for such tenants.
Colvin said the group will be looking to town leaders for help with Community Development Block Grants, tax stabilization and revolving loan programs, parking lot improvements, and coordinating infrastructure improvements on Washington Avenue and Franklin Lane with the project construction.
Bennington resident Mike Bethel asked if the group would be able to close on the property right after the 90-day window was up and begin its fundraising efforts.
Once the 90 days is up, the group has 30 days to close. "The 90 days is the due diligence phase to do, frankly the only contingency in the agreement is environmental, doing phase one and phase two environmental assessments are required to establish innocent prospective purchaser status," Colvin said, adding that the block has already had a great deal of environmental studies done on it. "We need to gather that and go through the appropriate processes and make sure there's no surprises there."
— Contact Keith Whitcomb Jr. at 802-447-7567 Ext. 115