Developer seeks financing approval for apartments at former Groton Inn & Suites

Groton ― The developer and owner of a project to renovate the former Groton Inn & Suites at 99 Gold Star Highway into apartments are requesting approval for a financing mechanism for the 112-unit development.

The owner, Arizona-based Community Finance Corporation, is seeking tax-exempt revenue bonds through the Public Finance Authority of Wisconsin to finance the project. The Public Finance Authority issues bonds for public and private projects across the nation, according to a presentation at Tuesday’s Town Council Committee of the Whole meeting.

Town Manager John Burt said the proposed financing would not create a financial obligation for the town, and Groton is not issuing the bonds.

Town Attorney Raymond Baribeault said the Internal Revenue Code stipulates that to qualify for the tax-exempt financing, project officials must get recognition from the municipality, where they want to build the development, that it will benefit residents.

The council has scheduled a Tax Equity and Fiscal Responsibility Act public hearing on Oct. 29 at 6:30 p.m. in the Town Hall annex. The council is then expected to vote on the recognition that evening, Burt said.

David Mitchell, lead team member with New York-based GoodHomes Communities, the developer, told the Town Council on Tuesday that 40% of the apartments at GoodHomes Groton are set aside for households making 60% of the median area income or less.

In the Norwich-New London area, 60% of the area median income for a one-person household is $48,000, according to the U.S. Department of Housing and Urban Development.

The amenities will include a fitness center, yoga rooms, a golf simulator, a private movie theater and a pickleball court, Mitchell said.

He said the company is trying to create housing that is attainable. Throughout the country, he said wages have not kept pace with rising construction prices and have created massive housing shortages.

The company buys obsolete hotels and vacant senior housing, from Erie, Pa. to El Paso, Texas, and converts them into multifamily communities with amenities, he said.

The Groton apartment complex has 69 studios, 23 one-bedroom units and 20 two-bedrooms units, he said. Large studios are currently being advertised for rent at $1,700 a month.

He said all but six of the apartments, which are the remaining units that have to go through the certificate of occupancy process, have been rented. The amenity space will hopefully be completed by mid-October.

Town councilors asked questions about the project financing and confirmed that there is no financial liability to the town.

Gary Molenda from Community Finance Corporation, a nonprofit corporation, said the plan is to bundle projects in multiple states into one financing package. The financing for the Groton project, including interest and maintenance reserves, is about $32.5 million, said Mitchell.

In response to questions from councilors, Mitchell explained that he is not seeking a property tax exemption and will pay full taxes on the property.

Molenda said the tax exemption is for the owner of the bond, who will not pay taxes on the interest on their earnings. Interest rates are typically a little bit lower on tax-exempt debt, than taxable, which helps the project be affordable in the long term.

Mitchell said Thursday that the most of these bonds are traditionally done at this point in the project, when there are no construction risks or market risks for the bond holders, and will replace the existing financing.

“I think it’s wonderful,” Councilor Portia Bordelon said of the project at Tuesday’s meeting. “There’s a lot of talk about needing affordable housing for EB employees, and I think this a model that fits that because not everyone’s making six figures at EB.”

Councilor Jill Rusk said housing is needed in Groton.

“We have a very, very high demand, and the only way that we are going to lower prices for apartments in this area is by increasing our supply so thank you for reusing a space that could have just deteriorated and been blighted in our community,” she added.

The Town Council this spring also approved a lease for a police substation at the former hotel.

k.drelich@theday.com