50 Morgan

Shelbourne Joint Venture Commits $30M to Hartford Hotel Conversion

June 9, 2021

Shelbourne Global Solutions and a Waterbury-based partner have acquired downtown Hartford’s Red Lion hotel for $22 million, and plan to spend another $8 million converting the remaining guest rooms at the recently foreclosed property into market-rate apartments.

A joint venture of Shelbourne and Axela Group closed late last week on the 50 Morgan St. hotel, according to Yitz Rabinowitz, vice president at Axela, which is a significant off-campus housing developer and landlord around UConn in Storrs and also develops single-family homes, storage facilities and other properties.

The property is in the midst of a stalled conversion overseen by former owner Inner Circle, and currently contains 96 apartments on the upper floors and approximately 156 hotel rooms. The Red Lion closed shortly after the COVID-19 pandemic hit.

The new owners plan to brand the property as The Millennium, which would contain a total of 260 apartments — including about 138 studios — when completed.

They also plan to convert meeting and banquet space on the lower floors into a fitness center, yoga studio and movie theater, and will be adding other amenities like a pet-washing station, laundry facilities and co-working space.

There will also be an outdoor lounge on the second floor, where the owners plan to remove a swimming pool.

The Millennium's website went live this week.

A current apartment at 50 Morgan St. in Hartford, CT.
A current apartment at 50 Morgan St. in Hartford.

They hope to start construction in the next few months, with completion slated for 12 to 14 months out, Rabinowitz said.

Mayor Luke Bronin has met with the ownership team, and said in a statement Wednesday that the project is a boost for the city.

“Increasing the residential density downtown will be an important part of our recovery from this past year, and this residential conversion is a perfect complement to the broader development around [Dunkin’ Donuts Park],” Bronin said. “The project will help accelerate our efforts, and the transaction has already resulted in the payment of a significant amount of delinquent taxes.”

Inner Circle ran into trouble with its lender, DW Commercial Finance, which foreclosed on the building in 2019 and took possession earlier this year.

Rabinowitz said the sale of the hotel has been a long time coming. Axela and Shelbourne had the property under agreement just before the COVID-19 pandemic hit, but were delayed by DW Commercial’s foreclosure proceedings and pandemic-related court slowdowns.

The foreclosure cost the Capital Region Development Authority (CRDA) $5.2 million it had committed to the conversion project, which was the quasi-public agency’s first sizable loss in its ever growing portfolio of Hartford projects.

CRDA financing is a common subsidy in Hartford, where rents often aren’t high enough to justify construction and redevelopment, but Rabinowitz said Axela and Shelbourne -- which is receiving CRDA backing for a major redevelopment project that’s ongoing on Pratt Street -- don’t intend to ask CRDA for help at 50 Morgan, partly due to the loss the agency took on the project under the former owner.

“I don’t think we’d have the chutzpah to ask for a CRDA loan, it just wouldn’t be good business,” Rabinowitz said. “Of course, we would love one, but we didn’t end up needing it.”

The project is receiving financing, on favorable terms, Rabinowitz said, from a New Jersey-based lender that he declined to name.

Apartments at The Millennium are expected to range from $925 per month for a 350-square-foot unit to $1,800 for a 975-square-foot unit.

The new owners plan to keep project costs down by working within the existing interior layout of the building. Rabinowitz said the previous owner appeared to make some costly construction decisions, such as spending well over $2 million on electrical and plumbing work.

“They could have saved a significant amount of that,” he said.

Axela and Shelbourne are hoping to lease the apartments to students and downtown employees, including those who may own a home farther away and need to be in the city a few days a week or less.

The existing 96 apartments, which began leasing after COVID-19 hit, have struggled so far but have made some progress. They were about 50% leased as of this week, up from about 33% back in February.

Rabinowitz said getting the conversion project rolling again should provide a further boost. Amenities will be the first order of business, as not having them puts 50 Morgan at a competitive disadvantage to other apartment properties.

“Why would someone decide to move here vs. somewhere else if you don’t have a fitness center?” Rabinowitz said. “Amenities will bring more traffic through and show who we are.”

Meanwhile, the new owners are on the hunt for a partner or tenant to open a restaurant and sports bar on the ground floor, which has been without an eatery since the pandemic hit.

Rabinowitz said a sports bar could be a good fit, given the proximity of the property to the baseball stadium, home of the Hartford Yard Goats.

Read the Article on Hartford Business Journal