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December 30, 2009

New hope for Part 3 of Pond View

Developer zeroes in on affordable housing project

By Richard Gaines

Two years after the popping of the housing bubble, a legal snare and burgeoning site costs helped knock down plans for completion of Pond View Village, the project appears to be back on track.

The Caleb Foundation, an interfaith nonprofit developer based in Swampscott, is awaiting approval for the final element in a $9 million construction financing plan involving state tax credits; once it arrives, it will begin demolition of the old warehouse at the back of the 30-acre parcel on Essex Avenue, project coordinator Rob Bernardin said yesterday.

The work would be the final piece to a community housing complex on the site of the former LePage's factory complex.

"We're working to finalize the financing for the redevelopment of Phase 3," Bernardin said, noting that work could begin "in the first quarter of 2010" on a condo building on the footprint of the old warehouse.

The new building would be subdivided into 34 units of one, two and three bedrooms to be sold at prices deemed affordable for people with incomes at 60 percent of the community's average.

Already built and largely sold or rented are the 83 units of Pond View Village's Phases 1 and 2.

"Permitting by and large is in place," said Bernardin.

The arrival of the Caleb Foundation on the scene corresponds to the exit from it of Cape Ann Housing Opportunity.

That nonprofit corporation was organized in the early days of the decade by community activists to acquire the LePage's site for $2.74 million raised locally, and to redevelop it into Gloucester's most ambitious mix of rental and ownership units at affordable and market rates.

The dream of locally developed infill housing was sparked by Nancy Schwoyer, who emerged as the president of CAHO, and chose to attempt to serve as developer as well.

The project quickly attracted support from philanthropies and the state, especially Lt. Gov. Kerry Healey, who took on Pond View Village as a personal project after the salesmanship of then-Mayor John Bell.

Earlier this month, CAHO made a final sale of the property on which the existing housing stands, in technical tenancy through 99-year ground leases with options for another 99 years.

The buyer — for $25,000 — was the Massachusetts Housing Investment Corp., a private lender that specializes in affordable housing, MHIC represented a consortium of lenders, including Bank of America, that had loaned CAHO $9.2 million and, at the time of its 2007 default, was owed $8.57 million.

Subordinate lenders, contractors, subcontractors and other creditors were also left in the lurch.

Joseph Flatley, president of MHIC, said at the time the losses were the first suffered by his company, which was founded in 1990 and has raised more than $700 million for investment in affordable housing.

MHIC, however, foreclosed on CAHO after the financial problems made the its completion of the project impossible.

MHIC Vice President Sandra Blackman said the company needed to acquire the property to be able to show compliance with permitting and tie up loose ends in order to move the project forward. "We have the property free of liens," Blackman said. "The bankruptcy trustee gave us a viable offer. There is nothing left for distribution."

With the transfer of the property underlying the project, CAHO effectively ceases to exist, its legacy complicated by the failures along with the creation of two-thirds of the original Pond View project.

Blackman said that only eight of the 41 units in Phase 2, the condo building, were sold when MHIC took the property from CAHO in November 2008. Now, she said, 32 units have been sold, with only six market priced and three affordable units remaining on the market.

Locally, the national housing bubble was characterized by a rush to condo-ize homes and apartment buildings. The biggest of these to begin converting was right next door to the CAHO project; a buyer of the Heights, the city's biggest complex of rentals at prices at or below those offered at CAHO, began making apartments over into ownership units in 2005.

The new owner, Forest Management Properties, immediately modernized 92 apartments and brought them to the market to compete with the units CAHO was building.

CAHO also reported finding expensive site problems that had not been anticipated. These involved required blasting of the ubiquitous granite shell of the cape just below the surface.

A final complication that helped do in CAHO was a legal challenge by the Heights to the height planned for Pond View's Phase 3 — the last part of the project that the Caleb Foundation is preparing to take on.

After converting of its apartments to condos, Forest Management sued CAHO on the theory that its condo high-rise just south of the commuter rail tracks — replacing the former LePage's warehouse with a 57-foot high building, well above the zoning limit — was blocking views of the Annisquam River estuary, a selling point for both projects.

The settlement only slowed the project further just as the housing bubble was collapsing.

Richard Gaines can be reached at 979-283-7000, x3464, or via e-mail at rgaines@gloucestertimes.com

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New hope for Part 3 of Pond View
by By Richard Gaines , , Wed Dec 30, 2009, 05:55 AM EST
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