Editors Note: This is an occasional series that examines the successes and challenges experienced by major development projects constructed in Greater Hartford in recent years.
A month after the $158.8 million, 20-acre opening of Blue Back Square development in November 2007, the worst recession to hit the nation since the Great Depression officially struck.
While countless retailers have since closed their doors, and housing prices have plummeted, the developers of the mixed-use retail, office and residential complex in West Hartford Center are pleased with the Blue Back Square’s appeal to tenants, condo owners, and consumers.
West Hartford taxpayers are also seeing their approximately $48.8 million investment in the development achieve its promise to grow the town’s grand list and generate new tax revenues. Its grand list has grown 1.5 percent, from $5.527 billion in 2007 to $5.613 billion in 2008.
The $6.4 million in new tax revenues attributed to the project more than cover the town’s $3.8 million annual bill it pays on bond payments.
Town Manager Ron Van Winkle said that despite the anemic economy, property tax and parking garage revenues have exceeded estimates, which were deliberately conservative. Revenues are so strong, he said, that financial projections indicate that parking garage revenues and the Special Services District tax assessed to Blue Back fully will cover the town’s annual bond payment starting in fiscal 2012, five years ahead of schedule.
“Obviously we’re very pleased. We thought the recession would have a much bigger impact. And it has — Blue Back Square has some stores that they were never able to rent,” Van Winkle said. Despite the difficulty independent retails have faced, “we’re drawing shoppers that we have never seen before. When I stand there and look at how wonderful it is, I am incredibly impressed.”
People from Canada, China, and the Boston suburbs have come to look at Blue Back Square so they can emulate it, he said.
Despite numerous legal actions filed by the owners of Westfarms mall, Taubman Co., the developers share Van Winkle’s view about Blue Back Square’s success.
“The last two years have been challenging from time to time, but my partners and I are very pleased with the way we have weathered this recession,” said Robert Weinner, a managing partner of Blue Back Square, LLC.
Blue Back Square’s 220,000 square feet of retail space is 92 percent occupied, and eateries like Besito’s are packed with lines out the door on Thursday, Friday and Saturday nights.
Blue Back’s Lexicon professional office building has a 2 percent vacancy rate and its Rutherford building’s medical and professional space has a combined 12 percent vacancy, said Rick Langhorne, president of Ronus Properties of Atlanta, Ga., one of Blue Back’s partners.
By comparison, the Class A office vacancy rates in western Hartford County were 11.8 percent for the third quarter, according to Cushman & Wakefield, a global real estate services firm. Notably, Blue Back’s rental rates for the Rutherford building of $31 per square foot exceed Hartford County’s average of $22 per square foot.
“You don’t make a deal in a terrible market if you’re confident in your product; at some point you gotta do what you gotta do. We’re not quite there yet,” Langhorne said. “The medical is filling up; it’s slow … If a deal is close, we may try to get there — 12 percent is not that vacant.”
The residential component has also done well. All but five of the original 59 condos are sold.
The 48 apartments, which rent for $1,560 to $1,810 for a one bedroom and $1,985 to $2,710 for a two bedroom, are all occupied and have a waiting list, Weinner said.
Rental rates have been flat or up by 5 percent since the apartments went on the market in April of 2008, said Will Lorenz, property manager of Blue Back Square apartments.
As a comparison, Trumbull on the Park, which came on line in 2005, offers one-bedroom apartments for $1,200 to $1,800 and two-bedroom units for $1,600 to $3,000. The high-rise overlooking Bushnell Park in downtown Hartford has a 6 percent vacancy rate.
When the Blue Back luxury condos in The Heritage building went on the market in 2005, asking prices ranged from $539,900 to $572,900, Langhorne said. Prices rose to $629,900 to $684,900, then dropped when the real estate market crashed. The two-bedroom units for sale now range from $524,900 to $569,900, depending on size and location.
While Blue Back principles declined to release specific figures, they conceded that the retail portion of the project has struggled, and deals with tenants “are getting very creative,” Lorenz said.
Since the anchors and the restaurants have been doing “very well,” he said, property managers have been able to be flexible with the smaller mom-and-pop retailers who are “suffering” with slow sales. While it differs by tenant, examples of the developer’s “creativity” include restructuring the lease to a percentage of revenues, changing location or helping with marketing.
Retail Sales Challenging
“I think there’s a fair amount of traffic and I think that well-grounded stores are doing pretty well,” despite the region’s “over-retailing in general,” said Prof. John Clapp, director, Center for Real Estate and Urban Economic Studies at UConn.
Bob LaPerla, owner of LaPerla Fine Jewelers, said he is doing better in his new location in Blue Back Square than he would have done had he stayed on Farmington Avenue in West Hartford Center.
Since moving to Blue Back, his store has seen a 12 percent spike in sales from customers who live at least 15 miles away — up from 27 percent of sales to 40 percent.
“In the business environment we are in today, with competition from the Internet and the mall, we needed to be able to draw from a much greater distance,” LaPerla said.
People are drawn to Blue Back because of anchor stores like The Cheesecake Factory, Crate & Barrel and Ann Taylor, he said, and they stop into the local stores as they walk by.
“There’s no question in my mind that if I had stayed in my previous location,” LaPerla said, “I would have been adversely affected by the downturn in this economy.”
Becoming A Destination
Blue Back Square also has attracted businesses that are new to the state, further enhancing its destination image, such as the Green Teahouse and Besito’s Mexican Restaurant.
John J. Tunney III, Besito Restaurant Group owner, had been searching for a new location to expand his restaurant group beyond New York. He considered Boston and Fairfield County, he said, but chose West Hartford because he liked the “vibe.”
He appreciates historic buildings, he said, and when his real estate agent brought the space inside the former town hall to his attention, he “fell in love” with the space and its high ceilings.
After spending a couple of weekends dining and shopping in West Hartford, “I thought West Hartford was a place I could live,” Tunney said. “I was pleasantly surprised by the people and the town itself. That was probably the biggest draw — the warmth of the community, the feel of the town, Blue Back Square itself. … It doesn’t mean I’m not going to build in Boston next — I didn’t want to lose that building.”
Chris Steiner, left, and Martine Egan recently drove an hour from Brookfield to shop at Blue Back Square.
