It turns out a private developer may be interested in buying Hartford’s XL Center after all.
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It turns out a private developer may be interested in buying Hartford's XL Center after all.
A Chicago private equity firm sent an unsolicited bid to city officials in December offering to pay $50 million for the aging venue and to invest up to $250 million in improvements “such that the property is up to par with top National Hockey League facilities.”
According to correspondence obtained by the Hartford Business Journal, Oak Street Real Estate Capital LLC contacted Hartford Treasurer Adam Cloud on Dec. 6 with an offer to acquire the venue, which is in need of significant repairs (Gov. Dannel P. Malloy allocated $100 million in his February budget proposal to renovate XL Center, but it's not clear if that funding will be approved).
City officials shared the offer with the Capital Region Development Authority, which oversees the venue. CRDA Executive Director Michael Freimuth said he told Oak Street officials they could bid to purchase the building in an upcoming RFP that will be out by late June, as ordered by the legislature last year.
“As part of our larger plans for investment in the city, we would like to make a preemptive bid on the arena,” Oak Street analyst Jared Sheiker wrote to Cloud in December.
Oak Street would not comment for this story, but Sheiker's reference to larger plans in Hartford may refer to the firm's offer this month, both to state and city officials, to acquire and leaseback government-owned buildings. Bloomberg first reported that offer.
Details gleaned from Oak Street's correspondence with the city shows that the firm would want a 7.5 percent initial return on the purchase of Hartford real estate, including the XL Center, as well as annual rent increases.
Freimuth said CRDA will review the offer, but noted that the state can borrow money at a lower rate.
“It gets to the whole question of how much the private dollars are worth,” he said.
Oak Street provided HBJ with a comparison sheet claiming that bonded debt would cost the city more in the long run, even on 5 percent bonds, than its proposed sale-leaseback transaction.
Oak Street's XL Center offer last year was facilitated by Westport's Gregory Kraut, a managing partner of K Property Group in New York. Bloomberg reported that Kraut was also involved in the sale-leaseback offer.
Kraut issued a press release several days after Bloomberg's story published calling the sale-leaseback maneuver “a smart measure for desperate times.”
“The proceeds from the Hartford sales will allow for a citywide bailout and growth, rather than significant increases in taxes and further debt obligation from the state,” Kraut said. “The money gained from the state sale could pay for the Teachers' Pension Fund's unfunded liabilities, which would go a long way toward reinvigorating our state's financial well-being.”
Kraut, a Westport representative town meeting member, formed an exploratory committee for statewide office in February, but according to state records, the committee was terminated soon after.
He also has a campaign website, but he told HBJ he does not intend to run for higher office.
