🔒Windsor Federal buys longtime offices for $5.5M as seller funds redevelopment

Windsor Federal Bank recently paid $5.5 million for a 32,532-square-foot office building in its hometown, claiming ownership of space it has leased for years to house its back-office operations.

The bank occupies about 60% of the building at 995 Day Hill Road, where 65 of its 110 employees work, including staff in finance, marketing, commercial lending, loan servicing and operations.

Windsor Federal acquired the 1988-vintage office building on July 17 from Litchfield developer Mark Greenberg. The deal followed years of on-and-off negotiations.

Luke Kettles, president and CEO of the $882.1 million-asset bank, said Windsor Federal has invested heavily in interior buildout and technology to tailor the space to its needs. Buying the property helps protect that investment while eliminating lease payments, he said.

“We’re saving a lot of money annually with the purchase,” Kettles said.

Kettles said he and Greenberg had discussed a potential sale several times over the past few years before recently reaching an agreement.

The building also includes a rooftop solar array installed by Greenberg. Ownership of the array transferred with the property, allowing the bank to benefit from lower utility costs and incentive income tied to the system.

The remaining space in the building is leased to IT services company CoopSys, which Kettles said the bank hopes will remain a long-term tenant.

Because the building already meets the bank’s needs, Kettles said Windsor Federal has no immediate plans for major capital improvements.

“Everything’s in very good shape,” he said. “That’s why we wanted to buy the building.”

Redeploying capital

For Greenberg, the sale represents another step in repositioning his Connecticut real estate portfolio.

Greenberg used a portion of the proceeds to begin a Section 1031 tax-deferred exchange, which allows real estate investors to defer capital gains taxes by reinvesting proceeds into another like-kind property. As part of the exchange, he purchased a vacant, 97,256-square-foot Windsor office building at 1 Targeting Centre on July 23 for $2.3 million.

The purchase added to Greenberg’s holdings at the site, where he already owned a vacant, 51,778-square-foot office building at 10 Targeting Centre.

Greenberg is moving forward with efforts to redevelop the combined 11.6-acre site with three new buildings containing 201 apartments and two retail buildings along its northern edge.

One retail building will house a Starbucks, while the other will contain a Jersey Mike’s sub shop and a Chipotle restaurant. Greenberg said leases for the three restaurants are expected to be finalized by the end of August, allowing construction of the retail buildings along Bloomfield Avenue to begin.

The residential portion will unfold more gradually. Rather than immediately demolishing the existing office buildings, Greenberg said he plans first to build an apartment building between them. The offices will remain standing until he is ready to move forward with the additional apartment buildings.

“It could be two years before I demolish the next building,” Greenberg said.

Greenberg said an earlier concept to convert the existing office buildings into apartments was ultimately abandoned.

“The conversion doesn’t look quite right,” he said. “It was trying to make the buildings something that they aren’t. So, we’re going to knock them down.”

Discount properties

Greenberg said in late July that he was searching for another investment property in which to reinvest the remaining $3.2 million in proceeds from the Windsor Federal building sale through the 1031 tax-deferred exchange program.

He said he remains open to virtually any type of commercial property, including office buildings, despite continued weakness in that sector.

In June, Greenberg paid $7.5 million for The Hartford’s 457,396-square-foot office building at 1 Griffin Road North in Windsor.

Greenberg is among the developers converting or demolishing older office buildings that have struggled with vacancies since the COVID-19 pandemic. He is betting that as obsolete office space disappears, the shrinking supply will push more tenants toward higher-quality properties, including 1 Griffin Road North.

“I’ve been a great buyer of these properties at discount,” Greenberg said.