A grand vision fades
Developer of mixed-income housing village files for bankruptcy
GLOUCESTER - On a pond and near a train station, the old LePage glue factory seemed like the perfect spot for "community housing," a mix of market-rate and low-cost apartments and condominiums for working people in Gloucester.
Pond View Village aimed to turn the industrial site, with buildings dating back to 1877, into 116 units of new housing. Brick buildings were replaced by clapboard town houses. Factory space was turned into one- and two-bedroom apartments.
It was hoped that the $36 million project, backed by public and private financing, would create its own village on Essex Avenue. People could walk to the West Gloucester train station or would have enough space for a home office. Some would have underground parking spaces and share common areas such as barbecue pits. A separate child-care center was to be built there, too.
Cape Ann Housing Opportunity Inc., a nonprofit, was formed to redevelop the 21-acre site. It was led by Nancy Schwoyer, a well-known housing advocate and a founder of Wellspring House, another nonprofit that provides shelter and services to the homeless in Gloucester.
"We wanted housing that was affordable to people who lived and worked in Gloucester and their children," said Schwoyer, now retired from Wellspring. "We knew that affordable housing for the people of Gloucester was a pressing need."
It was to become an elusive goal.
CAHO, as the developer was familiarly called, filed for Chapter 7 bankruptcy protection Jan. 6 in US Bankruptcy Court in Boston. The developer has debts ranging from $101,000 to $500,000 but assets of less than $50,000, according to the filing. The filing follows the foreclosure last summer on the third and final phase of the project, three lots of land, permitted for units.
"We never could have imagined it would end this way," Schwoyer said, a frown stretched across her face.
Leslie Varghese, a Boston lawyer representing the developer, said she could not comment on the filing.
The filing seeks to dissolve Cape Ann Housing Opportunity. It does not involve three corporations set up to govern each part of the three-phase housing development. The Massachusetts Housing Investment Corp., a nonprofit community development bank that invested $16 million in the project, now controls the site.
The development has 43 apartments and 41 condominiums, with permits for 32 more units to be built. The condominiums, including seven designated as affordable, are drawing interest and are priced from $154,600 for an affordable two-bedroom unit to as much as $235,000 for a market-rate two-bedroom unit, according to the Massachusetts Housing Investment Corp.
"Interest has been good," said Joseph Flatley, president of the agency. "The market in that area for condos is not that great anyway. It's not that big of a market."
Gloucester condo sales from January through November 2008 were 64, down from 94 during the same months in 2007. The median condo price for January through November 2008 was $229,500, down from $243,000 during the same months in 2007, according to the most recent data available from The Warren Group of Boston, which tracks real estate sales. In Gloucester, 11 foreclosure petitions were filed for condos in 2008, compared with 16 in 2007, and eight foreclosure deeds were recorded for condos in 2008, compared with just two in 2007, the data show.
Having lost almost $2 million on the project, its first loss in 18 years of lending to housing developments statewide, Massachusetts Housing Investment foreclosed on the last phase of the project last August.
"When we foreclosed on the property, we basically knew that CAHO was going bankrupt," Flatley said. "We needed to ensure the property was developed."
He said the agency now has an agreement to sell the property to Community Economic Development Assistance Corp., a nonprofit in Boston. Roger Herzog, a program manager there, did not return a call seeking comment.
The site will probably be developed as apartments, Flatley said. "The current market really dictates that it will be rentals."
Pond View ran into trouble soon after Cape Ann Housing Opportunity bought the property for $1.7 million in 2002.
Although a clean site, problems such as drainage delayed construction. Labor and material costs rose. Owners of a high-rise apartment complex next door filed a lawsuit. Then the real estate market collapsed.
"We had this gorgeous site on a 7-acre pond," Schwoyer said. "And the timing got away from us. . . . There were unforeseen site costs. The market began to tank. We got permission from the City Council to take down a building we hadn't planned on and put up a new building."
But the neighbors appealed that decision, she said, on the grounds that the project would diminish their view. "And that cost us another $150,000 in legal fees and another delay," Schwoyer said.
She said Pond View was planned to meet the housing goals of the city's 2001 comprehensive plan, which stated residents should "have the choice to live within the community and in neighborhoods that maintain their special identities."
Some Pond View residents said they now have homes they had never imagined.
"God is good," said Mike O'Neil, 47, a disabled carpenter who got a one-bedroom condo two years ago in a lottery for affordable units. "I never thought I'd have someplace like this."
O'Neil said his unit is large enough for his daughter Kaylee, 6, to visit on weekends. "There are some kids around here," O'Neil said. "But I would like to see more people move here and for it to be finished."
The 43 apartment units of the project were finished on time. The 41 condo units were finished, but the developer turned the deeds of unsold units back to Massachusetts Housing Investment Corp., after sales slowed to the point where company officials could not make timely loan payments, Schwoyer said.
"We were not able to pay them back," she said. ". . . We were in this to make housing available to people in Gloucester. We didn't see the point of going through foreclosure on those units. We wanted people to be able to buy them, free and clear, without any problems."
But the developer could not avoid foreclosure on the third phase. To settle the lawsuit filed by neighbors, the developer agreed not to start construction until a certain number of units were sold in the high rise, Schwoyer said.
"It was another holdup," Schwoyer said. "There are two key factors in a development. One is site; . . . we had a beautiful one. The other is timing. That's what didn't work out for us."
Kathy McCabe can be reached at email@example.com