HOLYOKE – City Council backed Canal Row LLC’s campaign to secure a Tax Incentive Funding Agreement (TIF) and state tax breaks to build over $ 13 million multi-use space on Race Street.
Canal Row will also apply for a proposed $ 1.5 million Massachusetts housing development incentive program, which the resolution supported. The council passed a similar resolution last year for the old Jess Hotel on Dwight and Main Streets.
Ward 3 Councilor David Bartley said the property is currently earning “peanuts” in tax revenue. However, Bartley predicted that Canal Row would generate $ 140,000 in annual property taxes once the TIF expired. “It’s a good thing for the city,” he said. “This could be an exciting development for this region. “
The resolution allows Canal Row to proceed with the tax incentives. If awarded, the promoter would make additional tax payments over a period of five to six years. By the seventh year, Canal Row would pay 100% property taxes.
On Monday evening, the council’s development and government relations committee met with Canal Row owners Denis and Marco Luzuriaga.
Canal Row offers a four-story mixed-use complex along Race Street, featuring 45 market-priced apartments. The Luzuriagas own and operate the neighboring Cubit Building, which houses the HCC-MGM culinary arts program and 18 market-priced apartments.
Without TIFs, Denis Luzuriaga estimated a low financial return in the first year of around 4%. The TIF would bring the average to more than 7%.
The combined city and state tax incentives equate to a 9.7% return, which is in line with current stock market trends. “This project is not viable without some state support,” Luzuriaga said.
Marco Luzuriaga, the company’s chief financial officer, said national and local tax credits would endorse the project’s competitiveness by attracting the capital needed to meet financing needs.
According to Marco Luzuriaga, the initial tax incentives would help Canal Row offset investment costs in the early years, especially in securing leases. TIFs would also reduce the debt ratio, signaling to banks that the developer can meet their repayment obligation.
Marco Luzuriaga added that a slow “ramp-up” in property taxes would help establish the project and shift future income in a positive direction. He expects a first shovelful of soil in March or April 2022 and a two-year construction schedule.
“We plan to be fully leased by the third year,” Marco Luzuriaga told the committee. After that, Canal Row would incorporate a rental model similar to that of the Cubit Building. “We target young workers or empty nesters given the nature of the neighborhood and the types of apartments.
Marco Luzuriaga said Cubit receives four to five weekly inquiries about available apartments. “There is a very high demand for these apartments,” he said.
Councilor Joseph M. McGiverin said, “It’s amazing what’s going on in this area. Even if we drop a little taxes at the beginning, we come back in the long run. Councilor Peter Tallman congratulated the developers for their continued investment in Holyoke.