Developer to avert condemnation, turn Woonsocket mills into 60 affordable apartments

The rehabilitation is only made possible with state, federal tax credits and financing

Two of the Bernon Mills buildings in Woonsocket are in very bad shape, with rotten roofs. A developer is trying to turn them into a mixed-use development, mostly apartments.

WOONSOCKET — The planned rehabilitation of two mill buildings into apartments in Woonsocket is coming just in the nick of time, as the structures were at risk of being condemned due to water eating away at them.

Hammad Graham, with Brisa Ventures LLC, plans to turn the mill complex into 60 apartments and a small amount of commercial space spread across three buildings. Two of the larger Bernon Mills buildings, on Front Street and bordered by the Blackstone River, were just a single winter away from irreparable structural damage, Graham said.

The two largest mill buildings, more than 200 years old, have not been maintained for a long time. To prevent further water damage, Brisa Ventures put a temporary roof on the building, a "Band-aid," Graham said.

"The roof is like swiss cheese, but it doesn't make sense to replace it now when we're going to be doing an expensive rehabilitation," he said.

Graham learned about the property in 2020, when a friend in real estate brought it to his attention. This is the first Rhode Island project for his company, which is based in New York City.

"For Bernon Mills, this was the last hope," he said. "We're probably the only developer willing to get it done."

This rendering shows what a developer thinks Bernon Mills in Woonsocket could look like after being developed into 60 condominiums and space for a grocery store and small offices.

Although the rents will be reduced, units at the top of the income range are "effectively market-rate units" in Woonsocket, Hammad said.

"Without the support of the state and federal governments, we would not be able to rehabilitate this kind of building," he said.

The project will bring density to Woonsocket's downtown, which should help area businesses. In addition to the apartments, one building will be turned into small offices on the second floor and a small grocery store on the bottom level.

The current mix of apartments is 19 efficiencies, 30 1-bedroom and 11 2-bedroom apartments.

Construction is expected to start in October and take 18 months, putting the opening in March 2024.

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How tax credits and below-market financing made the project possible

Rehabilitating mills and turning them into housing is expensive, and Graham had to line up enough financing to pay for the project, which has become much harder as construction costs continue to rise amid supply-chain and labor shortages and inflation at its highest level in 40 years.

Part of the equation are state and federal tax credits for the rehabilitation of the property. A previous developer secured state historical tax-credit funding and used it to turn one of the smaller buildings into 12 condos. Those will be converted into 19 apartments, Graham said.

That leaves the current project with $3.9 million in potential tax credits because of a $5-million cap. The state gives a credit of 25% of rehabilitation costs. The National Park Service is expected to rule very soon on Graham's application for federal tax credits, which would give him 20% of whatever costs he incurs for bringing the building back into its historical shape, historic tax-credit consultant Kim Smith Barnett said. The federal program has no cap.

One of the key steps in getting the mill ready to be redeveloped was updating its listing on the National Register of Historic Places. The site had originally been added in 1973, but buildings had since been demolished and a garage built in 1911 was not added to the listing at the time, said Interim Historical Preservation and Heritage Commission Executive Director Jeffrey Emidy.

In May, RIHousing gave preliminary approval to the project for $11.56 million in tax-exempt financing, which would reduce the rents based on tenant income eligibility. Woonsocket is in the same income region as most of the cities and towns in the state, including Providence, with maximum salary at 80% of the median being $54,150 for a single person and $77,350 for a family of four.

The total project is expected to cost $24.8 million, or $413,000 per unit, according to projections provided by RIHousing.

"These things aren't economical unless you can get the historical tax credit," Emidy said, referring to mill rehabilitation.

A history of manufacturing, energy generation and failed projects

The first Bernon Mills building was built in 1828, the second in 1833 and the third in 1859. The first textile mill was built by the Russell Manufacturing Company, which folded in 1829. The Woonsocket Company bought the property in 1831 and built three more textile mills, producing two to three million yards of cotton cloth a year. By 1883, the company was dissolved, according to the Rhode Island Historical Preservation and Heritage Commission.

Emidy said the mill building from 1828 is one of the earliest examples of "slow-burning" mill construction in the country. The mill was built with heavy walls and floors and with large and heavy timbers to increase the time it would take for the building to burn down. By reducing edges, surface area and the use of small timber, the aim was to make harder for fires to take hold in a building.

In 1887, the Woonsocket Electric Machine and Power Company, providing electricity to the town, bought the property and leased a portion to textile manufacturers, which continued into the 1970s, while some of the smaller buildings were turned into power-generation stations, either water or coal powered.

"It's an important piece of history that deserves to be recognized," Emidy said.

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A developer is proposing to rehabilitate the Bernon Mills in Woonsocket, partly through the financing available through historic-preservation tax credits.

Between 2003 and 2007, a developer turned one of the buildings into condos, part of a whole-complex redevelopment. Then the housing market burst, Emidy said.

The previous developer had planned to turn the mills back into a manufacturing plant, but he was unable to secure enough money to complete the project, Smith Barnett said.

"A bank had it, then another bank had it, then a few developers had tried to come up with something on the site but couldn't figure out how to make it work" Emidy said. "Now we finally have a developer who looks like he'll make it happen."

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