Boston – Today the Dartmouth Hotel is one of the most beautiful buildings in a city full of grand structures.

But for decades, the empty upper floors of the Dartmouth loomed over Dudley Square. Paint peeled from its crumbling marble and the windows were cemented shut.

Busy stores still operated on the Dartmouth’s first floor and a knot of bus lines started and ended there. But Dudley Square, once the heart of Boston’s Roxbury neighborhood, had a dangerous reputation after dark. “By 5:30 p.m., everybody was out of here,” said Evelyn Friedman, executive director of Nuestra Comunidad Development Corp., based in Boston, the project’s developer.

Restoring the Dartmouth took years of work. Buying a building has become increasingly difficult in Roxbury, and the Dartmouth Hotel was no exception. “In the last couple of years, prices have increased over 150%,” Friedman said.

The family that previously owned the Dartmouth bought it at an auction in the 1970s, and in the decades since they had done little besides collect rents from the building’s retail tenants. Nevertheless, they were convinced that the Dartmouth was worth significantly more than a small community development corporation (CDC) like Nuestra was likely to pay.

The straw

After several years of unsuccessful negotiation, Nuestra hired Patrick Cipolla, of Cipolla Associates, to act as a “straw” –  an intermediary. He purchased the property on Nuestra’s behalf without revealing the CDC’s identity. Large developers often use straws when they assemble parcels of land.

Cipolla’s offices are on Boston’s fashionable Newberry St., and he brought a feeling of professionalism to the negotiations that impressed the sellers. “They knew he was, like, a downtown player, and they were excited by that,” Friedman said.

Finally, in 2003, Nuestra took possession of the Dartmouth for $1.8 million, which is close to the price appraisers had put on the property. Cipolla’s services cost only $40,000. That’s a deep discount from his usual rate. Friedman said his services made the acquisition/rehabilitation possible.

The upper floors of the Dartmouth Hotel were finished earlier this year and now include a mix of 45 studio and one-bedroom apartments. None of these apartments can be rented to tenants earning more than 60% of the area median income (AMI).

In addition, 30 of the 45 apartments will receive project-based Sec. 8 rental subsidy and are reserved for tenants earning no more than 50% of AMI. Of these 30 units, 25 are set aside for recently homeless tenants and 12 are reserved for mentally disabled tenants.

As part of the same project, Nuestra is building another 20 units next door in a new four-story building that will match the Dartmouth Hotel, though this new building won’t be made of marble. Of those apartments, 13 are reserved for tenants earning 60% to 80% of AMI, while the remainder are reserved for tenants earning 80% to 110% of AMI. Six of the 20 are live-work spaces reserved for artists. Nuestra will finish these apartments in the summer.

Battle for rental subsidy

The biggest challenge to rebuilding the Dartmouth was securing its rental subsidy. In 2003, the Department of Housing and Urban Development (HUD) refused to agree to sign the project’s housing assistance payment (HAP) contract, which would have guaranteed that the Dartmouth would receive project-based Sec. 8 subsidy. Nuestra needed this agreement to close its financing. But HUD officials thought reserving apartments for mentally ill tenants would discriminate against other tenants and might be illegal under fair housing law.

In took more than five months to convince HUD that the 12 units were legal, even though Nuestra had already created similar units with HUD’s help at other projects.

While Nuestra waited to close its financing, its workers killed time. “We had contractors working at quarter speed,” Friedman said. She estimates that HUD’s delay cost the project $180,000. “It was really hair-raising.”

In addition, Boston’s housing authority was also reluctant to sign the Dartmouth’s HAP contract because of a massive shortfall in its Sec. 8 voucher program in the summer of 2004.

The project’s budget also suffered when workers tore out the drop ceilings on the first floor: The beams above were blackened and charred. Sometime over the past 30 years, fire had torn through the shops. Workers had to reinforce support beams with steel.

Throughout this process, Nuestra made payments to the retail tenants that were displaced. In the end, it cost a total of $20 million to develop the Dartmouth Hotel, $2 million more than the project’s original budget.

High-cost marble rehab

Today the Dartmouth is a magnificent building – but it took a lot of expensive work to fix it up. The carved marble blocks that cover the building had been hidden under paint that had to be painstakingly removed by hand.

Workers smeared a chemical paste over the marble, then laid plasticized paper over the paste. Once the paste had dried, the workers pulled the plasticized paper away, taking the dried paste and the old paint away with it.

The marble had also become discolored, so workers on scaffolding had to shave about a quarter of an inch of stone from the blocks. The stonework around the windows had been damaged by freezing and thawing water and needed to be replaced. Nuestra used composite concrete (cast concrete blocks that contain a great deal of marble dust) to match the rest of the building.

Inside the Dartmouth, most of the building’s historic features had been torn out in the 1970s, just before it was seized and sold at auction. The good news was that Nuestra could therefore have more rentable square footage inside the building. “Since all that has gone, we were able to be more efficient,” Friedman said.

Nuestra has been working in the Roxbury neighborhood, and Dudley Square in particular, since it was formed in 1982. The CDC now owns 750 units of housing and 70,000 square feet of retail and office space in Roxbury and Dorchester. Nuestra has built and sold 350 homes in the area.

Dartmouth Hotel: Sources of funds

  • 9% low-income housing tax credit equity from Lend Lease ($6.2 million allocation): $5.4 million
  • 18-year loan at 5.1% interest with 30-year amortization from the Massachusetts Housing Partnership Fund: $4.8 million
  • Federal historic rehabilitation tax credit equity from Lend Lease: $1.8 million
  • City of Boston Rental Housing Development Program grant: $1.5 million
  • Massachusetts Affordable Housing Trust Fund grant: $1.2 million
  • Neighborhood Reinvestment Fund grant: $891,000
  • Massachusetts HOME grant: $750,000
  • Massachusetts Facilities Consolidation Fund grant: $620,000
  • Massachusetts Housing Innovations Fund grant: $570,000
  • City of Boston Neighborhood Housing Trust grant: $500,000
  • Grant provided by developer with funds raised from general partner loan from Federal Home Loan Bank of Boston: $313,000
  • City of Boston Community Development Block Grant: $250,000
  • MassHousing soft financing:$217,500
  • Foundation grants: $185,000
  • Deferred developer fee: $200,000
  • Other sources of funding: $1.4 million

Total development cost: $20 million

Bank of America provided $8.6 million in construction financing.

Editor's note: The August 2005 issue of Affordable Housing Finance included a clarification. This article above has been changed to reflect this clarification.