LYNN — The $4 million redevelopment of a downtown building into market-rate apartments is the city’s first investment under the federal opportunity zone program, which provides tax incentives to encourage development in low-income communities.
Alex Steinbergh, principal of RCG LLC, a Somerville-based real estate and property management company, plans to convert the top three floors of 145 Munroe St. from offices into 18 market-rate apartments. The units will be a mix of studios and one-bedrooms, but he said it was unclear what rent prices would be.
Steinbergh plans to keep the ground floor as retail space. Some may be familiar with the building — Tacos Lupita is one of the first floor tenants. The restaurant and other retail stores will remain, but the tenants occupying office space on the other floors will move out by the end of March.
Steinbergh bought the Woodbury Building on Jan. 31 for $1.35 million, according to the Southern Essex Registry of Deeds. He plans to invest $3 million into the structure, which includes construction costs and rehab. New windows will be put in and there will be improved mechanical systems, such as heating and plumbing.
RCG has been in Lynn since 2002 and Steinbergh said the company is always looking for new redevelopment projects in the city. The company owns the Lydia Pinkham building, rehabbed the Franklin Street Fire Station into condominiums, and was behind the Boston Machine Lofts and Sloan Machinery Lofts.
“We’re interested in helping with the revival of downtown Lynn,” Steinbergh said. “That’s why we’ve been there. Lynn and Salem are two of our bigger markets.”
The project is the first investment since the city was chosen as an opportunity zone by the U.S. Department of Treasury last year.
The U.S. Tax Cut and Jobs Act of 2017 created the Opportunity Zone program to provide tax incentives for investment in low-income communities across the country, which is designed to spur economic development and job creation, according to the U.S. Department of Treasury.
The program offers capital gains tax relief to investors for new investment in designated low-income areas known as Opportunity Zones. Investment benefits include deferral of tax on prior gains as late as 2026 if the amount of the capital gain is invested in an Opportunity Fund, according to the U.S. Department of Treasury.
Lynn was approved for four opportunity zones, which encompasses most of the downtown and all of the waterfront, according to James Cowdell, Economic Development & Industrial Corporation of Lynn.
“(RCG) is investing $3 million into the downtown and it’s another sign that the investment community is looking to invest in Lynn,” Cowdell said. “It dovetails nicely with the $90 million Procopio development on Munroe Street.”
Construction is expected to begin on April 1 and be completed by early next year. There will be no parking with the building. Tenants will have to make use of the city’s municipal lots, but Steinbergh cited nearby access to the commuter rail as an attraction to the property.
It’s not a huge project, he said, but there’s a housing shortage and plenty of demand for apartments. He’ll be applying for federal tax credits with the project and the opportunity zone program was what drew him to the project.
“The incentives from the opportunity zone were very useful and I think that’s what sparked this to change the use,” Steinbergh said.