After nearly two years in receivership, the largest piece of the Knox Mill LLC properties has been sold to real estate investors who are banking that there is a market for condominiums in this economy — within the right price range.

Kelm Acquisition, a limited liability company established in Maine, is the new owner of Building Six, the 80,000-square-foot, three-storied structure that extends from the edge of the Megunticook River up Washington Street. Once a woolen mill, then a call center with office cubicles, the building is now partially renovated as retail and residential space.

Work is under way again to finish the upstairs condominiums, whose conversion from office to residential space began five years ago but was never finished. Kelm LLC represents a group of real estate investors, with Cathleen Moore, a Massachusetts real estate developer, as the lead investor. Michael Nash created Waterfall Investments LLC to market and sell the 26 units and commercial space, and he is taking the lead on renovating the building. Both Moore and Nash established their LLCs in Maine, and are now living in Camden as they oversee the project.

“We rented a post office box today,” he said. “I walk every day to get the mail.”

Nash believes he can sell Building Six condominiums with a formula he found successful in the economic slumps of early 1980s, and again in the early 1990s.

“It’s private money that is going to pull us out of this,” he said, describing a stagnant real estate market and tightened bank lending. Kelm’s purpose, he said, is to establish a privately owned fund that acquires real estate and other troubled assets owned by banks. The purchase price of Building Six was $2.5 million. Just five years ago, it was assessed by the town of Camden at $7.5 million. Kelm intends to invest approximately $2.3 million to finish off the Building Six renovations.

A short history of Building Six and the Knox Mill

With 80,000 square feet of space, Building Six is the largest piece of the Knox Mill complex. It represents the portion of the Knox Woolen Mill that edges up to the Megunticook River at one end, and extends up Washington Street at the other end. Built in the later part of the 1800s, it has a large rear parking lot, as well as indoor parking space beneath part of the building, courtesy of MBNA.

For more than 100 years, the Knox Woolen Mill was alive with the manufacturing of wool blankets, as well as uniforms for soldiers through various wars. In 1987, the last of the looms went quiet, followed by several years of vacancy before the credit bank MBNA arrived, reinvigorating the space with telephone lines and employees operating 24-hour call center.

MBNA also purchased homes in the neighborhood, ultimately creating for one decade a vibrant office complex, anchored by the call center and conference rooms. MBNA succeeded in securing a large piece of downtown Camden in industry, employing hundreds of workers, just as the Knox Woolen Mill had done for the previous 100 years.

After Bank of America, which acquired MBNA in 2004, began divesting of its Camden and Lincolnville real estate, much of it was acquired in 2005 by three Baltimore businessmen, Walter Skayhan, Stephen Geppi and Richard Pineau, who collected the real estate under Maine Investment Properties, and then spun off limited liability companies for the buildings.

Most of the MIP properties were in downtown Camden, though one, the Ducktrap Retreat, was in Lincolnville.

Building Six was included Knox Mill Properties LLC, and Maine Investment Properties began a $2.5 million retrofit to turn the office space into 26 condominiums. That followed much public discussion by the community about the future of the Knox Mill, and its hesitancy to watch downtown industrial and commercial space converted to residential units.

The town eventually approved the condominium plan, with ground floor commercial space. The condominiums were to be luxurious, according to their marketers, with rooftop gardens and balconies.

But by the end of 2008, the properties were placed under receivership. PNC Bank, based in Pittsburgh, asked the court to appoint Gray and Associates, also of Baltimore, Md., to act as receiver and sell the properties after Maine Investment Properties failed to make mortgage payments.

On Dec. 31, 2008, PNC said, the Camden LLCs “were in default under the Note and Mortgage, and pursuant to the provisions of the Note, Defendants confessed judgment in favor of plaintiff in the amount of $14,696,986.24 for unpaid principal, $264,605 for accrued interest, $34,790.46 for late charges, and $1,469,698.62 for attorneys fees, together with costs of the court.”

By 2008, three units in Building Six had been converted to condominiums and sold to individual owners; other spaces were leased out to small businesses.

While PNC worked through its divestiture of the Knox Mill properties, it also at one point this past summer intended to auction off personal property collected by Knox Mill Properties LLC, bits and pieces of artwork and artifacts from the mill, including spindles, felt hammers, and an old Knox Woolen Mill sign.

But this week, Nash reported that he had retained, as part of the acquisition, all of the old vestiges of the mill, where they are remaining.

Nash first showed up in Camden to inquire about the Knox Mill last winter, and as a seasoned real estate investor, bided his time for the right price.

“I do deals,” he said, earlier this year. “I am a real estate investor.”

At 55, with 32 years of real estate experience and feet planted in Maine (he owns a business and property in Rangeley, as well as a home in Freeport), the project’s possibilities excite Nash. Adjacent Knox Mill buildings also interest him, including the utility building at the base of the former woolen mill’s smokestack, the mill’s combined office, retail and restaurant space that extends up Mechanic Street, even  51 Mechanic St., known locally as the Knowlton Street building, which was also a former mill that was renovated in the early 1990s for a Kodak Corporation digital image workshops, and subsequently scooped up by MBNA for corporate offices.

More recently, 51 Mechanic’s interior has suffered from mold, thanks to its exposure of Megunticook River moisture. Disrepair prompted its most recent tenants, Pen Bay Media, to relocate altogether its high tech business to Brunswick. Currently, the building is on the market with the Boulos Company for $800,000.

“You could have some intriguing alternative uses of 51 Mechanic,” said Nash, who is willing to explore any ideas, from restaurants to Pilates studios to colleges, that might make his investment a success. He has said on a few occasions that elderly housing would be explored for that building.

Currently, however, it is Building Six that receives his sole attention. Since acquiring it this month, Nash has put to work his own construction crew — a starter crew with six men — to complete 23 unfinished condominiums, to paint the exterior, landscape, make repairs, tear up some of the parking lot in back and plant grass, and to redesign and rebuild the front entrance.

The entrance, he believes, deserves an architectural overhaul; besides, he laughs, “the tower is beginning to lean.”

He plans to hire up to 25 construction workers for three or four months to help with the jobs, which include tearing up old oil-soaked floors.

“The intent is to hire locally,” he said.

He is also lining up businesses to occupy downstairs space, including a wine bar and a Pilates instructor, and possibly a small store selling staples, such as wine and cheese, for residents upstairs. He anticipates even seeding a business or two himself.

The facility also includes an event center (a former MBNA cafeteria), which can accommodate 120 to 150, and Nash expects get it functioning. Camden’s Community and Development Advisory Committee convened a scoping meeting there two weeks ago.

Nash believes the real estate market has bottomed and is banking that if he buys now, renovates, and then sells the condominiums for almost $100,000 less than what former owner Walter Skayhan envisioned, he will make a profit. Skayhan’s goal was to market the condos as luxury units, with price tags ranging from $350,000 to $800,000.

“Our prices are going to start at $169,000 and go up to $350,000,” said Nash.

His strategy will target a wider range of the market, from the affluent to the mid-range. There is a local need, he bets, for one-floor housing, with an elevator and indoor parking. There will also be four to five high-end units, that will be custom-finished, according to an owner’s own taste.

“A lot of people have a love for the area,” he said. “I don’t think Walter Skayhan’s vision was a poor one. The timing was a mistake.”

That 2006 vision described Building Six, known to Skayhan as “the Residences,” as lined with shops and restaurants on the ground floor, offering “first class shopping, as well as necessary retail. When combined with the plethora of shops just one block away on Main Street, the retail options surrounding the Residences at Knox Mill cater to every possible need and desire.”

Nash said the group of investors and marketing crew are considering renaming Building Six as the Knox Mill Community.

“That’s what it is going to be,” he said. “With 30 families, along with businesses. That is the way it should be.”

Nash cut his teeth on condominium development in 1983. He was 27, and his first project was a 24-unit complex in Haverill, Mass. He is a South Boston native, and grew up in Marblehead. He was right there when the real estate market collapsed in the early 1990s, and he bought 341 Beacon St. in Boston’s Back Bay, a half-finished townhouse project. He finished them, reduced prices by 50 percent, from $375 a square foot to $200, and the units sold, he said, in two months.

Skayhan’s strategy, said Nash, was to sell from a model.

“That can happen in a high market,” he said, such as what existed up until 2004. “Because everybody wants to buy something.”

With banks lending only conservatively, Nash expects sluggish real estate movement, despite that investors want to get into the market.

“It is as difficult as I’ve seen it since 1991,” he said. Those years, 1989-1991, remains the nuclear winter, the years that banks took all the inventory “and didn’t know what to do with it.”

Today, Nash is moving ahead with the Knox Mill renovation using his proven formula. The enterprise is moving fast: he wants to deliver the first unit in three weeks, and then finish one off every five days.

As of Oct. 26, a few weeks after acquisition, three of the units are under negotiation.

 

 


 

Where are they now?

Last April, Gray and Associates contracted with CBRE/The Boulos Company to divest of the Knox Mill complex, including the Ducktrap Retreat in Lincolnville. Altogether, the parcels and buildings held then a collective price tag of almost $20 million.

There have been several false starts for the sale of pieces of the Knox Mill complex, with purchase and sales talks initiated, but then severed as closing dates approached.

Some buildings are currently under purchase and sales agreements, including 1 Free St., which is on the market for $500,000, and 100 Mount Battie St., a 10,000-square-foot industrial warehouse available for $400,000.

Other buildings once owned by MBNA/Bracebridge have, however, changed hands. They include:

49 Mechanic St. was purchased in January 2010 for $350,000 by John D. Morris, and is now listed under ownership by the Woolen Barn LLC. Knox Mill LLC had originally purchased it from Bracebridge in 2005 for $450,000.

On May 4, 23 Whitney Road, in Lincolnville, the Ducktrap Retreat was purchased by Ducktrap Hospitality LLC, of Exchange St., Portland, for $700,000. The property is assessed by Lincolnville at $850,700.

Knox Mill properties on the market include:

The Knox Mill Center, 52,000 square feet, $1.2 million. It currently houses offices, restaurant and bookstore. This center also includes 43 Mechanic St., Building 3 (retail/office); 39 Mechanic St., Building 4 (retail/office); 32 Washington St., Building 5 (retail/office); 36 Washington St., Power Plant; 30 and 34 Mechanic St., and parking lots

51 Mechanic St., 24,975 square feet, $800,000

48 Washington St., 5,325 square feet, $500,000, an empty office building