Lafarge developers seek extension; downsized Duluth waterfront project meets lenders’ approval
Plans for a multimillion-dollar waterfront hotel in downtown Duluth will take center stage tonight as the Duluth Economic Development Authority considers whether to authorize a fifth extension to the would-be developers of the project.
“It feels like we’ve turned the corner, and we’re so excited to get to this point,” said Sandy Hoff, a commercial real estate developer and member of the investment team that aims to erect a $29 million, 140-unit hotel next door to the massive concrete silos of the former Lafarge Cement terminal.
Hoff said two lenders recently signed term sheets that could provide investors with the financing they need to start work on the hotel this summer.
First, however, Hoff and his cohorts who have formed Pier B Holding LLC will need to obtain a three-month extension from the Duluth Economic Development Authority on an option to redevelop property it owns adjacent to the Lafarge terminal. DEDA granted its first option to Pier B in November 2011.
Now that investors have financing commitments in hand, Heidi Timm-Bijold, a business resources manager for the city of Duluth, said she’s optimistic the team can complete work on a development
agreement and arrange to close on the property by the end of September. Toward that end, she plans to recommend DEDA commissioners extend the current March 31 deadline for the project until June 30, 2014.
Timm-Bijold said other final details to be addressed include establishing a tax-increment financing district to help subsidize the development and the successful completion of grants awarded to assess the site and determine what it will take to make it buildable.
“The next three months are going to be more than a little crazy, but this is going to be my No. 1 focus,” she said.
Hoff said lining up financing for the hotel project proved tough.
“We’ve found ourselves in a very challenging lending environment, and few sectors in commercial real estate have been hit harder than the hospitality and restaurant industries,” he said.
“When we came forward with plans for the new construction of a hotel and restaurant, it sent most bankers diving under their desks,” Hoff joked.
“But we found a few brave bankers willing to hear us out, and they found our business plan is very solid. I think they also were impressed with the quality of our investment group,” he said, pointing to a collection of fewer than one dozen local business people who have remained committed to the project through thick and thin.
Nevertheless, original plans for a nine-story hotel/condominium had to be downsized, said Alex Giuliani, one of the investment partners. He said the development now proposed would be a four-story hotel with a restaurant on the ground floor.
Hoff and Giuliani said there would still be room to add condominiums to the development at a later date if market demands warrant.
Some of the added benefits of building a shorter hotel are that it should be less costly and take less time to complete, Hoff noted. If construction begins this summer, as anticipated, he predicted the hotel should be ready to welcome its first guests by summer 2016.
Pier B also plans to install a sliding bridge across the mouth of a slip located upshore from the proposed hotel, connecting it with neighboring Bayfront Festival Park via the Baywalk pathway. The developers also propose to use dredged materials to make the existing slip more shallow and inviting for smaller watercraft using a transient marina they aim to create, assuming the idea passes muster with the Minnesota Department of Natural Resources, the U.S. Army Corps of Engineers and other regulatory stakeholders.
There are no plans on how to reuse the multi-silo Lafarge terminal, but Hoff said some future ideas could include additional hotel rooms, condominiums or apartments, retail space and a top-floor night club overlooking the harbor and the Aerial Lift Bridge.
Timm-Bijold said that if done right, Pier B’s redevelopment of the Lafarge site could well set the stage for yet more investment along downtown Duluth’s western waterfront.