Duluth HRA plans to purchase Seaway HotelThe Duluth Housing Redevelopment Authority has entered into an agreement to purchase the Seaway Hotel.
By: Peter Passi, Duluth News Tribune
The Duluth Housing Redevelopment Authority has entered into an agreement to purchase the Seaway Hotel.
A purchase agreement calls for the HRA to buy the former lodging house that operates as a low-cost apartment building for $230,000 — assuming several pieces of critical funding to fall into place.
The building, at 2001 W. Superior St., has lost its rental license, but continues to operate as the HRA scrambles to make sure its tenants aren’t left in the cold. Sixty-two of the building’s units are occupied.
“(Selling the building) just seemed like the right thing to do,” said Rick Caya, who has owned the building for about 22 years. “I think the people buying it have more resources.”
The city of Duluth recently declined to renew the rental license for the Seaway, which has faced numerous structural issues and was once condemned by the city.
While most of the building’s roof has been repaired, its wiring has been upgraded and working sprinklers and alarms have been installed, some portions of the structure still don’t meet rental standards, said Jim Mlodozyniec, an inspector with Duluth’s building safety department.
“The building is currently operating with a rental license that has expired, and that’s certainly a contributing factor in our efforts to purchase the property,” said Rick Ball, director of the Duluth HRA.
He said the building requires improvements to individual rental units and common areas, too.
“The city still could choose to more aggressively enforce its licensing, possibly resulting in the displacement of vulnerable residents who might not have anywhere else to go. Unfortunately, that’s still a potential outcome, and it’s why we’re working to ensure the future occupancy of the building,” Ball said.
If all goes well, the HRA could assume ownership of the hotel by the end of February.
The current purchase agreement calls for the HRA to buy the building for $230,000, subject to an independent appraisal.
The county assessor’s office lists the property as having an estimated market value of $546,800.
Ball said the HRA is hoping for financial help from the Duluth Economic Development Authority with the acquisition. DEDA Executive Director Chris Eng could not be reached Friday afternoon.
Ball said the deal also will require the support of the Minnesota Housing Finance Agency, which had agreed to provide up to $600,000 in a forgivable loan to upgrade the building. The authority would need to sign off on transferring this financing from the current ownership to the HRA for the deal to proceed.
Ball acknowledged the purchase agreement sets forth “an ambitious timeline,” but he said: “I’m fairly hopeful this deal will continue to move forward.”
“This project is not without its challenges,” Ball said, noting that the HRA plans to bring in a professional property manager to oversee the Seaway’s operations. This will increase overhead costs, and the HRA aims to hold the line on rents. Ball anticipates the apartment building may operate at a loss and probably will need to be subsidized.
“We expect there will be a cash flow deficit, and we will need to find a way to cover that,” he said.
Keith Hamre, the city’s director of planning and construction services, said the city has been working with the HRA to seek an owner that could “properly manage” the facility.
Hamre called the sale a “positive step” for the redevelopment of Lincoln Park, particularly the business district from Garfield Avenue to Carlton Street.
“We need to look at a new vision for that district, so we see the Seaway as being the catalyst to the project,” he said.
Hamre said the city would initiate a small area planning process around March or April to address the area’s future.
“We’re very encouraged,” Hamre said. “We’re really excited to support the project, and we’re ready to engage the business community and leaders in Lincoln Park to seek a new vision for the community and neighborhood.”
Ball said the Seaway provides critical housing to many people who are unable to find suitable rental units elsewhere, sometimes due to criminal records, mental issues or past issues they’ve had as tenants. He said the HRA would continue to serve many of these “hard to house” people.
“We definitely know much of the population at the Seaway has been challenged to find any other safe, appropriate housing in our city,” he said.
Caya shared Ball’s sentiments.
“Absolutely,” he said. “I definitely hope to see the building continue to be available to people.”
But Ball also expressed hope that under new management, the Seaway will prove to be a better neighbor for people who live in Lincoln Park.
He said that the HRA plans to work with CHUM to provide additional support services to Seaway residents who could use a little help.
News Tribune staff writer Tom Olsen contributed to this report.