Duluth Economic Development Authority agrees to forgive $230K loan it provided to purchase former Seaway Hotel

Debt could otherwise stand in way of property's redevelopment

A passerby strolls past the Esmond Building.. The Duluth Housing and Redevelopment Authority has agreed to sell the Esmond Building to a developer for $1, but the deal hinges on several outstanding loans being forgiven./Duluth file photo

In hopes of spurring new investment in the Esmond Building — formerly known as the Seaway Hotel — the Duluth Economic Development Authority is prepared to write off a $230,000 loan it earlier provided to save the Lincoln Park structure.

On Wednesday night, DEDA commissioners voted 5-0 to forgive the debt, which it incurred in 2014 when it lent the Duluth Housing and Redevelopment Authority the money it needed to acquire the Seaway, which had been flagged for multiple building safety violations. Without the HRA's intervention, more than 70 predominantly low-income tenants could have been displaced without alternative housing options available.

Most of those residents of the Seaway, now renamed the Esmond Building, have since been relocated to the recently completed Garfield Square apartment building operated by Center City Housing Corp.

The HRA proposes to sell the Esmond Building for $1 to an entity called Minnesota Opportunity Zone Advisors LLC , also known as MN-OZA for short. That firm aims to redevelop the Esmond into a modern 30-unit apartment building with 8,500 square feet of space available for commercial use on the ground floor.

MN-OZA's plans to breathe new life into the property hinge in large part on shedding the Esmond Building's debt. In addition to asking for DEDA's help, the would-be developer also seeks to have the Minnesota Housing Finance Agency forgive another $1.1 million the state lent the HRA to help bring the building up to code.


For its part, the HRA stands to take a financial hit, as well. Through January, the Authority had poured more than $708,000 of its own money into the Esmond — funds that HRA Executive Director Jill Keppers said she does not expect to recover.

Chris Fleege, Duluth's director of planning and economic development, said preliminary analysis suggests that the Esmond building may be beyond salvation.

"The intent is to likely not remodel but to do demolition and build back up. But a lot of that hasn't been finalized yet," he said.

As for forgiving DEDA's loan to the HRA, Fleege said: "It's really about paving the way for them to move forward."

Fleege noted that none of the involved government entities will make any money on the proposed redevelopment but advocated for it nevertheless, saying: "HRA owns the building, and they're anxious to get rid of it, because it has been a challenge for them over the years. It's a drain on their resources, so the sooner they can exit, the better. They felt the obligation when there were residents and people living there to help as part of their mission. Now, we're all trying to really move it on to the next step so they can redevelop it."

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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