Time soon may be running out for the Esmond Building, formerly known as the Seaway Hotel.

A previous effort by Minnesota Opportunity Zone Advisors LLC to put together a plan to renovate the Lincoln Park building has been abandoned, due to the challenges of reconfiguring the structure and its poor condition, as reported in Perfect Duluth Day.

Now, the Duluth Housing and Redevelopment Authority, which owns the Esmond, is working with a new would-be partner: Merge Urban Development of Cedar Falls, Iowa. And this time around, plans call for the Esmond to be demolished, clearing the way for a new building with retail on the ground floor, topped by three more floors that would accommodate 42 units of rental housing.

The new project has an estimated price tag of about $9.8 million, according to Jason Hale, Duluth’s senior housing planner.

HRA Executive Director Jill Keppers said the authority had been drawn to the idea of rehabbing the brick building. But when it became clear that was not a feasible plan, the authority reached out to Merge, as the firm had also submitted a proposal to redevelop the property, albeit from scratch.

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“We moved along and went with Merge, and it’s probably going to turn out for the best,” Keppers said. “So, as soon as they sign the development agreement, which we are fairly confident is coming together, Merge will be doing demolition, with assistance from the HRA.”

Keppers predicted the Duluth HRA will probably end up sinking about $1 million into the project, by the time the site has been cleared and prepared for redevelopment. The authority would then turn around and sell the property to Merge for $1, and the prospective apartment building would be expected to provide affordable housing as part of the bargain.

Merge Urban Development proposes to tear down the Esmond Building and put up a new apartment building in its place.  This is a rendering of what the new structure could look like. (contributed image)
Merge Urban Development proposes to tear down the Esmond Building and put up a new apartment building in its place. This is a rendering of what the new structure could look like. (contributed image)

When contacted by the News Tribune Friday, a Merge representative, declined to discuss the prospective Esmond project until it is formalized.

While the Esmond appears to be shaping up as Merge Urban Development’s first project in Duluth, it's not the firm’s first and only foray into the city. Merge was granted an exclusive 1-year option to redevelop the Pastoret Terrace and Paul Robeson Ballroom properties, formerly home to the Kozy Bar and Apartments, in 2019. But that site remains tied up in litigation, and the option has been extended.

If not for Minnesota Housing’s March 25 decision to forgive a $1.1 million loan it had earlier provided the HRA, the Esmond project could not have moved forward, Hale said. That loan was provided to make needed repairs to the then-privately-owned building, after it was nearly forced to close in 2012, due to a leaky roof and numerous other building safety violations.

Had the Seaway been condemned for human habitation, about 70 residents could have been forced onto the street with little prospect of finding affordable replacement housing. The HRA stepped in to purchase the building, stabilize the situation and rebrand the troubled Seaway as the Esmond.

Most of those remaining residents of the Esmond moved to Center City Housing Corp.’s newly constructed Garfield Square building in 2020.

The HRA has signed off on a prospective development agreement with Merge, but that agreement has yet to be finalized.

Hale said the Duluth Economic Development Authority also will be working on a second development agreement with Merge that is expected to provide additional financial assistance, in the form of tax-increment financing. While the exact scale of that package has yet to be determined, Hale hopes to have a package ready for consideration before the end of May. DEDA already has written off a $230,000 loan it had provided to the HRA to help it with the costs of managing the Esmond.

Last summer, Keppers said someone broke into the Esmond and started stripping copper pipe out of the building. While that individual was apprehended in the act, he had already caused substantial damage to the structure and its heating and water systems.

“Now, I knew I was going to have problems with the boilers for the wintertime and that the building wouldn’t have working sprinklers. So, we had to take extra precautions. That’s why we’ve been checking it all the time,” Keppers said.

Hale said the incident only heightened the sense of urgency to move forward with redevelopment of the site.

“Because the building doesn’t have appropriate or adequate heat, and now it’s essentially a vacant structure in cold storage. That makes it No. 1, obviously more difficult to maintain; and No. 2, less safe. So, that’s why there’s a little time sensitivity to seeing this project occur,” he said.

This story was edited at 8:10 p.m. April 30 to correct the name of Perfect Duluth Day. It was originally posted at 7 p.m.