A real estate development firm with offices in Minneapolis and Chicago has set its sights on Duluth and is laying plans to invest about $36 million in the 2100 block of London Road.
Harbor Bay Real Estate Advisors aims to construct a 148-unit apartment building overlooking Lake Superior and have the building ready for occupancy by the early summer of 2016.
“We’re trying to fill what we consider to be a gap in the market,” said Tom Lund, one of the principal partners in the firm.
“You’ve got a large young professional population there looking for quality housing. You’ve got the health care industry, which is just down the street. You have Enbridge,” Lund said.
“You’ve also got empty-nesters who live up in the upper eastside who may be looking for alternatives to their larger homes. It’s a really broad spectrum of people that we think will find our project attractive,” he noted.
The proposed building would contain a variety of units - including studio, 1-bedroom and 2-bedroom apartments - ranging in size from 500 to 1,500 square feet.
The developer said it would be premature to publicly speculate what rents might cost.
In addition to providing a home for residential tenants, the proposed development would include 13,000 square feet of retail space, probably enough for four to five businesses. Lund said the retail operations will prove an amenity for both residents and the wider community.
As proposed, the development would include two levels of underground parking, with access off South Street. A grassy courtyard would be created atop the parking structure. The common space would provide residents with access to an outdoor kitchen and grilling area, some cabanas, seating and fire pits, all overlooking Lake Superior.
VISION FOR VIEWS
Although the water-facing side of the development would stand six stories tall, the side fronting London Road would rise only a few floors from the ground. The slope of the site should work to the benefit of the development, said Mark Bell, another principal partner at Harbor Bay.
“The topography of that site proved to be very advantageous to preserve views of the lake while we designed the project, meaning our project as it fronts London Road will fall within the height limits of the site,” he said.
The current zoning would allow for a building to rise no more than 35 feet above street level at London Road, and preliminary plans show a maximum height of 31 feet.
Bell said his firm worked closely with DSGW Architects to consider the project’s impact on people’s views.
“We focused extensively on how to preserve a maximum amount of sight lines to Lake Superior,” he said. “So both from height, as well as setbacks, we tried to create a building design that would provide beautiful sightlines not only for our residents but that would also preserve the sightlines of the surrounding community.”
Bell believes the project will strike a balance.
“We’ve got the advantage of sitting above the lake, so we have basically unimpeded views of Lake Superior and the downtown and Canal Park,” said Bell. “I’d say 95 percent of our residences will have views of the water.”
The project’s proximity to the Lakewalk will likely be a selling point as well, and Bell said this will be a primary consideration in designing the development.
“We consider that Lakewalk to be one of the single best amenities for the project. So creating a connection point that’s easy to access is important to us, both for walking and bike connections, in order for residents to have easy access to the Lakewalk, down to Canal Park, up to Brighton Beach,” he said.
Bell said he has biked from the site himself and noted that it takes less than five minutes to pedal to downtown Duluth, and maybe 10 minutes to reach Canal Park.
“Our project at the base of the hill is going to provide residents a truly unique experience where they can live and bike and walk to work,” he said.
While the property Harbor Bay has acquired is properly zoned to accommodate the proposed development, the project is far from a done deal.
The assembled full city block-sized parcel is now home to a shuttered Burger King, four homes fronting 22nd Avenue East and a barn-like structure on South Street. All those will need to be removed to make way for the development.
The would-be developer also will need to hold a neighborhood meeting and appear before the Duluth Planning Commission to request a review and approval of the site plan for the project.
The development, which would be one of the largest single residential development investments in the city’s history, also will require help, according to Chris Eng, executive director of the Duluth Economic Development Authority.
“Redevelopment in an urban setting is always more expensive than a new green field development, so we know tax-increment financing will be needed to make this project feasible,” he said.
Exactly how large a subsidy will be requested still remains to be determined.
Lund described the availability of public assistance for such a project as “imperative.”
“These sites are very complicated,” he said. “We’re in Duluth with bedrock issues. We are not in a green field. We can’t spread our parking out over six acres. We’re dealing with a 2.7-acre site.
“There are lots and lots of site development costs that go into doing an urban redevelopment like this, and without tax-increment financing, it would be impossible for us to do this project,” Lund said.
“There’s still a long way to go, but we’re very confident in this development,” Bell said.
Lund said his interest in Duluth stems partly from a personal fondness for the city.
“I’ve got a passion for Duluth and Lake Superior. I’ve been traveling there since I was a child,” he said. “I love Duluth, the community and its people.
“I’ve always frankly dreamed of doing a project in Duluth. So this is an opportunity that we started exploring,” he added. “We knew that we wanted to have some physical connection to Lake Superior, and we wanted to be close to the downtown. As we started to look, we identified this site as a great corner for a mixed-use project that includes multifamily and retail.”
The macro-economic picture emerging in Duluth also makes it an attractive candidate for development, Bell said.
“We’ve been very encouraged by the economy, the job growth, the low unemployment rate and the projected 4,400 housing units that will be needed by the year 2020,” he said, referring to a market analysis conducted by Maxfield Research earlier this year.
“It really suggests there’s a lack of quality housing and rental housing for a lot of residents and also for many employers looking to recruit top talent to Duluth. We felt that to be a tremendous opportunity to design and develop a project that is very needed in Duluth,” Bell said.
If the London Road development is well-received, Bell said Harbor Bay probably will consider additional investments in Duluth.
“There’s no question that we’re very encouraged and excited about the economic ambitions of Duluth, and we would love for this project to be a springboard for future projects if we believe there’s significant demand in the next several years,” he said.
Although Lund and Bell just founded Harbor Bay in January, they have no shortage of experience with large-scale development.
The two boast more than 35 years of combined experience in the commercial real estate industry, and have been active on a number of fronts, including multifamily residential, office, industrial and mixed-use developments. Both previously worked for the Minneapolis-based Opus Group, where they helped orchestrate total investments of more than $1 billion.
While at Opus, Lund said he was involved in several prominent Minneapolis developments, including the Carlyle, Grant Park, Vélo and Nic on Fifth.
Given his team’s experience, track record and connections, Bell said capitalizing a project of the size proposed should be no problem for Harbor Bay.
Bell said the firm isn’t just a developer. Rather, its business model calls for an extended involvement in Duluth.
“We want to be mindful of market conditions always, but our first priority is to develop good projects and hold them long-term,” he said.