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DEDA approves subsidy for Kenwood developer

Members of the Duluth Economic Development Authority unanimously approved a subsidy Wednesday night to help erect a four-story apartment/retail development at the corner of Kenwood Avenue and Arrowhead Road.

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An artist's rendering of the Kenwood Village development planned for the southwest corner of Kenwood Avenue and Arrowhead Road in Duluth. This view is looking southwest from the intersection. (Image courtesy of United Properties)

Members of the Duluth Economic Development Authority unanimously approved a subsidy Wednesday night to help erect a four-story apartment/retail development at the corner of Kenwood Avenue and Arrowhead Road.

The authority signed off on a development agreement that would provide up to $2.86 million in tax-increment financing for the project, which is to include at least 80 market-rate apartment units, no less than 14,000 square feet of commercial space and a two-tiered structure containing 73,000 square feet of parking.

Tax-increment financing is a mechanism that uses new property taxes generated by a project to cover certain development costs. The proposed agreement would expire within 26 years, at which time all future property tax proceeds would flow directly to taxing authorities, namely the city, county and school district.

The property currently has an assessed value of $729,500, but that is projected to increase to at least $9.9 million after development. The improved property is expected to throw off $141,750 in annual real estate taxes, not accounting for inflation.

The site is a challenging one to develop because of bedrock formations and heavy traffic flows, noted David Montgomery, chief administrative officer for the city of Duluth.

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Montgomery observed that the project will bring badly needed additional quality housing to the city. Layouts will include studios and 1- to 3-bedroom units.

The development agreement endorsed by DEDA Wednesday will be considered by the Duluth City Council for final approval on Monday.

Rick McKelvey, a representative of the prospective developer, Bloomington-based United Properties, said he anticipates the project will require a total investment of more than $21 million. The development will be called Kenwood Village.

McKelvey said United initially considered putting up a purely commercial building on the site, but the project evolved to include housing as the firm learned more about the housing shortage in Duluth and the desire for more mixed-use development.

The building likely will include slots for five to six retail businesses, according to McKelvey. He said United has been in lease negotiations with a couple of restaurants interested in the location, but he said he couldn't disclose their names. McKelvey also said a financial institution is looking at establishing a presence in the building, too.

As part of the project, United Properties has agreed to contribute $200,000 to the city for improvements to Kenwood Avenue and Arrowhead Road.

All told, plans call for about $1 million to be invested in road improvements, said Jason Hale, a business development representative for the city. Those improvements will include widening Kenwood Avenue, adding dedicated turn lanes and installing a traffic signal at the intersection of Cleveland Street and Kenwood to be timed to complement the signal at Kenwood and Arrowhead.

United Properties is privately held by the Pohlad family, which also owns the Minnesota Twins as well as several auto dealerships, a radio station and a movie studio.

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The development agreement requires United properties to begin construction on the site no later than June 2016 and to complete it by September 30, 2017. But United Properties aims to commence work this year, putting the project on a more ambitious schedule.

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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