Construction of stalled Duluth high-rise likely imminent
The development will need to begin soon or local financial assistance could be placed at risk.
DULUTH — It’s likely now or never for a high-rise apartment building to be constructed next door to Essentia Health’s new downtown hospital.
Landmark Development is pushing ahead with plans to build Lakeview 333 — a proposed 15-story, 200-unit apartment building — despite repeated project delays.
“The city is still cautiously optimistic the project is going to move forward,” said Chris Fleege, director of Duluth’s planning and economic development division. He said city staff have been talking weekly with the development team, which is in the final stages of securing financing for the project.
He acknowledged that rising interest rates and construction costs have created challenges, however. When first proposed in 2018, the project was expected to cost $70.4 million, but that estimate has now climbed to about $85 million.
“They seem to be on a good trajectory. And for us, it’s really important that something gets started this summer,” Fleege said.
To help the stalled project forward, the Duluth Economic Development Authority has boosted its financial support for the project , increasing the value of a tax-increment financing package the city had offered from $6.2 million to $7.5 million in May 2022. Tax-increment financing is a subsidy that uses a portion of the new taxes generated by a property to cover certain qualified development costs.
Under the terms of the TIF agreement, the eligible development costs must be incurred by June 20, 2024, or the financial assistance package could dissolve, said Duluth’s senior housing developer Theresa Bajda.
“I think both the developer and the city know that we’re on a tight timeline now. But we’re very optimistic they can secure their financing and keep moving through the permitting process with our staff,” she said.
However, Bajda noted that some of the earliest project expenses, including utility connections, site acquisition and demolition of previous structures are eligible costs for reimbursement using TIF funds. She added that TIF funds will not be released until the project reaches completion.
Landmark partner Rob Robinson said: “After a number of difficult obstacles that we have overcome — including COVID delays, unprecedented construction cost escalation and now, turmoil within the regional banking sector (a key source of debt financing for projects like the Lakeview) — we are still working hard to move the project forward.
“With the completion of Essentia’s fantastic Vision Northland Project next door and the increasing demand for housing of all types in Duluth, we are very excited to bring the Lakeview Project forward as soon as possible. We are also optimistic that we will be able to restart activity on site during this construction season,” Robinson said.
To make way for the new apartments, three structures in the 300 block of East Superior Street have been razed: the Lakewalk Voyageur Inn, the Hacienda Del Sol restaurant and the First Oriental Grocery building.
A small portion of the former hotel has been left standing temporarily, as its removal could compromise the stability of an alley that runs behind it.
Fleege said Robinson, based in Madison, has been working with CG Schmidt Construction also out of Wisconsin, to advance the project.
Bajda said the development will be subject to a project labor agreement, ensuring that prevailing wages be paid to all tradespeople involved in its construction.
Fleege said construction likely will need to begin yet this summer in order for the project to remain on track.
He said many in the community are eager to see construction begin to fill the current gap in the downtown which he described as “an eyesore” and “a section of the city that needs reinvestment.”
In addition to providing housing, the building also is expected to provide about 20,000 square feet of retail space on the ground floor. The developer’s initial aspirations for that space included a potential grocery store tenant.