Duluth agency rejects Raymond's proposal for Pastoret
The future of the 1887 building remains unclear, as the city is prohibited from tearing it down and no other developers have come forward.
DULUTH — The Duluth Economic Development Authority has rejected a developer's proposal to renovate the fire-damaged Pastoret Terrace property as part of a First Street revitalization effort.
DEDA, which owns the historic downtown building that long housed the Kozy Bar and Apartments, announced in a statement Friday afternoon that it was declining to move forward with a plan submitted by Rod Raymond's Endion Station, LLC.
"DEDA will continue to explore alternatives to demolition of the Pastoret Terrace," the statement read. "Both DEDA and the city of Duluth are committed to revitalizing the First Street corridor."
Raymond, who first learned of the decision from the News Tribune, called it "frustrating." He said Mayor Emily Larson called him earlier in the day to set up a meeting Monday, at which point he hoped to advance his goal of fixing up the building for short-term rentals that would capitalize on the rapidly expanding downtown health care industry and serve as a catalyst for redevelopment in the Historic Arts and Theater District.
"I really hope they save the building," Raymond said. "I hope the next guy or gal who comes in is going to do this. I don't think they're going to tear it down; I don't think they want to tear it down. The lawsuits aren't going to go away, that much I can promise you. So it's going to remain a boarded-up, ugly building. And I think we had some viable ideas."
Raymond, the lone developer to come forward when DEDA issued a request for proposals last year, also was shut out in 2017 when he pitched restoration as market-rate efficiency apartments. DEDA at that time rejected three proposals, sparking a lawsuit from former owner Eric Ringsred and other preservationists as the agency instead sought to move forward with demolition.
Raymond said he received a letter Friday citing four reasons for rejecting the proposal: an unwillingness to take ownership of the building and a lack of detail regarding financial backing, project timeline and development experience.
Raymond is a well-known local businessman whose history includes redevelopment of historic properties including Old City Hall, the former Carlson Bookstore and Endion Station. He said he hasn't been allowed to enter the structure, and his proposal was premised on the city first undertaking court-ordered steps to shore up the building in order to assess the next steps for his plan.
"We were exploring a go or no-go," Raymond said. "So that's really confusing to me. There's not a single person who would take ownership without going into something."
The city cited the "business data" section of the state's public information law in declining further comment on the details and merits of Raymond's proposal.
Litigation, which does not involve Raymond, had been put on hold while DEDA considered the proposal. But Friday's announcement likely signals a resumption of the court battle, with Judge Eric Hylden slated to hold a conference with attorneys on March 13.
Miles Ringsred, an attorney representing the plaintiffs, said he was "a little surprised" by the decision.
"It'll be interesting to see why and what reasonings they have for rejecting the Endion Station proposal," he said, "because at the end of the day, there's an appellate mandate for this case that's pretty stringent, and I think would very much apply to Mr. Raymond's case. So, unless they have some other other things up their sleeve, it would seem to me that the options are pick this or something else — not demolition."
Designed by renowned Duluth architect Oliver Traphagen, Pastoret Terrace was originally constructed in 1887 as six luxury townhouses at the corner of First Street and Second Avenue East. It was later divided into roughly 50 smaller, affordable housing units, and a bar was added to the front.
But the Pastoret, and adjoining Paul Robeson Ballroom, have been beset by a number of fires since 2010, rendering it uninhabitable. Ringsred, lacking fire insurance, lost the property to tax forfeiture in 2016.
The lawsuit, filed in April 2018, has already resulted in one trial and three appeals. Hylden initially gave DEDA permission to move forward with demolition, but that decision was overturned by a three-judge panel of the Minnesota Court of Appeals, which said the decision could not be based on financial considerations alone.
While DEDA was ordered to shore up the building and prevent its further deterioration, the property has largely remained untouched as the plaintiffs were unable to come up with a $140,000 bond ordered by the court to shield DEDA from financial losses should the agency ultimately prevail in litigation.
Raymond and Miles Ringsred both suggested the city could be pursuing grants from several funding sources, including the Minnesota Department of Employment and Economic Development, to take critical steps such as bracing the exterior walls and installing a new roof. With the state's budget surplus and a new Legislature, there is also hope of reviving a historic tax credit program that expired last year.
Raymond, who estimated he has invested $10,000 in the Pastoret proposal, said he brought on developer Meghan Elliott as a consultant. Elliott is behind the conversion of the former St. Louis County Jail to the Leijona apartments, which city, state and federal officials celebrated at an open house Friday.
Raymond hoped the Pastoret would cater to medical professionals and others visiting Essentia and St. Luke's, offering the only downtown hotel rooms to include kitchenettes.
Describing a neighborhood revitalization similar to the Lincoln Park Craft District, he laid out a vision that included restaurants and coffee shops, and a possible conversion of the Paul Robeson Ballroom into a fitness center and wedding venue. The Duluth Playhouse already plans to move in across the street at 201 E. First St.
He said he secured options to purchase several buildings across the street — including the Ringsred-owned Wabasha Bookstore — and he hoped other developers would be inspired to build apartments or other businesses nearby. Noting that he helped broker Ringsred's sale of the NorShor Theatre to the city, he expressed skepticism that another developer could bring the long-feuding parties together.
Pointing to other revitalized properties, including the former Last Place on Earth head shop that now houses Duluth's Best Bread, Raymond said old buildings contribute to the character of the city. Still holding out hope for the Pastoret's redevelopment, he asked that people focus on its historic value and future potential, and not its seedy reputation of the present.
"I'm not a victim here," Raymond said. "I'm just a hard-working Duluthian who has blood, sweat and tears here. I just want what's best for the city. And I'm getting old; I'm a few years from retirement. I just hope that these buildings last much longer than you and I."