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Duluth may open wallet wider for high-rise apartment building — priced at nearly $85 million

Higher construction costs boosted the need for aid to keep the proposed development on track.

Downtown apartment building seeks additional TIF financing
Demolition is underway at 333 E. Superior St., seen on Thursday, May 26, 2022, in Duluth. The area was once home to Voyageur Lakewalk Inn, Hacienda Del Sol and First Oriental Grocery.
Clint Austin / Duluth News Tribune
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DULUTH — A project that promises to bring more than 200 new market-rate housing units to the downtown could receive up to $7.5 million in tax-increment financing.

On Wednesday, the Duluth Economic Development Authority voted 4-0 in favor of boosting its support for the proposed Lakeview 333 apartment complex by $1.3 million beyond the tax-increment package previously approved for the 15-story building.

Duluth high-rise apartment building.jpg
A rendering of the proposed 15-story apartment building at 333 E. Superior St., Duluth, which would replace the Voyageur Lakewalk Inn. Developers hope to attract a grocery store to the ground level of the 204-unit complex. Contributed / Landmark Development

Tax-increment financing is a subsidy that uses a portion of new property taxes generated by a project to cover certain qualified development costs for a defined period of time, after which taxes flow in full to local units of government. In the case of this particular project, the duration of the agreement would be for a maximum of 25 years.

While DEDA gave its nod to the revised development agreement Wednesday, the Duluth City Council also would need to sign off on the deal before it becomes official.

Downtown apartment building seeks additional TIF financing
Portions of rooms from the former Voyageur Lakewalk Inn are still visible at 333 E. Superior St., seen on Thursday, May 26, 2022, in Duluth.
Clint Austin / Duluth News Tribune

If the requested aid is approved, construction of the new apartment building at 333 East Superior St. is expected to begin this year.

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But even with the proposed aid package, the building's prospects remain uncertain, said Chris Fleege, director of Duluth's planning and economic development division.

"There's still a gap that this developer is working to overcome. So, even with this assistance, we're not certain that they're going to make it," he said.

Downtown apartment building seeks additional TIF financing
A developer is looking to construct a 15-story apartment building at 333 E. Superior St., seen on Thursday, May 26, 2022, in Duluth.
Clint Austin / Duluth News Tribune

In a section of the resolution labeled "statement of purpose," city staff observed: "The request for additional assistance is based on changing project costs driven by inflationary pressure in the construction materials and labor markets."

Fleege said the undertaking is now projected to cost nearly $85 million.

When originally proposed in 2018, the anticipated cost of the project was about $70.4 million. At the time, developer Rob Robinson of Landmark Co., based in Madison, Wisconsin, projected studio apartments in the high-rise would likely go for around $1,345 per month on average, with higher rents for larger units and those with special views.

Downtown apartment building seeks additional TIF financing
Lots are being prepped for development at 333 E. Superior St., seen on Thursday, May 26, 2022, in Duluth. A developer of a 15-story high-rise apartment building is seeking an additional $1.3 million in tax-increment financing for the project due to increased costs of construction.
Clint Austin / Duluth News Tribune

While the Lakeview complex is not geared toward providing low-cost "affordable" housing, Fleege said it came forward at a time when the city was providing support for all types of housing. Hence, Duluth offered similar similar types of assistance to housing developments such as Kenwood Village, Endi and Bluestone.

"We need housing at all levels," Fleege said. "We need market-rate and affordable housing."

The proposed 15-story building would have about 20,000 square feet of commercial space on the ground floor, which the developer had suggested might be an attractive location for a grocery store.

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Downtown apartment building seeks additional TIF financing
333 E. Superior St. sits across the street from the Essentia Vision Northland project seen on Thursday, May 26, 2022, in Duluth.
Clint Austin / Duluth News Tribune
030221.n.dnt.HighRise1.jpg
Lakeview 333, a 15-story apartment building with commercial space on the ground floor, is proposed to be constructed at the site of the former Voyageur Lakewalk Inn, 333 E. Superior St., Duluth.
Jed Carlson / 2021 file / Duluth News Tribune

The original development agreement for the project was first signed in August 2019. But while the former Voyageur Lakewalk Inn, Hacienda Del Sol restaurant and the First Oriental Grocery buildings have been razed to make way for the development, it has been repeatedly delayed. Wednesday marked the fifth amendment to the original development agreement.

Downtown apartment building seeks additional TIF financing
The neon sign of the former Voyageur Lakewalk Inn still stands at 333 E. Superior St., seen on Thursday, May 26, 2022, in Duluth.
Clint Austin / Duluth News Tribune
SEE ALSO:
The Duluth Planning Commission supports rezoning a Blackman Avenue site to accommodate an apartment building.

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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