DULUTH — The developer of a Lincoln Park apartment building once again has been threatened with penalties arising from an alleged breach of a contract it signed with the Duluth Economic Development Authority.
The 45-unit Urbane 218 development, 2011 W. Superior St., at the site of the former Esmond Building, aka the Seaway Hotel, has been repeatedly delayed. But Brent Dahlstrom, a managing partner for Merge Urban Development Group of Cedar Falls, Iowa, estimates the project is just 30 to 60 days away from being ready to receive a certificate for occupancy.
A view of the Urbane 218 project from 20th Avenue West.
Peter Passi / Duluth Media Group
While Dahlstrom knows the project is running behind schedule and won’t be finished by year’s end, as hoped, he pointed to continued progress, saying: “We are so close to being 100% done.”
Dahlstrom said he was perplexed by one of the claims in a Dec. 18 letter he received from DEDA that said the authority “has been made aware of claims that Urbane 218 LLC has failed to pay its contractors and/or subcontractors.” The letter further warned that if a mechanic’s lien is filed against the property for unpaid bills, “the developer will be deemed to be in further breach” of a development agreement.
But no current liens were on file against the property when the News Tribune visited the St. Louis County Recorder’s Office on Wednesday.
Dahlstrom said Merge is continuing to pay contractors, while also acknowledging: “This is a $14 million project. So, there are always invoices coming in and checks going out.”
As soon as he received DEDA’s “notice of breach” letter, Dahlstrom said he met with city staff to address their concerns.
A rear view of the Urbane 218 apartment building.
Peter Passi / Duluth Media Group
The project ran into early delays due to financing difficulties, causing work on the unfinished building to temporarily stall before the project could resume, and Dahlstrom conceded, “I get that people got worried and that long pause did not look good for us.”
However, he said: “We never walked away from the project, and we’re excited to bring more affordable housing to the neighborhood.”
The building will offer units ranging in size from studios to two-bedroom apartments.
After nearly 20 years in the real estate industry, Dahlstrom referred to Urbane 218 as “the most difficult project of my career.”
“But we’ve continued to invest millions of dollars more than we ever anticipated,” he said.
The stakes are high for Merge, which has received substantial aid for the development, including a $1.8 million tax-increment financing package.
A letter signed by Tricia Hobbs, DEDA’s executive director, said that, unless the alleged breach is promptly cured, “DEDA will have no other alternative than to seek remedies under the development agreement and under any applicable law, including termination of the development agreement and TIF note.”
Dahlstrom said that if the city withdraws its support, the building will likely need to switch to a market-rate model, depriving the neighborhood of greatly anticipated and badly needed affordable housing units.
“Nobody would win then,” he said.
Peter Passi covers city and county 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.
