A private investment group intends to build Duluth’s newest apartment building, which will be located in the Historic Arts and Theater District downtown.
Developers say it will provide much-needed housing for workers, particularly those employed at Essentia Health and St. Luke’s, which both will construct new facilities in the same neighborhood.
The new concrete structure will be one of the city’s largest at 15 levels. It will house more than 200 units and be 170 to 180 feet in height. Apartments will be offered in three sizes – two bedroom high-end units on the corners, one-bedroom units designed for traveling doctors, healthcare specialists and people in similar situations, and efficiency units. The latter are on the larger size, with the studios offering 700 to 800 square feet in an open floor plan.
“They will be geared toward younger people having lower incomes,” said Brian Forcier, principal and managing partner of Titanium Partners LLC of Duluth, one of three primary investment groups.
At the Superior Street level, a grocery story will occupy about 17,000 square feet. Another 1,200 will be available for a boutique business.
Titanium has been preparing the development plan for about two years, but it initially was much smaller – a seven-story stick-built structure. Massive expansion plans revealed by Essentia and St. Luke’s were one factor that prompted the project to grow. The other was the federal government’s Opportunity Zone incentives, which were included in the 2017 tax reform bill. The primary investors will form an Opportunity Zone Fund, through which significant capital gains tax reductions are offered. Other accredited investors can participate by injecting capital into the project while receiving a tax break.
Forcier said the $75 million project, which will be adjacent to the Sheraton Hotel, currently is being called the Voyageur Redevelopment. That’s because it will displace three Titanium-owned commercial structures – the Voyageur Lakewalk Inn, the former Hacienda del Sol restaurant building and a structure that was last used as a Japanese food market. The Voyageur Lakewalk Inn will continue to operate until construction begins, which will either be next spring or next fall. Completion is anticipated to be by fall of 2020.
Firms from Chicago and Madison – Fogelson Development and Landmark Development – are the other primary investors. In Chicago, Gerald Fogelson owns about 10 percent of the city’s apartment units. Landmark Development is best known for its work as owner’s representative for U.S. Bank Stadium.
“They’re great partners to be aligned with. Everything should go smoothly,” Forcier said.
He believes this is the first Opportunity Zone project to emerge in Duluth. Opportunity Zone funds can be organized as corporations or partnerships. Within six months of being established, 90 percent of investors’ capital must be invested as equity (not debt) into property.
The investments can be used in conjunction with some other incentives such as those dedicated toward affordable housing.