Developer at center of Duluth housing controversy aims to build apartments in Grand Marais
WTIP file photo

Developer at center of Duluth housing controversy aims to build apartments in Grand Marais

A Minnesota development firm that recently found itself in the center of a housing controversary in Duluth is hoping to build a 51-unit apartment complex in Grand Marais.

The developer is P&R Companies. They are scheduled to appear before the Grand Marais Planning & Zoning Commission Wednesday, May 3.

This is the same company being scrutinized after it recently told tenants occupying some of the apartments in a new Duluth subsidized housing complex they needed to vacate one floor of the unit. The tenants at Lincoln Park Flats, as the apartments are called, were going to need to change floors or move out because their homes were going to be turned into a “boutique hotel.” The reaction in the Duluth community was swift. Protestors gathered outside the Lincoln Park Flats apartment complex in support of the tenants. The words “Homes Not Hotels” were emblazoned on some of the signs held by protestors. The largest media outlets from the Twin Cities to Duluth covered the story. WTIP first reported on the situation April 4.

Erin Makela is the director of marketing and public relations at P&R Companies in Duluth. She told WTIP May 3 that some of the media reports focused on this story did not present the situation fairly. For example, Makela said all of the tenants at Lincoln Park Flats who wanted to stay in the building were allowed to do so. The turnover rate following the first year of an apartment lease is 30 percent in the Twin Ports area, according to P&R officials. This meant apartments recently became open on other floors at Lincoln Park Flats so those who needed to vacate their current units only had to move to another floor to make way for short-term rentals, Makela said.

P&R Companies built the Duluth apartments in 2020. They feature more than 70 apartments that were built to address a housing shortage in Duluth. To support the project, the company received a $2 million appropriation from the city of Duluth. In recent weeks, the company said construction costs went above estimated projections and that the project was losing money under the current model. Essentially, they describe a situation where they were financially forced into turning 24 of the units at the Lincoln Park Flats into short-term rentals. If the two dozen units were not converted into short-term rentals, P&R Companies likely would have been required to sell the building, according to Makela.

Locally, the Cook County Housing Redevelopment Authority (HRA) and representatives from P&R Properties will be asking for a conditional use permit during the May 3 meeting to build a proposed apartment complex in Grand Marais.

The 51-unit apartment complex would be located below the water tower on the curve leading up the Gunflint Trail on the edge of city limits.

During a May 2 interview with WTIP, Hale said there are mechanisms in place that will prevent the proposed apartment complex in Grand Marais from falling into a similar situation as the Duluth project. Among the safeguards are deed restrictions, local zoning laws, and a development agreement that will prohibit short-term rentals at the proposed apartment complex. However, after a certain amount of time, and if variances are given by the planning commission and city council, at some point the apartments could, at least in theory, be turned into short-term rentals, Hale acknowledged. Nevertheless, the idea in building the proposed apartment complex near the bottom of the Gunflint Trail would be to provide housing for community members, Hale said.

“My mission is not short-term rentals,” he added.

Safeguards aside, Hale acknowledged that the optics and the timing of the situation are not ideal.

“Yeah, I don’t disagree,” Hale said in regard to the situation in Duluth being an easy target for people concerned about the proposed apartment complex in Grand Marais. That being the case, Hale said he supports the intention of the developer and trusts the mechanisms the HRA and city have in place will keep the apartments as long-term rentals if they are built.

Makela told WTIP that P&R Companies owns six other properties in the Twin Ports area and that all of them are long-term rentals. She said the business is focused on providing housing throughout the Northland.

“We’re not a big corporation from the Twin Cities,” she said. “We’re here to help.”

The request for a conditional use permit will come before the Grand Marais Planning and Zoning Commission. The committee members listed on the city’s website include Michael Gary, Anton Moody, Stacey Hawkins, Ben Peters and Brandon Batchelor.

Earlier this year, the city sold the land where the apartments would be built to the HRA for $1. Following that, planning and zoning and the city council changed the zoning ordinance so such a project would be allowed in this location.

The Planning and Zoning meeting starts at 5:15 p.m. Wednesday, May 3, at City Hall in Grand Marais.

Listen to the audio below to hear the full interview with WTIP’s Joe Friedrichs and HRA Director Jason Hale.

This story was updated at 9:45 a.m. May 3 to include comments from Makela at P&R Companies. 

WDIO-TV in Duluth shared photographs with WTIP that were used in this story from the April protests outside Lincoln Park Flats.