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Serving Northern St. Louis County, Minnesota

Harbor hiccup

Project back on track after differences over amended agreement are resolved

Marshall Helmberger
Posted 1/18/17

TOWER—For a time last week, it appeared the town home development at the harbor here could go off the rails over a change in wording in an amended agreement covering development at the site. But at …

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Harbor hiccup

Project back on track after differences over amended agreement are resolved

Posted

TOWER—For a time last week, it appeared the town home development at the harbor here could go off the rails over a change in wording in an amended agreement covering development at the site. But at a special meeting of the Tower Economic Development Authority and the city council last Thursday, the city and the developer, Orlyn Kringstad, found common ground that keeps the project on track.

Kringstad and his development team had sought the amendment to the agreement signed last August to obtain an option on additional land around the harbor. His development plan, which he said will proceed in three phases, now includes 18-20 town homes, a small commercial retail development and a restaurant and upstairs apartments. The new agreement provides Kringstad an option to purchase the city lands, once developed, and it increases the amount of land under Kringstad’s control from the roughly 2.5 acres secured in the first agreement, to just over five acres in the amended version.

Attorney Christopher Virta, of Duluth-based Fryberger, Buchanan, Smith & Frederick, who has been handling the agreement, was present at last week’s meeting. He told council members that Kringstad will only need to exercise his option on land actually encompassed by the development, and that some of the five acres will continue to be owned by the city.

“In our opinion, it’s much cleaner that they have an option on the entire site, but the city will only convey the land where development takes place,” said Virta. He said approach taken by the original development agreement transferred the land to Kringstad, with the understanding that unused land would eventually be transferred back to the city. But Virta said such an approach posed risks of raising questions in the future about whether the city has clear title.

The agreement, approved last Thursday, maintains some of the same terms as the original deal, including that the city will approve moving ahead with its commitments towards the project once Kringstad’s firm has at least five signed letters of intent to purchase town homes. City officials had told Kringstad two days earlier that they wanted to change that requirement, to five signed purchase agreements. But Kringstad had objected, noting that he had already obtained four letters of intent and was uncomfortable going back to interested buyers asking for a second agreement.

City officials ultimately agreed with Kringstad’s argument and dropped their demand for purchase agreements in the final deal approved last Thursday.

The latest agreement does not extend the October 2017 deadline for Kringstad to begin work at the site. While Kringstad said he remains confident of meeting that deadline, he raised the possibility that the deadline may need to be extended. He specifically asked for minutes to be taken at the TEDA meeting to put his concerns on the record about what he said were a number of delays on the city’s part that have already slowed progress on his development. Kringstad noted that the signing of the original land transfer agreement had been delayed several times by the city, and he said those delays had cost him at least one town home sale as well as two cash investors in the project. The city and Kringstad had discussed the need for an amendment to the transfer agreement back in August, but Kringstad noted that the city had made little progress on the revised agreement for months. “The addendum was going to be minor,” said Kringstad. “It should have been ready four months ago and I want that on the record.” Kringstad noted that the delays had cost him time and money, and had proven to be a setback to the project. “If there are additional costs due to delays, I don’t think we should be liable for all of those costs,” he said.

Kringstad also asked for more information about why the Cobblestone hotel project had never moved forward. He said he had tried to research the issue by reviewing TEDA minutes, but said the most recent TEDA minutes available on the city’s website date back to 2013.

The development agreement does require Kringstad to provide the city with his project’s completed business plan, which Kringstad said he should have finished within two weeks. He said the initial business plan will deal with the town homes, with subsequent business plans for the restaurant/apartment complex as well as the commercial retail project. Kringstad said he expects those projects, which he calls phases 2 and 3, will proceed very quickly once the town home project begins.