$3.8 million preservation project planned for downtown Lakeland Hotel in Willmar, Minn.
WILLMAR -- A developer is proposing a $3.6 million project to fully rehabilitate and operate the historic Lakeland Hotel building as a mixed use commercial and residential property in downtown Willmar.
Southwest Minnesota Housing Partnership of Slayton is proposing to buy the former hotel from Bremer Bank. The bank acquired the property in a foreclosure proceeding, according to Rick Goodemann, housing partnership executive director.
Goodemann discussed the project with the Willmar City Council's Community Development Committee Thursday afternoon and he asked for council support for two key elements of the project's financing plan.
The housing partnership has a purchase agreement with Bremer Bank to buy the Lakeland if the council approves the two requests.
The first was support for low-income housing tax credits, which Goodemann said will be the project's main financing mechanism. The credits are needed because the project proposes to redevelop the existing 30 small studio and efficiency rooms on the second and third floors into a total of 10 workforce housing apartments.
Typically, low-income housing tax credits are a workforce housing financing mechanism, according to Goodemann.
Also, Goodemann asked the committee to recommend the council support a future property tax abatement for the project, possibly in the seventh year after the start of operation.
Committee Chairman Jim Dokken initially said he wanted to take the proposal for information, rather than vote to make a recommendation to the council.
Committee member Ron Christianson said he needed more information about the project and the effect of the tax abatement on city tax revenue before he could vote to recommend it to the council.
Committee members Bruce DeBlieck and Denis Anderson indicated they wanted to vote on the requests.
Anderson said the project could increase the value of the property and he said the tax abatement may not cost the city anything. "This could be just a jump start for the downtown,'' he said.
In a vote on the requests, the committee deadlocked 2-2, with Anderson and DeBlieck voting in favor and Dokken and Christianson voting against. The matter now goes to the council on May 7 without a recommendation.
Later, Bruce Peterson, director of planning and development services, told the Tribune that a property tax abatement tries to estimate the amount of taxes that a project will generate upon completion.
It is generally provided to get a redeveloped property "on its feet'' for a new business. In this case, it would be a means of supplementing the investor's cash flow in the later years when the project begins to encounter expenses in and above the redevelopment cost, he said.
Design Center seeks partnership's assistance
The Willmar Design Center asked the partnership to assist in preserving the Lakeland. The partnership has worked with the city on a number of housing projects, including the most recent, Westwind Townhomes.
Constructed in 1927, the Lakeland is a community landmark and recently received historic designation status through the U.S. Interior Department. Between 1927 and 1958, the Lakeland was cited as a good example of a refined hotel in an outstate urban center, achieving maturity in the early decades of the 20th century.
The Lakeland's façade and structure have barely changed since construction, but the property's function is now mixed-use, with four commercial enterprises on the ground level and 30 residential units on the second and third levels.
The commercial space is 100 percent occupied, although two of the tenants are planning to relocate within the near future.
Existing rental units are small studios and efficiencies, some with shared bath and kitchen facilities, which are unappealing to today's renters and whose rental income does not support the operations of the residential portion of the building, according to Goodemann.
Current residential occupancy is about 50 percent. The site has inadequate parking accommodations and currently rents parking space for tenant use. Parking for residential tenants is challenging and more work will be needed with the city to determine a long-term solution, said Goodemann.