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Proponents look to the positives in failed development plan for Willmar, Minn., hotel

Rick Goodemann, executive director of Southwest Minnesota Housing Partnership of Slayton, said Tuesday that a $3.6 million project to redevelop the Lakeland Hotel in downtown Willmar is not feasible because the housing partnership was unable to obtain low-income housing tax credits allocated by the Minnesota Housing Finance Agency. Tribune photo by Gary Miller

WILLMAR -- Downtown improvement proponents are disappointed the proposed $3.6 million rehabilitation of the historic Lakeland Hotel in Willmar fell through Tuesday after difficulties arose with the project's complicated financing plan.

But they vow to maintain a broad coalition of supporters and to find other developers or ways to move the project along.

"It's very disappointing that this fell through. I thought we were so close,'' said Richard Engan, president of the Willmar Design Center. "But I do feel that there's still a lot of opportunity downtown.''

Beverly Dougherty, Design Center project coordinator, talked Wednesday about their successes in fundraising and the development of partnerships throughout the project.

The Design Center raised money to fund architect's designs for market-rate apartments in the former hotel. Also, she said the center raised funds to have the 87-year-old building listed on the National Register of Historic Places.

"My expectation is that while this effort has failed, it's brought a lot of attention including statewide, and I believe that someone else will come in and redevelop that property according to the standards set by the Willmar Design Center,'' she said.

Currently, many of the small one-room studio units in the Lakeland Hotel building are rented for residential use, and the main floor commercial space is 100 percent occupied.

The rehab project would have converted the 30 studio residential units on the second and third floors into 10 workforce apartments and created three retail business spaces on the main floor.

Dougherty said during the last 18 months she worked on this project -- and since the Design Center was established in 2005 -- it has been a combination of public, governmental and private groups working together that has made things happen.

"There couldn't have been a more cohesive unit of people with all kinds of expertise working toward one goal, and now that we have set that pattern, I don't think that we can be stopped,'' she said.

She pointed to the city of Willmar, Kandiyohi County, the Kandiyohi County and City of Willmar Economic Development Commission, Housing and Redevelopment Authority "and hundreds of private citizens" who have been in support of the redevelopment of downtown "and a big project like the Lakeland.''

The proposed rehab of the Lakeland Hotel had been seen as a potential catalyst to greater improvements downtown. The complicated financing plan fell apart when the project's developer, Southwest Minnesota Housing Partnership of Slayton, could not obtain low-income housing tax credits.

The money for the Lakeland redevelopment project was to have come from multiple sources, but Rick Goodemann, executive director of the housing partnership, said Tuesday afternoon that the project was no longer feasible without the housing tax credits that would have funded more than 50 percent of the costs.

The low-income housing tax credits, authorized by the IRS, are purchased by investors who use the credits to offset their corporate or personal income tax liability for 15 years.

The Minnesota Housing Finance Agency allocates the credits based on ranking, and the Lakeland project did not receive the expected ranking. Goodemann said the use of a grant in the financing package lowered the ranking under the agency's rules.

Steve Renquist, executive director of the Kandiyohi County and City of Willmar EDC, said Wednesday that he believes the Minnesota Housing Finance Agency liked the project "even though they weren't helping us out on the grant determination.''

Renquist said this setback "should not cloud an absolutely great record'' that Goodemann and the Southwest Minnesota Housing Partnership have in developing about $500 million in housing projects in 68 cities in 38 counties in southwestern Minnesota.

The financing package put together by Goodemann and the nonprofit development corporation was complicated, "but in the configuration that we had, that was the only way that it worked,'' Renquist said.

He said a strictly private-sector project would not have happened because low downtown rental rates -- caused by 30 years of decline -- would have provided insufficient cash flow.

"It was only through the acquisition of the grants and low-interest bonds that anybody could make this work. In the end, it was a private sector project, but it took extensive public sector participation in order to make it work,'' Renquist said.

"If we don't have that, we have to go forward and say is there another way.''

David Little
David Little covers the Willmar City Council, Willmar Municipal Utilities and other city news.
(320) 235-1150