Duluth’s multifamily market has been hopping in July, as three multifamily properties in the area two in Duluth’s city limits and one in Cloquet have sold since the start of the month.
Two buildings, Duluth’s Pennel Park Commons and Cloquet’s Larson Commons, were sold to Steele Properties for $24.3 million and $18 million, respectively, according to a press release from the Denver-based firm. Another multifamily building in Duluth, the Lenox Place Apartments, sold for $18 million to a California group, according to a certificate of real estate value.
Steele Properties’ acquisitions are both Section 8 housing and extensive renovations are planned, Steele’s press release said. Pennel Park Commons will receive more than $46,000 per unit in renovations, while Larson Commons will have $42,000 per unit.
With its 101 units, Pennel Park cost 240,594 per unit, while Larson Commons at 85 units will cost $211,764 per unit.
“We are looking forward to providing each unit with a complete refresh and update, which will include upgraded kitchens, including new appliances, all new flooring and freshly painted interior,” the release said. “The exteriors will receive new siding, building signage and redone parking areas.”
Pennel Park Commons is located at 330 N. Arlington Ave. in Duluth with 101 units spread across seven stories. Larson Commons is located at 810 Cloquet Ave. in Cloquet with 85 units spread across seven floors. Both apartments were built around 40 years ago and are designated affordable for seniors 62 years and older.
“Pennel Park and Larson Commons are both in need of significant renovations,” Steele Properties Principal Hud Karshmer said in the press release. “We look forward to providing a fully comprehensive rehab to these communities so their residents will have a place they can continue to be proud to call home for many years.”
On its website, Steele Properties describes itself as a real estate investment group that specializes in working with affordable housing. It’s purchase of the Duluth area apartments for renovation pushed the number of units they have worked on over 9,000.
According to the press release, the renovation project is financed through 4% tax credits issued by Minnesota Housing, and tax-exempt bonds from both Duluth and Cloquet.
Titanium Partners CEO Brian Forcier said Wednesday the Duluth housing stock is overall pretty old and called the rehabilitation of various product types pretty common.
On the other hand, Lenox Place Apartments was purchased by a group from San Juan Capistrano, California called APEX CFM.
APEX did not respond to a request for comment before publication. According to its website, APEX “provides trusted General Contracting & Facilities Management Consulting services across a variety of asset classes.”
According to St. Louis County property tax records, Lenox Place is valued over $12.5 million. With its $18 million price tag for 152 units, the price-per-unit is $118,421. Like Larson Commons and Pennel Park, the apartments are reserved for seniors over 62 years old and is designated as affordable housing.
With their respective price tags, Larson Commons, Pennel Park Commons and Lenox Place are all some of the largest multifamily transactions to happen this year so far outside of the Twin Cities metro market.
Forcier said the sales of these properties doesn’t surprise him, but that they are on the larger size of what normally is seen trading in Duluth. Titanium Partners, a Duluth-based firm, was not involved with either transaction.
“There’s a lot of developers right now and property holders that are looking at their portfolios and rebalancing,” Forcier said. “That’s probably what’s driving most of this just as a market we’re seeing a lot of commercial real estate where people are rebalancing portfolios.”
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