Plans afoot to refurbish Solem Hotel for housing

The currently condemned Hotel Solem building in downtown Cloquet could become 18 market-rate apartments, if plans by a pair of structural engineers click into place.

The three-story building at 915 Cloquet Ave. was constructed after the 1918 Fires decimated Cloquet, with the first section going up in 1919 and an addition in 1923. The city gained possession of the former Mexico Lindo building in 2022, citing public safety issues to condemn the building and using eminent domain statutes to take over ownership.

As more was revealed about both the construction and condition of the building, community development director Holly Hansen searched diligently for the right developers. Local contractors told her the city would need to find niche developers who are structural engineers in the area and would be interested in a smaller project.

Craig Jouppi and Chad Scott, owners of C&C Holdings of Duluth, fit the bill. They toured the building multiple times, evaluated the interior, and flew drones over the exterior to assess the needs. The two men have been redeveloping old buildings in and around Duluth for 25 years, Jouppi said.

"We're so lucky right now to have such a skilled team that's interested in doing something like this," Hansen said.

"It's not something a normal developer can take on. You can't move walls because the weight is stacked floor by floor," Hansen said.

In late May, C&C Holdings submitted a formal letter of interest to work with the city to renovate and reuse the hotel. Since then, the developers have also submitted a tax increment financing (TIF) application, which diverts future property tax increases back to the property owners for a set period of time to reduce costs.

"This building is a poster child for TIF redevelopment," Hansen said.

On Tuesday, Cloquet city councilors unanimously passed two resolutions relating to the historic downtown building: the first an application for a redevelopment grant, the second a commitment by the city to match the grant with TIF funds.

The grant application approved by the council is due Feb. 1, but required the TIF process be underway. Tuesday's council votes were the first step of a complicated process that will require multiple public hearings, ending with a council vote in April or May.

Construction could begin as soon as this summer, according to the staff report.

History

Hotel Solem owns a rich and important history in Cloquet. Following the fire of 1918, the hotel rose as a sign of new beginnings in June 1919. It housed hotel guests and later apartment tenants throughout most of its life until an interior fire in 2001 displaced what were then low-income residents.

The city purchased the 25,000-square-foot building in 2002 from Wells Fargo Bank for $67,500. In September 2003, the city sold the building in "as is" condition to Felipe Mata and Carlos Villareall, who opened the Mexico Lindo restaurant to thriving success. At the time, there was no plan to renovate or reuse the upper two floors of the building, although the new owners did make repairs to the roof.

Mexico Lindo became Pedro's, and Pedro's moved several blocks west in 2021. The Hotel Solem building sat vacant, with some obvious structural issues. Assessments in 2022 revealed new deficiencies in the building - the result of 20 years of neglect as the former owners ignored repeated city orders to make repairs. The city put up barriers to protect the public from bricks at risk of falling onto the east wall sidewalk.

The city gained possession of the building two years ago. Since then the city's Economic Development Authority commissioned structural engineering and hazardous materials reviews, always with an eye toward redevelopment.

Hansen likes the preliminary proposal from C&C Holdings. "It'll be really nice for downtown."

Plans

The C&C Holdings total project cost is estimated at $3.75 million. The project will involve gutting the entire building down to the studs, bolstering and stabilizing the building, replacing the HVAC systems, adding an elevator and sprinkler system and making other improvements to support 18 market-rate apartments, ranging from studio to two-bedrooms units.

Jouppi told the council that he has a "soft spot for old craftsmanship and the history of our small communities and their downtowns." They hope to feature exposed brick and stylings that honor the industrial nature of the city.

City officials know that more housing is needed, and Jouppi said they've been watching the rental listings for the area.

"I don't think I've ever seen more than three apartments available, so that means there's a lot of people living in apartments who would rather live in something more modern or updated," he said. "And there's a lot of people who would like to stay in Cloquet but can't. If they aren't living here, they're not spending here either."

He praised the vibrancy of the Cloquet and said seeing a historic building demolished on the taxpayers' dime is not in anyone's interest.

Jouppi called it a fun, but tough project. "We've got to make all the numbers work," he said.

The city paid $8,000 for the building after condemnation. C&C will pay $1. The staff report said funding will come from a $2.2 million bank loan, $306,000 in developer equity, $936,000 in a Cloquet Economic Development Agency gap financing loan and $553,800 in TIF.

"It's very exciting, but the journey has just begun," Hansen said. "Now I need to bring it home and button up the grant application."

In other matters Tuesday:

• The council heard the first reading of an ordinance to update the city's floodplain regulations. A second reading is set for the March 5 council meeting with implementation of the 10-page document on March 13, after legal publication.

• The council approved the purchase of six "stop stick" tire deflation systems for use by the Cloquet Police Department. The stop sticks are hollow and stick into the tire when run over, explained police chief Derek Randall, so they deflate rather than blow up tires. They are a safer way to stop vehicle pursuits, and will reduce the risk of damage to police vehicles. Randall said his department has worked to limit the number of vehicle pursuits, but they do aid other agencies - usually by stopping cross traffic - engaged in a pursuit that starts elsewhere but comes through the area. The total cost of the stop sticks is $3,118; funding will come from state public safety money.