$500 million housing development proposed in Duluth, its largest ever

DULUTH — The scale of a planned $500 million housing and retail development overlooking Lake Superior here, the city’s largest development of its kind, is massive enough to be likened to the creation of a new neighborhood.

Incline Village — planned for the former Central High School hillside property with the famous view — is expected to include 1,300 market-rate apartments and condos to be built in three phases over seven to 10 years. Located in the center of the city, it would also be home to 80,000 square feet of retail space and several public spaces, including a trailhead pavilion and potentially an amphitheater.

The developer is New York-based Luzy Ostreicher of Chester Creek View LLC and Incline Plaza Development LLC. He bought 53 acres for $8 million last March from the Duluth school district, which recently developed a back portion of the property for an administrative building. The 50-year-old school was demolished in 2022 after sitting empty since 2011. Two major development deals for the site fell through since then.

Duluth’s population of about 86,000 has barely budged for decades, seen on the green signs as you drive into the city, said longtime resident Jeff Schiltz of ICS Builds, representing the developer.

“A development like this has the ability to literally change that sign,” he said.

The multi-building project is undergoing an Alternative Urban Areawide Review to study how different development scenarios will affect the environment. The project is contingent on approval of that review, but last week the Duluth Economic Development Authority approved an agreement with Ostreicher’s LLCs that establishes the framework for the project’s tax increment financing (TIF). It includes the first phase, which is intended to pay for infrastructure such as utility connections.

Subsequent TIF districts will still need to be approved. Tax subsidies are expected to account for a large chunk of the developer’s financing gap, which is projected to be up to $130 million, according to the city.

The planned public amenities are required by the agreement, but details, including financing and design, aren’t finalized. The trailhead will connect to the Duluth Traverse and other trails.

City Council President Roz Randorf said the project was a good candidate for tax subsidy because its level of investment will increase the city’s tax base.

“And this hasn’t been on the tax rolls for a really long time,” she said of the property.

Construction on the first set of apartments and condos encompassing 340 units and 30,000 square feet of retail is set to begin this summer. Demand will indicate how soon the remaining phases are built. But because of the project’s location, the full scale should be realized to make it successful, Schiltz said. Perched on the hilltop and surrounded by trees, buildings aren’t visible from nearby roads.

The name, Incline Village, is intended to evoke the city’s Incline Railway that operated from 1891 to 1939, climbing Duluth’s steep hillside.

A plaza with a pedestrian-oriented style is planned, with room for food trucks and other vendors, a skating rink and community events. Retail space may include a restaurant, hair and nail salons, child care and a coffee shop.

The still-standing former Secondary Technical Center building will serve as a real estate sales office and job trailer until it is demolished to make way for the last phase of construction.

Schiltz said the complex project could employ up to 1,000 construction workers over the next decade. Incline Village is expected to be a destination, he said, and Ostreicher is cognizant of the city’s potential for growth, with an expanding medical district and other major projects like the Northern Lights Express in the offing.

Landlocked cities like Duluth don’t often get to create new neighborhoods, said Jeff Anderson, a spokesman for ICS Builds.

“That’s what’s happening here, and it’s very exciting,” he said.

Provided it clears the environmental review, the city doesn’t doubt the project will be fully realized, said Ryan Pervenanze, manager of planning and development for the city. Public hearings on that review are planned for spring.

Rachel Johnson is president of Area Partnership for Economic Expansion (APEX), a private group that promotes regional business development. She spoke at a recent Duluth Economic Development Authority meeting in favor of public financing for the project.

Developers, large employers, financiers and builders told APEX in the past year that a lack of housing is impeding growth, she said. Duluth’s latest housing report showed pent-up demand for housing, both market rate and affordable.

The City Council is expected to vote on the tax credit measure Feb. 12.