North Shore's Lutsen Resort goes up for sale

Built by a Swedish immigrant fisherman who found he could make more money luring tourists than lake trout, Lutsen Resort has long been an iconic Minnesota property known to every traveler on Hwy. 61 in search of Betty's Pies, Lake Superior agates and scenic hikes.

And now, for the first time in nearly 30 years, it's for sale.

Longtime owners Nancy Burns and Scott Harrison have put the resort on the market, asking $9.95 million for a collection of buildings and land that includes 50 acres, some scenic Lake Superior shoreline, a ballroom, a covered bridge, restaurants, a main lodge and beds for 700.

The adjacent ski hill known as Lutsen Mountains is owned by a different company and is not part of the sale.

The resort is the latest in a string of classic Minnesota resorts to go up for sale in the past year. North Shore realtors said the sales were mostly a coincidence driven by retirements, but could also be a sign that low interest rates are making resort properties a strong investment.

"It's not just the resort industry. It's everywhere. Look at home prices in the Twin Cities," said broker Daniel Houle of Minnesota Resort Sales.

Still, he said, this year seems to be a "breakaway" year for resort sales.

Lutsen Resort, which claims to be the state's oldest, was founded by Charles Axel Nelson in 1885. He bought 160 acres of land at the mouth of the Poplar River for $12, according to company lore. The area was his preferred spot for commercial fishing. His first guests stayed a year later.

Known for trapping bears and herculean feats of lake rowing, Nelson named the nearby town of Lutsen and eventually built a hotel for sportsmen and guests seeking relief from hay fever and tuberculosis.

The main lodge was designed by Edwin Lundie using white pine from the Gunflint Trail and stones from the area.

Burns and Harrison bought the resort, located 90 minutes northeast of Duluth and about four hours north of the Twin Cities, in 1988. They could not be reached Tuesday for comment on the listing.

The sale includes 43,000 square feet of finished space with the main lodge, the Cliff House Townhomes, Log Homes and Poplar River condominiums and the Sea Villa Townhomes, according to a sales brochure.

"Properties like this just don't come along often," said Frank Jermusek, the president and managing director of SVN Northco Real Estate Services and the person who's handling the sale.

If sold at its listing price, Lutsen Resort would be the biggest of the recent resort deals so far.

The Gunflint Lodge sold for just more than $6 million last year to new owners Mindy and John Fredrikson. The Cascade Lodge in Lutsen was sold earlier this month to Thom and Jelena McAleer. Bearskin Lodge, near Grand Marais, is in the midst of a family transition as owners Bob and Sue McCloughan turn things over to their son Quinn and his wife, Kate.

The Naniboujou Lodge and Restaurant was on the market last year for $3.295 million, but owners Nancy and Tim Ramey reconsidered and for now have taken it off the market.

And Superior Shores and Resort in Two Harbors is on the market for $24.95 million.

Lavonne Christensen, an agent broker at Odyssey Real Estate, said the sales and listings have been mostly coincidence. In the case of the Gunflint Lodge and now Lutsen, retirements are driving the listings.

While the real estate market on the North Shore has been heating up this year, the vacation homes market typically lags about five years behind the residential market, she said. And although lakeshore values are climbing, they're not as strong as they were in 2006, she said. Lakeshore today is about $1,400 a foot, down from $2,200 a foot a decade ago.

"Up here it's a buyer's market," said Christensen. There's still a good supply of vacation homes on the market, she said, but she thinks it will tighten up soon and when it does, prices will rise quickly.

The sales have been remarkable for some of the prominent properties involved, but it's not an unusual number of listings, said Houle.

He estimated that there are 1,000 resorts in Minnesota, and his brokerage company has 22 listed for sale, and there might be another 50 listed elsewhere.

"There's not a mass exodus," of resort owners leaving the business, he said.

The rise of short-term vacation rental properties through websites like Airbnb and VRBO (Vacation Rental By Owner) has cut into resort business somewhat, and the increasing number of properties listed on those websites give tourists more options. The Ely area now has 32 or 33 Airbnb offerings, said Houle.

"So the pie gets split up a little bit there, but our resorts that are the true Minnesota classic resorts are still super strong," he said.

One advantage for resorts is that they can host family reunions and larger groups, he said.

A spokesman for Airbnb said the San Francisco-based company had 1,300 listings in Minnesota at the start of 2016 and about 3,100 today. One third of those listings are for a room in a house, and the rest are for the entire house, said spokesman Ben Breit.

Meanwhile, low interest rates and a strong tourism business have inspired many people to consider tourism-related businesses for investment, said Jermusek. A resort owner can see an 11 percent capitalization rate, compared to 6 percent for an apartment building, he said. Their individual return will depend on how much debt they take on, but resorts can make a strong investment for the right buyer.

"Minnesota resorting and the tourism market is real strong right now," said Houle. "Folks love northern Minnesota, they just do."

Matt McKinney • 612-217-1747