City's price for Hotel Solem: $8,000

A panel of court-appointed condemnation officials agreed with an $8,000 appraisal for Hotel Solem on Thursday, Aug. 25. The approval opened the door for the city of Cloquet to proceed with plans to redevelop the deteriorating 103-year-old building on the corner of Cloquet Avenue and 10th Street.

"We believe we have established that is the actual value of the property that was taken and the amount that should be due to the owners," city attorney William Helwig said near the conclusion of the hearing at City Hall.

The city gained possession of the building earlier this year, citing public safety issues to condemn the building and using eminent domain statutes to take over ownership of the building. The city has since put up barriers to protect the public from bricks which have been falling onto the east wall sidewalk.

As compensation, the former owners, Felipe Mata and the estate of the late Carlos Villareal, had been holding out for a previous tax-assessed value around $193,000.

But property appraiser John Vigen of Duluth testified that county assessors hadn't been in the building like he'd been in determining his 45-page appraisal, which featured detailed descriptions and photos of the failing condition of the building.

"They have never been in the building, only outside," Vigen said of assessors, adding that the most recent assessment was conducted when the building still featured a functioning Mexican restaurant on the main floor.

The popular Pedro's Grill and Cantina moved down the block and across the street last year. What's left of the now-condemned Hotel Solem was described in the hearing as salvageable only as a "shell."

Neither of the former building owners was represented in the hearing, meaning they failed to present a defense for getting a higher price from the city.

"Any fault for the value of the property in its present condition falls clearly on the (former) owners," Helwig said. "They should not be given any benefit of the doubt as to valuation in my opinion or in the opinion of the city."

After a short deliberation, the condemnation panel agreed to the $8,000 figure, to be split among the former owners.

"I see it as fair," said Lisa Westendorf, one of three local Realtors appointed by District Court judge Amy Lukasavitz to the panel. Westendorf was joined by Marci Moreland and Ron Tondryk on the condemnation commission.

"It hasn't been easy for me to put a value to it," Tondryk said. "Part of my thought process is, 'If I'm going to put this on the market, what do I do?' It's very difficult."

Westendorf suggested the former Robert's Home Furnishings building in the West End as a potential comparison.

"That building had a lot of square footage, and it didn't sell for a lot," she said. "I don't believe that (building) needed the rehab or work that this one needs."

Moreland estimated the cost of razing the building at $2 million.

"The cost of just getting a bare lot there is going to be tremendous to whoever buys it, or whatever the city wants to do with it," Moreland said.

Both Helwig and Cloquet community development director Holly Hansen reiterated the city's aim to redevelop the building.

"Demolition is the last priority on our list," Hansen said.

The Cloquet Economic Development Authority will begin discussing the future of the building at its Sept. 7 meeting. In the meantime, Hansen said she was planning to issue a request for proposal to find a developer interested in rehabilitating the building.

The prospect of redevelopment is daunting and figures to cost millions.

"You're not going to have a private investor doing this," Tondryk said at one point during the hearing. "You're going to need public money, too."

Hotel Solem owns a rich and important history in Cloquet. Following the fire of 1918, the hotel rose luxuriously and 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 building in 2002 from Wells Fargo Bank for $67,500 and also settled a lien.

In September 2003, the city sold the building in "as is" condition to Mata and Villareal, 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.

But testimony last week revealed new deficiencies in the building - the result of 20 years of neglect as the former owners ignored repeated city orders to make repairs.

City of Cloquet building official Matt Munter testified that officials found water in the basement during a liquor inspection, and subsequently located a roof drain connected to the city's sanitary sewer network and not the storm sewers as is code. They also located a makeshift way to direct leaking water out of a third-floor window. Bulging bricks were suspected to be the result of water leaking into the walls below where parapets were missing from the roof.

No actions were ever taken by the owners to orders from the city to make repairs, Munter testified.

He described the building as once having "good bones," but he would no longer suggest that. He recommended a structural analysis of the building by a licensed engineer.

"With years of deterioration from leaking water, there could be structural damage," Munter said.

At the very least, Munter said the building needed a new roof and repairs to bricks, but that it likely also needed to be gutted.

In the months leading up to the condemnation commission's decision last week, the city had offered the previous owners $50,000 and then $75,000. Those offers were turned down by the former owners.

"The additional offers that were made by the city were not based on the city's belief of actual value of the property, but were contingent on structural analysis," Helwig explained during the hearing.

The former owners had 45 days, starting last week, to file an appeal to the $8,000 appraisal.

"Their only appeal is for the value," Helwig said, noting that the city now owns the building no matter what.