The London East development is located about a quarter-mile east of Glensheen Mansion, on the opposite side of London Road. The property is a long, relatively narrow 3-acre strip of land, sandwiched between London Road and the North Shore Scenic Railroad. When completed, it will include 20 townhomes and 3 single-family dwellings.
In 2018, the developer, Ted Stocke, told the Duluth News Tribune that the townhomes would cost between $269,900 and $299,900. “I hear a lot that no one can find a home between $250,000 and $300,000 that’s decent in Duluth,” Stocke said. “So I thought, let’s gear a project to provide housing to meet that need.”
Over time, however, the scope of the project grew considerably. In June of 2022, Stocke sold the first of the townhomes—a 3-bedroom, 3-bath unit—for $622,000.
There is nothing wrong, in and of itself, with a developer choosing to expand a project. However, in the case of London East, the most significant change—the addition of rooftop decks and enclosed rooftop penthouses to the townhomes—occurred without public input or transparency. This addition has created a cascading series of problems for the developer and the city, which have yet to be fully addressed two years after the decision was made.
The developer
Ted Stocke is no stranger to development in Duluth. In 2005, Ted and his brother Dan Stocke launched an ambitious project to develop nearly 90 acres of land adjacent to Trinity Road, overlooking the Coffee Creek watershed. Favorable land deals involving St. Louis County and the Duluth Economic Development Authority enabled them to assemble the required property, on which they hoped to build “40 duplexes, 30 single-family homes, and 80 to 180 apartment units” (according to a 2006 News Tribune article).
Unfortunately, the development ran into trouble during the housing crisis of 2008 and the associated failure of a construction-finance company, which had loaned the project several million dollars. The Coffee Creek project was adopted by a new developer, but Ted Stocke was forced to declare personal bankruptcy in 2011.
Speaking to the News Tribune in 2018, Stocke described his experience as “brutal.”
“After the [2008] downturn … I had seven different residential projects with about 327 different lots in my name, and I lost them all,” he said. “But like they say: Anything that doesn’t kill you only makes you stronger.
“I had to pick up a hammer again at 40 years of age, which was a little rough, but you live through it, and it’s kind of funny to be old enough now to have lived through a full business cycle,” said Stocke, who’s right back in the development game again.
Today, Stocke is involved in several projects besides the London East development. He is developing a number of individual properties in the Duluth area, and he is one of three developers involved in a potential waterfront townhome project in Two Harbors, which has generated enough community opposition to be reported statewide by the media.
London East begins
The city’s involvement with the London East project began on April 14, 2020, when the city Planning Commission considered an application from Stocke to re-plat the London East property into individual lots that would accommodate townhomes.
Stocke included in his application an artist’s rendering of a proposed townhome. It showed a blocky three-story duplex, with tuck-under garages on the first level. Notes from city planning staff state: “The first floor consists of a two-car garage and entry area, the second floor has living/dining/kitchen space, and the third floor has three bedrooms for a total living area of about 1,280 square feet, not including the garage. These are not extravagantly-sized dwelling units and are compactly arranged by utilizing a three-story configuration.”
On June 9, 2020, the Planning Commission approved a final plat for the property, subject to conditions. One condition required the developer to sign a development agreement with the city and make public improvements to the property—install water, sewer, and gas lines and add a public sidewalk, among other things.
On July 20, 2020, the Duluth City Council approved the development agreement.
The “elevator penthouse” exception
In March of 2021, responding to prospective buyers who wanted views of Lake Superior, Ted Stocke decided to add rooftop decks and enclosed penthouses to the townhomes. Unfortunately, adding additional structures to the roof would violate height limits in that residential zone, raising the building height to 41 feet, 1 inch, when the zoning only allowed for a 30-foot building height.
When Stocke consulted with the city, Deputy Director of Planning and Development Adam Fulton found a solution. The city’s Unified Development Code (UDC) provides for certain building features, such as water tanks, skylights, and flagpoles, to exceed the height limit. Another allowable exception is an “elevator penthouse”: an enclosed mechanical room at the top of an elevator shaft. The London East townhomes did not have elevators, but Fulton decided that an enclosed area providing access to the roof fell under the same exception, and he gave Stocke a green light.
[Update, 2023-03-13. Adam Fulton emailed the Monitor the following: “This is inaccurate. The developer and its architect proposed the use of a code provision in the UDC, and it was reviewed by staff. It was determined, based on the staff review, that it met the requirements of the UDC. I did not ‘find’ a solution.”]This was an administrative decision, made out of view of the public. Neither the Planning Commission nor any other public body knew about it. The developer did not have to go through the time and expense of applying for a building variance. The only place Fulton’s decision appeared was on the city’s Construction Services web page, buried in a long list of permits and documentation associated with the project.
On April 12, 2021, when Plans Examiner Brent Tonner was reviewing construction drawings for the buildings, he emailed City Planner Kyle Deming: “I was wondering about the UDC’s height limitations. This appears to be 40’ plus. Is this within the height limits or do they have a variance?”
Deming emailed Tonner back. “You can continue with the review of these twin homes. The building height has been approved by Adam.”
The penthouses that Stocke built were 24 x 11 feet in size, with expansive windows, running water and electricity. Marketed as “crow’s nests” overlooking the big lake, they significantly increased the property values.
In January of 2021, prior to the crow’s nest addition, Ted Stocke had listed the property at 3705 London for $472,000. In June of 2022, 3705 London sold for $622,000—a $150,000 markup.
A decision, not an interpretation
Under city code, if Mr. Fulton had made an official “interpretation” that 264 square feet of additional living space was equivalent to an elevator mechanical room, he would have had to notify surrounding property owners, explaining his interpretation and asking for their input. The interpretation would also have been subject to appeal by any member of the public.
However, because Fulton unilaterally decided that the exception applied, no public notice was necessary and no appeals were allowed.
Duluth resident Mark Baker, who follows development projects in the city closely, did attempt to appeal the decision, asserting that “This interpretation … was … arbitrary and capricious and not properly vetted as required by city code.”
Baker was told that Fulton’s decision “constituted application of the relevant provisions in the UDC,” and “as such, it is not an ‘interpretation’.” His appeal was dismissed unheard.
How to turn a floor into a basement
The townhomes were originally approved by the Planning Commission as three-story dwellings. However, under state code, the new penthouse on the roof was defined as an additional story, meaning the dwellings were now four stories tall. This created problems for the developer.
Four-story buildings are classified as “commercial” buildings, which are subject to more rules and regulations than three-story residential buildings. Among other things, commercial buildings are required to have sprinkler systems installed. The building plans did not include sprinkler systems, and Stocke certainly didn’t want to incur the extra expense.
The solution Stocke found was to turn the first floor—the garage level—into a basement. If the first floor was officially a basement, then the dwellings would be three stories tall, plus a basement—residential once again.
Many technical factors go into classifying a level of a house as a basement. In broad terms, a certain minimum level of backfill must be present around the outer walls. The key measurement of the backfill, the “grade plane,” is the average elevation of fill around the building. If the grade plane is less than six feet below the floor of the second story, then the first story is officially classified a basement. (And that is as clear as this non-engineer can make it.)
Contractors piled up backfill around the townhomes, holding it in place with boulders and retaining walls—but the sites were tight, and room to work was limited. Adding to the problem was that windows, utility boxes and conduits were installed in locations where the backfill would cover them if piled too high. Contractors put in as much fill as they could without covering these features, and left it at that.
City engineers were not convinced that the grade plane allowed for the bottom level to be classified as a basement. From mid-2021 onward, they expressed skepticism, notifying Stocke that they would need to see official surveyed drawings confirming the grade plane when the buildings were completed.
On March 2, 2023, I spoke with Adam Fulton about various aspects of the London East project. I asked him to comment on the additional floor he had approved.
John Ramos: You made the call that it was equivalent to an elevator penthouse, but, by doing that, you essentially allowed them to build another floor. That’s another floor up there.
Adam Fulton: Well, I mean, so I understand why you say that. But also, people have a right to access their roofs, correct? Like, people have a right to go up there. It’s a flat roof—they can shovel it off. So I think that’s where this gets a little bit unusual, is that the developer has taken that right to access the roof and done significantly more to it than the code anticipated, and so what we’re going to be looking at [is] updating the UDC to address rooftop decks. The UDC does not address rooftop decks, and so that’s something that we have to address, at this point. It has been sort of used in a way that was not anticipated during the adoption process.
JR: Well, the rooftop deck itself isn’t the problem. It’s the enclosed living space that’s the problem. That’s what makes it another floor.
AF: But it’s not living space. I mean, it’s a stairway and an access, an egress, up there.
JR: But it is defined as another floor, which is why they’re having all this problem with defining the bottom level as a basement, which was not originally the plan. It’s because they got the fourth floor up there … Everybody’s juggling definitions, and now all of a sudden they’re trying to pile up dirt around the garage so it can be a basement. It’s because of that fourth floor up there.
AF: The developer has utilized the code in a detailed way. Yes.
Pulling strings
Meanwhile, construction on the units continued, and Stocke continued to market and sell them. He also began pressuring the city to issue a Certificate of Occupancy for 3705 London, so the first family could move in.
In May of 2022, the city issued a stop-work order to Stocke, because he had begun building a 400-foot-long retaining wall in the rear of the property, without notifying the city or obtaining a permit. Stocke blew a gasket. He fired off furious emails to City Hall, and called Mayor Emily Larson personally to complain.
On June 17, 2022, Building Official Wendy Rannenberg emailed Stocke a number of concerns which needed to be addressed before the city would issue Certificates of Occupancy, including the grade plane issue: “The approval of the buildings in this development was dependent on the very specific site grading to establish a grade plane that made these three story buildings (not four story) so they would remain under the scope of the residential building code.”
Stocke emailed Mayor Larson: “To not allow the Certificate of Occupancy is absolutely baffling … We have several closings lined up … many of which are out-of-town buyers … If this approval gets dragged out without Certificates of Occupancy, the consequences will be catastrophic.”
Mayor Larson emailed her Chief Administrative Officer, Noah Schuchman: “This one needs your/our attention.”
Five days later, on June 22, 2022, Rannenberg and Construction Inspector Mike Lowry signed a “Conditional Certificate of Occupancy” for 3705 London. The condition was that the developer would have to “Complete site grading” before a final certificate was granted.
On June 23, Stocke closed his $622,000 sale of 3705 London. The buyers moved into the dwelling before the grading was completed or approved.
On June 23, Adam Fulton emailed Ted Stocke. “Let’s plan to get together for coffee to discuss the status of your project on London Road. Given that we have had to go to some extraordinary lengths to help make this project work from a regulatory standpoint—I cannot quantify the hours of staff time into it—I am disappointed that you’ve perceived there to be challenges in the inspection process, and would like to dive into that a little deeper to better understand what’s going on here.”
Over the following two months, Rannenberg and Lowry issued Conditional Certificates of Occupancy for three more townhomes. All required that final grading be done before a final certificate was approved. Nevertheless, the homes continued to be sold, and people continued to move in.
On Oct. 19, 2022, Rannenberg emailed Stocke, reiterating her concerns about the grade plane. “All the structures with rooftop decks and partial upper stories were reviewed under the Minnesota Residential Code (MRC) as three-story buildings because the garage level was presented to Construction Services as a basement, as defined in the MRC. However, the structures were not properly constructed as three-story buildings because grade plane is such that the garage level is not a basement, but rather a story above grade, making these four-story above grade buildings.”
“Because some of the buildings are occupied,” Rannenberg went on, “it is urgent that grade plane corrections be made immediately … No additional Certificates of Occupancy will be issued until grading is complete and documentation by the surveyor is reviewed and approved for currently occupied buildings …”
Sometime in December of 2022, Rannenberg left her employment with the city and took a new position with the state Department of Labor and Industry. Her involvement with the London East project, and her reminders to Mr. Stocke to follow the rules, came to an end.
Final approval
On Feb. 1, 2023, a surveyor named Scott Olson, who was employed by MSA Professional Services, Stocke’s contractor on the project, turned in drawings to the city showing that the grade plane requirements had been met for three of the townhomes’ basements.
On Feb. 3, 2023, Mike Lowry and Building Inspector Blake Nelson approved the grade plane drawings and issued final Certificates of Occupancy for the three structures, with all conditions removed.
In all three cases, the grade plane numbers reported by the surveyor just barely squeaked by the threshold required for a basement level. In the case of 3709 London, the grade plane was only 0.18 feet, or two inches, from the threshold.
What was more unusual was the fact that nothing about the grade around the houses had changed. Despite the requirement contained in the Conditional Certificate of Occupancy stating that final grading had to be finished, no additional grading seemed to have been done. The conduits and windows remained uncovered. Considering that the city and the developer had been wrangling about what to do for so long, it seemed surprising that the problem had suddenly been solved by doing nothing.
I attempted to reach Blake Nelson, to ask if he had verified final grading of the sites before signing off on the Certificates of Occupancy. The first time I sent him a message, the city’s Public Information Officer reported back to me that Nelson had “already covered that information in a previous conversation” with me—a bizarre claim, since I had never met or spoken with Blake Nelson.
When I tried again, I was told that Nelson was “unable to find time to talk before [my] deadline.”
On March 2, 2023, I spoke with Adam Fulton. I asked him if anybody from the city had verified the final grading before approving the Certificates of Occupancy. He said he didn’t think so.
AF: We’ll keep working to follow up on that … If you have questions about it, I think now is not a good time, because there’s so much snow, but in the spring, once there’s no snow, and there’s work back going on, that’s an area where our inspectors will be out there doing field measurements to make sure it conforms to what the engineer has submitted.
JR: Yeah, but they’ve already taken that condition off of the C of O, based on those drawings. If they’re taking measurements later, they’re a little late, because they should take the measurements before they take the condition off of the C of O.
AF: Right … We don’t employ that contracted engineer, so that would be up to MSA … It’s gotta come from them. I mean, we will do our field stuff down the road …
After making several unsuccessful attempts to reach the surveyor, Scott Olson, I emailed MSA President Mike Statz, explaining my concerns and asking him to authorize someone to explain the grade plane drawings to me.
On March 7, MSA Vice President John Langhans responded to me via email. He stood by the accuracy of the drawings.
The methodology noted on the drawings entailed a detailed, as-built, topographic survey along the perimeter of the building with shot frequencies ranging from 2’ to 25’ in spacing. The area between the finished ground surface profile and lowest elevation point along the subject perimeter was calculated using design software. This total area was divided by the length of the subject perimeter to obtain a mean average height of the ground. This height value was added to the lowest elevation point along the subject perimeter profile to establish the grade plane. This method produces a highly objective mean average of ground elevations which is the intent of the grade plane exercise. IBC compliant simplified methodologies were also used to verify this analysis resulting in similar findings that exceeded the minimum grade plane threshold …
[T]he grade plane determinations by Mr. Olson and MSA are correct.
The market-based variance
In addition to the townhomes, Mr. Stocke is planning three single-family dwellings on the eastern end of the property. Initially, he took it for granted that he had permission to put decks and rooftop penthouses (which he was now calling “scenery lofts”) on these homes as well. In an email to Adam Fulton and Kyle Deming on April 29, 2022, Stocke wrote:
The market is really wanting views of the lake. So all of these units have rooftop decks. These Scenery Lofts allow access to the rooftop decks from inside of the home. And they offer fantastic views of the lake. They have become the ‘must have’ option to these homes.
I’m hoping this is enough to allow for approval in building these? Please let me know your thoughts as soon as possible.
Deming emailed Planner Jenn Moses, expressing concerns about the size of the proposed scenery lofts.
This was an outgrowth of a phone conversation I had with Ted where it sounded like the design was similar to the design that Adam previously approved, containing a stairway up to the roof deck being interpreted as similar to an elevator penthouse. In the new design, the top floor occupies 20 feet of the 48 foot building width and is in the same plane as the front wall of the building rather than being set back … [T]he scale of the top floor of the new design exceeds what I would consider an elevator penthouse…
Moses emailed Fulton.
We allow exemptions for elevator penthouses and for other buildings in this development have extended that to staircases and associated egresses as well. But these plans show an entire extra floor with occupied space in the form of community/bonus rooms which cannot be allowed over the height maximum.
Fulton decided that Stocke needed a height variance for the scenery lofts. He would have to fill out the application, pay the fee, present his case to the Planning Commission, and take any public feedback. This is the usual process for such plan changes—but, apparently, the only thing triggering it was the size of the loft.
The penthouses on the townhomes were 264 square feet. The proposed penthouses on the single-family dwellings were 440 square feet. One was approved with the stroke of a pen and no transparency. The other had to go through the full variance process. It seemed arbitrary.
More importantly: Had a precedent been set? Was anyone in the city now free to build a 264-square-foot room on top of their house without a variance?
The Planning Commission considered Stocke’s variance application on June 14, 2022.
Variances can be granted for many reasons, but city code is clear about one thing: They cannot be granted for economic reasons alone. There must be some “exceptional practical difficulty or undue hardship” that justifies the variance.
In their presentation of Stocke’s application, city staff struggled mightily to convince the Planning Commission that a practical difficulty existed. Primarily, they focused on the fact that the site was narrow, and building space was limited, which meant…well, nothing in particular. They kept coming back to economics.
When Commissioner Andrea Wedul asked Kyle Deming, “What is the hardship that they’re demonstrating, as far as needing the variance for height?”, Deming responded as follows:
Deming: In this particular case, the unique site constraints are related to the linear nature of the site being pinched between a railroad and a trunk highway, and the fact that all of those lots were not able to be granted individual driveway permits, and so there has to be a frontage road, I guess, so to speak, to serve all of those properties in there. In addition, the site slopes towards London Road, so it causes you to do all of your stormwater treatment on the front part of the site. So when you take the rear-yard setback that normally applies, and you take the space that’s required for the circulation, for the driveway, and the stormwater treatment, it really pinches the site, and in order to…the applicant feels that in order to make a…I don’t find the words that they were using here…to make the project…to make the project fit in the market, I guess—I can’t remember exactly the words they were using—that it was necessary to make the buildings taller, in order to take advantage of the views.
The variance was being requested so the dwellings could “fit in the market” and “take advantage of the views.” There was no practical difficulty. It was all money in the developer’s pocket.
On occasion, the Planning Commission does ask hard questions, but they have never done so in the case of London East. They approved the variance unanimously.
During this investigation, multiple attempts to contact Ted Stocke went unanswered.
______________
Cover photo: London East Townhome Development, Feb. 28, 2023. Credit: John Ramos
Of course people want views, but not all properties have them (legally). This is interesting; good job!
Great investigative work here. The issue is not whether these townhouses are a good or bad thing, it is the rules are for thee and not for me. Straight up corruption by the city and developer. Do better, Duluth.
Typical Duluth–build it, then beg for forgiveness.
That is not just Duluth, that has been the standard reply since the beginning of codes everywhere, I served on a BOA for many years and saw that all the time.
Kudos to a developer who is trying to broaden Duluth. The city and its administrators lack any ability or desire to promote growth in this dying city. As our population (and tax base) continues to decline, the city administration’s answer is to throw as much red tape at developers as possible to create such an antagonistic environment that does anything but discourage the promotion of growth (and our tax base). So let’s just keep on raising everybody’s taxes in the city/state and watch people and money continue to leave for more favorable cities/states.
Yes……. “Dying city”…. When a developer just sold a 2 bedroom townhome for $600,000+ …. Not to mention NY Times has recently published its 3rd article about the climate refugees moving to Duluth in early March.
Not a two bedroom…all are 3-4 bedroom with some views and Lakewalk access a block away. Referencing Duluth NY Times article about climate refugees is quite interesting and a stretch…
Duluth is in no risk of dying due to procedures slowing development processes if those processes maintain everything that we love about Duluth and that those climate refugees love/will love about Duluth.
Excellent piece, though very disappointing that the city will do so much for developers. It sometimes seems that our “planning department” is really just a permitting department. Codes and rules are there for a reason and there will always be another builder/developer on the horizon if one project does not work out.
You encapsulated so much in so few words with “permitting department.” Planners need to be visionaries as well as pragmatists, and there is no demonstrable evidence to satisfy me that the director or staff have a conceptualization or strategy for steering the development of the built environment in the city of Duluth. In fact, it’s hard to believe that they drafted the comprehensive plan because they don’t seem to comprehend its content – and I am speaking firsthand btw.
I am sorely disappointed in Duluth. I am understanding more and more why my husband didn’t want to move back to the area when he retired in 1998, and I in 2011. We moved when National Iron closed in 1983, and a billboard said for the “last person to leave to shut off the lights,” as so much industry was leaving. The billboard didn’t last long, thank goodness! However, Duluth isn’t the same Duluth as it once was, and such a shame. It appears that part of Duluth is taken care of, and the remainder is all but forgotten. It is so sad, but so many cannot afford any of the homes or the taxes, no matter the age of the homes or the area. I wonder, also, is there a “Habitat for Humanity” in the area, Duluth or Cloquet areas, to help people help themselves, and work to get their own homes or for help for the Senior Citizens to get updates to make their own homes more livable for themselves so they are not forced into assisted living??
Fulton is a lackey for the developers, as is this administration. Adam always believes he is the smartest person in the room and the rest of us are too ignorant to see through his obfuscation of the truth.
Strange how we keep hearing Duluth is “unfriendly” to developers, yet they keep showing up, claiming hardships, and laughing all the way to the bank.
They’re selling Lake Superior by the square foot, folks, and hoping no one notices.
Remarkable! Developers build to meet a market need–and make a reasonable profit for their time and effort. This London Road frontage was an eyesore unless you like overgrown brush (the same kind that blocks many views on Skyline Blvd.). I just don’t understand the short-sightedness of complaining neighbors. Are they jealous that someone may be improving their lives over their own? I returned to Duluth to evaluate it as a retirement location fifteen years ago. I’m glad I chose not to spend my golden years here.
There are a lot of other possibilities for the aesthetic development of substandard lots like this, but this developer presented an appealing opportunity for the city council by proposing to fill a perceived gap in housing between 250-300K. But as too many developers are apt to do, he built to the highest market he felt he could avail. His presentation was what the council approved though and they, as well as the other homeowners nearby have been deprived of that promise. In my view what he has done is unconscionable: he has shortchanged the city of what they desired and approved as well as those in his original market range who are now priced out, and all for dollars in his pocket. As a former P&Z and BOA commissioner in Cook County I have witnessed this greed before and in one case I we made the builder tear down a house that violated the bluff setback simply to get the better view. I am not averse to making adjustments along the way, but they must first fit the development plans, retain the original concept and be approved by the planning board, in this case he failed on every count.
Eyesore or greenspace? I guess it’s in the eye of the beholder.
Stocke is notorious for cutting corners and doing whatever necessary to save a dime at the buyers expense. BTW I worked on the first few units and have unlimited stories/ photos if anyone is interested!
I am interested in hearing. We worked with him and had a bad experience.
I saw an article about Stocke’s development plans up the shore in Two Harbors. People who were against his plans mentioned the ugly “Minecraft” homes he is building along London Road. With two grandsons doing Minecraft all the time—I had to LOL since that is exactly what they look like. “Eyes far apart!”
Going by his development along London Road for at least 4 years, I have often thought “what a terrible place to put such homes/duplexes”, until I realized they are going higher and higher—-gobsmacked myself—“the View, the View!!!”