Pine Tree Inn on Cleveland Street in Bangor was supposed to be purchased by Penquis and turned into homeless housing. Penquis has not yet followed through with the sale and the Pine Tree Inn is losing money because of Tent City across the street. Credit: Linda Coan O'Kresik / BDN

Bangor city councilors approved a federal grant to help a local social services agency purchase an inn and turn it into housing for those experiencing homelessness after the sale stalled, leaving the inn owner in limbo.

Penquis CAP will receive $200,000 through a Community Development Block Grant, a federal funding program from the Department of Housing and Urban Development. The program allows states and communities to financially support developments that aid low- and moderate-income families.

Penquis is working on purchasing the Pine Tree Inn — a process that began a year ago — but increased construction costs and labor shortages have made additional subsidies necessary to make the project work, according to Anne Krieg, Bangor’s director of community and economic development.

The incomplete purchase left John Karnes, owner of the Pine Tree Inn at 22 Cleveland St., waiting while the sprawling homeless encampment across the street, dubbed “Tent City,” drove away guests and employees. Meanwhile, the city’s homeless population has been left waiting for Penquis’ plan to take shape and add affordable housing to Bangor’s lackluster stock.

Penquis plans to convert the inn into 41 units of permanent housing for people who are homeless and partner with another organization to offer addiction recovery and other services for people living there.

The agency anticipates closing on the property in the third week of April, said Jason Bird, Penquis’ housing development director.

Once Penquis has secured the property, it will finalize its construction loan and other MaineHousing administrative steps, Kreig said.

Construction is slated to begin within 45 days after closing on the property and last from three to four months, Bird said.

Penquis approached Karnes with an offer to purchase the property and turn it into housing for those experiencing homelessness in 2021. The parties began negotiations in May 2021 and signed a one-year purchase-and-sale agreement on March 25, 2022.

In May 2022, MaineHousing granted Penquis $4.25 million in federal pandemic relief funding to support the project. That funding has not disappeared, though the purchase has yet to be finalized, Scott Thistle, MaineHousing’s communications director, told the BDN.

As the encampment ballooned in summer 2021, incidents between guests, employees and people experiencing homelessness became more common, Karnes said. This brought negative reviews that tarnished the inn’s reputation and slowed business.

These incidents and ripple effects from the encampment range from trash and used needles being left in the inn’s parking lot to people who are homeless wandering into the inn and sleeping in the hallways and lobby bathroom, Karnes said.

“In the hospitality business, first impressions are everything,” he said. “I’ve had people fly into Bangor, get in an Uber, come to the Pine Tree Inn and that’s their first impression of Bangor, Maine.”

The signed one-year purchase-and-sale agreement between Karnes and Penquis was scheduled to end last week, according to Karnes. If the sale with Penquis failed, Karnes said he had planned to keep and revitalize the inn, but said he’d needed the city to address Tent City in order for that endeavor to be successful.

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Kathleen O'Brien

Kathleen O'Brien is a reporter covering the Bangor area. Born and raised in Portland, she joined the Bangor Daily News in 2022 after working as a Bath-area reporter at The Times Record. She graduated from...