Developer wants to convert former Nettleton school in Duluth into apartments

Minneapolis-based Sherman Associates has given new life to several former school buildings in Duluth by converting them into apartments.
There’s Jefferson, Irving and Merritt elementary schools. And work to convert Lincoln Park Middle School into affordable housing is underway.
Next up?
Nettleton Elementary School, which closed at the end of the 2012-13 school year.
Sherman Associates wants to buy the school from the Duluth school district and convert it into 50 apartments. Half would be affordable housing, the rest market-rate housing for qualifying low-income tenants. A purchase agreement with the Duluth school district has been pending for more than a year while Sherman secures financing.
The $7.3 million project passed a major hurdle in recent days with $5.3 million in low-interest loans and tax credit equity from the Minnesota Housing Finance Agency. It was among nearly $162 million in funding awarded for 78 projects around the state to create and preserve affordable housing.
“It makes the project financially feasible,” Andy Hughes, Nettleton project manager, said of the funding. “With the state seeing the need for housing in the area and the potential for that neighborhood, it means we can go to the next phase.”
The funding includes $1.75 million in a zero percent interest loan with no payments for 30 years, $2.38 million in a below-market amortizing loan and $122,499 in low-income housing tax credits that translate to an estimated $1.17 million in tax credit equity, according to Megan Ryan with Minnesota Housing, which approved the awards.
But more financing is needed for the Nettleton project. So Sherman Associates is seeking to get Nettleton placed on the National Register of Historic Places to get state and federal historic tax credits to help cover rehabilitation costs.
“We feel we have a really good shot,” Hughes said. “We’ll know really soon.”
So what’s historic about the 109-year-old Central Hillside school whose architecture is not ornate nor particularly notable? The two-story, red-brick school at 108 E. Sixth St. was built in 1905 with additions constructed in 1945 and 1987.
It’s not the structure that’s historic, it’s the school’s use and the times it represents, Hughes said.
“Nettleton was one of the first special education schools in Duluth in the 1920s,” he said. “And the 1954 addition was completed at a time of growth for the city of Duluth. It was a bellwether for growth.”
The plans are to convert the classrooms into a mix of one bedroom and two bedroom apartments. With historic status, the school can’t be gutted and its corridors and walls must be kept intact, though some classrooms may be combined to make larger apartments. Its woodwork, maple floors, nooks and crannies, cabinets and other built-ins, even blackboards, will be preserved.
“That’s what makes it appealing,” Hughes said.
Besides, the Duluth school district has done a great job maintaining these schools, they’re in good locations and they’re marketable, he said.
Half the apartments will be leased at affordable housing rates, the other half will be at higher market rates. But the apartments will be the same, with similar finishes.
Hughes said so many of the housing projects in the hillside are meeting the need for affordable housing, so they wanted the Nettleton project to also meet the need for market-rate housing. Monthly rents for low-income tenants will be $650 for a two-bedroom apartment, compared to the $960 market rate. The household income cutoff for the lower rates will be $31,000 for a two-person household, he said.
The school district welcomes such a conversion since so many schools have closed with declining student enrollment, said Kerry Leider, the district’s property and risk manager.
“Our school district has a policy in place restricting old school buildings from being used as a school,” he said. “So repurposing them for housing is a good use when housing is needed where they’re located in a community.”
If Nettleton’s historic status comes through, Hughes expects the sale of the building to close in May. Work to rehabilitate the property would then start in August and take 10 months. Leased occupancy would begin in summer 2016, he said.