A prospective developer has expressed at least some initial interest in tearing down the fire-damaged Pastoret Terrace and Paul Robeson Ballroom buildings in downtown Duluth to make room for a new multi-story structure that would house a mix of residential and commercial tenants.

The buildings, located at 125-129 E. First St., remain the subject of litigation by preservationists seeking to block their destruction, and Adam Fulton, Duluth's deputy director of planning and economic development, offered assurances that no project will proceed until those legal challenges are resolved.

Pastoret Terrace was designed by prominent local architect Oliver Traphagen to serve as luxury townhomes in 1887. But over time, it was subdivided into a number of small, low-rent units. A structure also was tacked onto the front of the building that became home to the Kozy Bar, a frequent trouble spot for police calls. Since a fire in 2010, the Pastoret and adjacent Robeson Ballroom have been condemned for human habitation.

Fulton said Merge Urban Development Group, a firm based in Cedar Falls, Iowa, first approached Duluth regarding the property earlier this year.

"They are looking at Duluth as a really appropriate location for development. They do focus on denser urban areas, and this site fits the criteria that they were looking for," said Fulton, noting that Merge has specialized in taking on projects located in Opportunity Zones, low-income areas where a federal program offers incentives to encourage long-term investment.

Brent Dahlstrom of Merge said: "We don't really have a lot to say about the project itself yet, because it's so early. But everybody who visits Duluth, you get excited right?"

"We're drawn to it, and it seems like a great place to be," he said. "We're still a long ways away from a project, and it's too early to say. But we're interested to find a way to get there."

The Duluth Economic Development Authority, which owns the Pastoret/Robeson property, is expected to take up a resolution Wednesday that would grant Merge an exclusive year-long conditional option to purchase it, so long as the firm comes up with an acceptable development plan and all legal disputes are resolved.

"That's why we were willing to consider this option agreement to give them some additional confidence that they would have the ability to proceed on the site, should they be able to come up with a concept that would work well," Fulton said.

He noted that the property in question is zoned as an F-8 Form District. A building of similar scale to the Sheraton could be accommodated in a such a district.

"So, it allows for fairly intense urban development," Fulton said.

Dahlstrom said Merge specializes in multi-use developments.

"It might not be what seems to make the most sense short-term. You see a lot of developers building single-purpose residential buildings," he said.

But Dahlstrom said the team at Merge favors a less insular approach to development.

"We firmly, strongly, passionately believe in developments that really have a public component on the first floor to make it inviting," he said.

Dahlstrom said Merge typically looks to offer market-rate apartment units of varying size and price points, to attract a diverse mix of residents.

The firm seeks out largely overlooked markets, and in that respect, he said: "Duluth is very similar to some of the other towns we're working with."

"After the recession of 2008, a lot of capital poured back into the market. But a lot of that capital went to the same places. So, in Minnesota, that would be Minneapolis and St. Paul. In Iowa, it was Des Moines. And in Wisconsin, it was Milwaukee and Madison. But there are a lot of great towns that just didn't see the amount of development they should," Dahlstrom said.