The sale of the former Duluth Nettleton Elementary School has fallen through, making it the third Duluth school district real estate deal that has collapsed in just more than a year.
Sherman Associates of Minneapolis, which has converted into housing several former Duluth school buildings, was not able to secure financing for the project, according to Kerry Leider, property and risk manager for the district. The company first signed a purchase agreement for the building in 2013, and it was renewed in February.
The developer suffered several financing setbacks, Leider said. It first sought historic status for the school, built in 1905, which would have made it eligible for certain tax credits. The building did not meet criteria for that, and other financing options pursued weren't successful. A message left with Sherman Associates on Monday was not returned.
The school at 108 E. Sixth St. was listed for $480,000, and the agreed-upon purchase price was $370,000.
The company had planned a mix of affordable and market-rate apartments for what was to have been a $7.3 million project, with more than $5 million in low-interest loans and tax credit equity from the Minnesota Housing Finance Agency secured.
In Duluth, the company has turned the former Jefferson, Irving and Merritt elementary schools into housing. It is also renovating the former Lincoln Park elementary and middle school. That building, sold to Sherman Associates for $1, will combine housing with space for nonprofit organizations.
Nettleton was closed in 2012 as part of the district's $315 million long-range consolidation and construction plan.
The district will continue to pay to maintain the building and its land, as it does for its two other unsold buildings. The former Central High School and Rockridge Elementary School remain unsold, along with some land. Each of those schools had developers back out last summer, one from a $10 million Central deal and the other from a $1.2 million deal for Rockridge. The would-be Rockridge developer went on to instead buy the district's old Morgan Park Middle School for $100,000.
A $14.2 million offer was made for Central this year, but the School Board rejected negotiations because the potential inhabitant - Duluth Edison Charter Schools - was considered competition.
The collapsed Nettleton deal is another blow to the district, which has counted on the sales of leftover properties to help pay off construction debt. It has, in the past, needed to take money from reserves to do that, and has raised taxes.
"So this delays that reimbursement to the fund balance," said Bill Hanson, business services director for the district.
What this has shown, he said, "is the complexity and relative difficulty in developing the (school) sites, and how tenuous those things are financially."
The original developers who had set their sights on Central backed out because of the costs involved in carrying out their planned project. The story was the same at Rockridge. Some land on that site has since sold. The former Woodland Middle School, with its land now full of housing, retail, restaurants and a College of St. Scholastica building, sold for $3 million in 2012.
Hanson said the district continues to receive inquiries for each of the unsold properties, and discussions with potential developers continue to take place.