Duluth NorShor project delayed by cost overruns, tax credit wait
Those looking for tangible signs of reconstruction of the NorShor Theater in downtown Duluth will have to wait a while longer. Brian Gorecki, project manager for Sherman Associates, told the Duluth Economic Development Authority on Wednesday that...
Those looking for tangible signs of reconstruction of the NorShor Theater in downtown Duluth will have to wait a while longer.
Brian Gorecki, project manager for Sherman Associates, told the Duluth Economic Development Authority on Wednesday that milestones it was expecting to hit in its contract to redevelop the historic theater have been snagged by estimated cost overruns and a wait for historic preservation tax credits that will allow the developer to close on the property.
Gorecki said those credits, which will allow for financing of the $21 million project, should be awarded by February, putting the project up to three months behind schedule. Gorecki said construction permits, which were expected to be secured by the start of the year, won't get done until late spring.
If all goes as planned, the theater could reopen by the spring of 2014. A few months ago, planners were shooting for an opening in December of 2013.
The contract with DEDA requires an opening by mid-2014 and the delays so far do not threaten that agreement.
The cost overruns came to about $600,000, Gorecki told the DEDA board. Construction drafts were put on hold until the overruns could be fixed, he said. The higher costs come from mechanical, electrical and plumbing systems, and engineers have worked to pare the overrun to $200,000, Gorecki said.
Work on drawings for the refurbished theater is expected to start again in a month.
Sherman Associates is run by Minneapolis-based developer George Sherman, who has been expanding his holdings in Duluth since the 1990s, including acquisition of the Chateau luxury apartments on London Road in March.
Sherman built the Sheraton Hotel that opened on East Superior Street in 2007 and purchased numerous apartment buildings in Duluth for refurbishing, including Greysolon Plaza, four former schools, the West Gate townhomes development and some buildings in Canal Park.
Sherman is planning a $21 million renovation of the NorShor with plans to acquire the Temple Opera building next to it.
Sherman built his company with large projects in the Twin Cities area but has a personal connection to Duluth. His mother and her family grew up here.
Plans for the NorShor moved forward in February when DEDA approved a proposal that would give ownership to Sherman to restore the space. DEDA purchased the NorShor and Temple Opera buildings in 2010 for $2.6 million.
Under the agreement, the city handed over the buildings under Sherman's plan to have it operating by the summer of 2014. If Sherman doesn't meet the agreement, he will have to pay the city its investment of $2.6 million.
The city will likely build a skywalk connecting the NorShor to Greysolon Plaza through the Temple Opera building. The skywalk would cost $1.3 million to $2.3 million depending on its design.
The Duluth Playhouse has been charged with managing the theater space and will partner with Sherman on a $3.5 million loan to help finance the project, with most of the rest of the money coming from the tax credit bonding and fundraising.
The Playhouse learned Wednesday that it will receive $150,000 in Minnesota Historical and Cultural Heritage Grants through the Minnesota Historical Society to preserve and restore brick and terra cotta on the NorShor building.
Preliminary plans for the space include a theater that seats an audience of about 720 at floor level and in the balcony, a bar and social area, a thrust-style stage with an orchestra pit and an increased backstage. It will also be brought up to American with Disabilities Act code, which stalled use of the theater soon after the city purchased it.
The theater will be used for some Playhouse productions, including musicals and other popular shows that have outgrown the space at the Depot. Other arts organizations, including touring productions and local colleges, would also be able to use the stage -- which will be able to accommodate plays, dance and opera productions.
The Playhouse would eventually own and run the theater, with Sherman taking over the Temple Opera building for condo or office rentals.
Sherman will hold onto the buildings for five years to meet the requirements for obtaining the tax credits.
Gorecki said another snag in the development is coming up with a memorandum of understanding with the Playhouse.
"We don't want to be the ones operating the theater," he said. But the agreement needs to have a plan in place should the Playhouse be unable to maintain the space.
"We could step in," Gorecki said.