Duluth's historic NorShor Theatre stages a revival Arts & Culture Dan Kraker ∑ Duluth ∑...more details »
A collection of recent and significant news articles about Sherman Associates, Sherman Associates' properties and employees.
Initial plans had called for the Duluth Economic Development Authority to consider approval of a development agreement for the long-awaited NorShor Theatre restoration this week, but details of the complicated, multifaceted $29.6 million project apparently will require more time to iron out.
David Montgomery, Duluth‚Äôs chief administrative officer, says he now expects to bring the agreement forward in October, requesting that it be approved by both DEDA and then the Duluth City Council. But he remains confident the deal remains on track to close in mid-November.
‚ÄúWe‚Äôre still working on internal drafts, and those are being shared amongst all the various parties. There‚Äôs a lot of documentation around the financing with the New Market Tax Credits and stuff, and we just said: ‚ÄėWe can‚Äôt rush this, because we need to make sure that the documents all work so we don‚Äôt screw up the tax credits,‚Äô ‚ÄĚ Montgomery said.
DEDA bought the run-down NorShor Theatre, an annex and the neighboring Temple Opera Building in downtown Duluth for $2.6 million in 2010. The authority will retain ownership of the Temple Opera Building but plans to turn over ownership of the other property ‚ÄĒ valued at about $2.3 million ‚ÄĒ to Minneapolis-based developer Sherman Associates, with the exact terms of the deal yet to be inked. The plan is for Sherman Associates to renovate and restore the theater as an arts venue.
George Sherman, founder of Sherman Associates, said he expects to begin work on the theater immediately after his firm takes possession of the building in November.
Work will continue through the winter, beginning with the abatement of lead paint and asbestos from the building and then moving on to the extensive demolition that will precede the actual renovation.
‚ÄúEven though we‚Äôll be keeping all the historic features, we are doing a major revamping of the interior seating and the balconies of the theater. There is probably two to four months of interior demolition work to reconfigure the seating in more of its historic fashion,‚ÄĚ he said.
Sherman said he hopes the theater will be restored and ready for use by September 2017, in time for the Duluth Playhouse to launch its fall season. The Playhouse will be the anchor tenant of the building and is expected to assume ownership of the theater after a few years.
‚ÄúIt will be tight. There‚Äôs a lot of work to do, but we are shooting to have it done within 20 months,‚ÄĚ Sherman said.
The future ownership of the theater and its annex by a nonprofit of relatively modest means required much consideration, Sherman said.
‚ÄúWe really wanted no long-term debt on the buildings so they could be self-sustaining, and that meant we had to find sources of funds to do $29 million of development that did not require long-term repayment streams,‚ÄĚ he said.
Sherman pieced together financing from a number of sources.
‚ÄúIt meant getting a lot of trains to the station at the same time,‚ÄĚ he said. ‚ÄúIt required a lot of creativity and ingenuity on the finance side,‚ÄĚ
‚ÄúThis project has been five years in the making. That fact alone is indicative of how difficult this project has been,‚ÄĚ Montgomery said.
The extended timeline of the project has come at a cost, however.
Original estimates had pegged the cost of the renovation at about $24 million ‚ÄĒ $5.6 million less than is now anticipated.
‚ÄúThe project has also gotten more complicated with time,‚ÄĚ Sherman said.
Originally, plans called for the renovation of just the first floor of the NorShor annex, which is home to the theater‚Äôs lobby, but now plans call for the second and third floors will be built out as well. Meanwhile, the proposed skywalk connection through the building has been extended.
‚ÄúThe work on the theater space itself has become more extensive, with the addition of an orchestra pit, which was not originally in there, too. And we‚Äôre expanding the stage as well,‚ÄĚ Sherman said.
Inflation has been another driver. Sherman noted that construction costs ‚ÄĒ including labor and materials ‚ÄĒ have been increasing 5 to 10 percent per year in most markets.
The venue dates back to the opening of the Orpheum vaudeville house in 1910. After extensive renovations, it reopened as the NorShor ‚ÄĒ a movie theater ‚ÄĒ in 1941. It operated as a first-run movie theater until 1982 and later as a venue for live events.
In more recent years, before DEDA acquired the property, the NorShor had become home to a strip club that Sherman and many others viewed as an impediment to additional investment in the neighborhood.
‚ÄúI think it would have been a complete roadblock to any further redevelopment of Duluth‚Äôs east end if the city had not stepped up and acquired this building. As a strip club, it was having a major impact on any additional enhancements. I don‚Äôt think we would have gotten the type of upgrades at Greysolon Plaza or Black Water (Lounge) if we continued to have a strip club next door,‚ÄĚ he said.
Sherman compared the NorShor of days‚Äô past to a notorious head shop in downtown Duluth that also was shut down after it was legally deemed a public nuisance.
‚ÄúIt (the NorShor) was a lot like the Last Place on Earth. It was a cancer that was killing all the properties around it. The pre-existing condition as a strip club was devastating for this part of town. Families didn‚Äôt want to come down here,‚ÄĚ Sherman said.
With the strip club gone, and the NorShor poised to be resurrected as an upscale theater venue again, Sherman sees a much brighter future.
‚ÄúI think the fact that both businesses ‚ÄĒ the NorShor strip club and the Last Place on Earth ‚ÄĒ are no longer there is opening the investment gates and is generating the interest in improving this whole end of town,‚ÄĚ he said.
Sherman Associates already owns both the Sheraton Hotel and the Greysolon Plaza buildings, and Sherman said he is looking at additional investments in the neighborhood.
‚ÄúWe just invested probably $1 million in Greysolon Plaza and we hope to do a couple more buildings. I think in the next 18 to 24 months, you‚Äôre going to probably see ‚Ä¶ double the investment we‚Äôre making in the NorShor in that area,‚ÄĚ he said.
Montgomery said he expects DEDA‚Äôs investment in the Temple Opera Building to appreciate as well.
‚ÄúWe see the Temple Opera Building going up in value as an additional development opportunity for somebody,‚ÄĚ he said. ‚ÄúIt‚Äôs not too big a space. It‚Äôs a digestible space, and now it will be on the skywalk.‚ÄĚ
Montgomery said plans call for the westward expansion of the skywalk system to the Fond-du-Luth Casino and an adjoining parking ramp in time, although details would need to be negotiated with the Fond du Lac Band of Lake Superior Chippewa, which owns the gaming facility.
Montgomery predicts the restored NorShor will be a catalyst for Duluth‚Äôs newly established Historic Arts and Theater District.
‚ÄúI think two years from now when this theater is up and operating, there‚Äôs going to be an excitement and a buzz in this town over what‚Äôs been accomplished and over this asset they now have ‚ÄĒ not just the bricks and mortar asset but the space, the activity, the home for the arts that will be created and sustained by this,‚ÄĚ he said.
Despite the delays the NorShor project encountered, Sherman said his team never was tempted to turn their backs on it.
‚ÄúEverybody at our company was very dedicated to the project once we got into it. We don‚Äôt walk away easily, and we pride ourselves on finishing what we start,‚ÄĚ he said. ‚ÄúWe have a lot of persistent believers at our company who want to see this theater become a real crown to the city of Duluth‚Äôs art district. ‚Äú
Montgomery said he has been impressed by Sherman‚Äôs steadfast efforts to restore the NorShor.
‚ÄúGeorge has shown an incredible commitment to this project,‚ÄĚ he said. ‚ÄúI think he looks at this project not just as a developer would. I think he has a real passion for the concept of a historic theater and all that can come out of it. I think he has a real appreciation for the arts, and that‚Äôs what excited him about this project,‚ÄĚ Montgomery said. ‚ÄúYou can see that in how hard he‚Äôs been working to make sure this thing stays on track.‚ÄĚ
Sherman contends his firm‚Äôs persistence paid off.
‚ÄúWhen it was meant to be, everything came in line, and we‚Äôve been able to put together the financing package this year that should allow us to move forward to closing,‚ÄĚ he said.
Although the extent of any public investment that will go into the NorShor restoration has yet to be nailed down in a development agreement, Montgomery was quick to offer assurances.
‚ÄúThere is no taxpayer money involved in this project. The money that‚Äôs involved in this project is money that is spent for exactly these types of purposes. DEDA is in the economic development and redevelopment game. That‚Äôs what DEDA does, and we view this as fundamentally a downtown district redevelopment project on a terrific scale,‚ÄĚ he said.
Montgomery maintains that any DEDA money that ultimately goes into the theater won‚Äôt come at the expense of other core city operations.
‚ÄúNone of the money going into this project can be used to build streets or to hire police officers or to run libraries. Oftentimes the public has a hard time understanding that. They kind of look at all money that the city touches as fungible ‚ÄĒ as though all money could be used for all purposes,‚ÄĚ he said.
‚ÄúIn this case this is economic redevelopment money that‚Äôs going in here, and we‚Äôre including in these agreements the appropriate precautions and guarantees and limitations so that public dollars are not expended in support of this project,‚ÄĚ Montgomery said.
Sherman said he harbors no illusions that his firm will make money on the NorShor project, although he thinks it will increase the value of the company‚Äôs other holdings in the area.
As for the NorShor restoration alone, he said: ‚ÄúI think it will cost us money. We‚Äôll have spent 11 years on this project before we exit it, because we have to guarantee its performance for all the investors and all the credit people, and we have to make sure the theater remains operational for its first five to seven years, although we believe the Playhouse will keep it going way beyond that,‚ÄĚ he said.
Complicated details in design, construction, legal documents and financing for the project have proven expensive, Sherman noted.
‚ÄúSome of it will get covered by project costs, but for 11 years it will cost our company significant money in staffing and overhead,‚ÄĚ he predicted.
But Sherman isn‚Äôt one to bellyache about the project.
‚ÄúOn the other side, we‚Äôll gain by seeing something really improve,‚ÄĚ he said. ‚ÄúThat‚Äôs personal, and you don‚Äôt take money to your grave. What you take is your personal accomplishments and what you leave behind. And I think everyone at our company will be very proud of this.
‚ÄúCertainly I am.‚ÄĚ
Peter Passi | September 20, 2015