I was going to post this as a response in a previous thread, but made it a post instead…
There are questions about the sale price. Legitimate questions, $2.6 million is a lot of money. Between the three buildings, there is a lot of value. This is both a fair price and makes economic sense for the city. I’ll share our value assessment with you.
First, we have examined the sq ft comps in the neighborhood. There is 40k sq ft of commercial / office space in the Temple and Annex space. The average per sq ft cost for sale in old downtown is $37.75 based on building sales of Coney Island Bldg and Gardner Hotel (and other area building sales). I think we could make a strong case that the Temple is a much more valuable property than those, but using this standard, the value of the commercial and office space would be $1.5 million.
The value of the theater space is more difficult. But we used a standard of national historic theater value and then used a 80% depreciation and came to a value of $1.3 million.
The primary business case for the city comes from our contractual obligation to build a skywalk. Without ownership of these buildings, we would be looking at (easily) a million dollars of additional cost for easement and construction through multiple buildings on the upper side of the alley.
We also want to demonstrate a good faith effort to the Band that we want to make Old Downtown a thriving arts and entertainment district, which obviously will benefit the Casino. There is over $150 million dollars at stake for the next 25 years of the casino agreement. These buildings will not play a direct role in the negotiations, but I think it is clear that the skywalk and a thriving theater that can bring 500-1000 people downtown for shows would clearly be a benefit to the Band.
And finally, I will stress that these are redevelopment dollars for the downtown. They cannot be spent on city services – that’s the law – it’s not about “political will” to spend it illegally as some have suggested. This investment supports all of the private investment that has taken place and that WILL now take place in Old Downtown because the NorShor will fulfill its potential.
The previous theater operators of the NorShor in the past will tell you the major detriment to having a successful operation is the condition of the building – whether a leaking roof, lack of fire suppression, or other deferred maintenance where distractions to the operation of the building. Think about the change in the 200 block of East Superior Street since 2003. There is more foot traffic on a Wednesday night in old downtown than there was on an average weekend night a decade ago.
Is there risk? Absolutely. Is there the opportunity for folks to criticize and second-guess? That’s part of politics. But I am convinced that this is good for Duluth – this is great for downtown – and this is the difference maker in supporting local arts in the region.