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More NorShor Details

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.

Don

64 Comments

Tomasz

about 5 years ago

This is all wonderful news Don and it's long overdue. Why does all the cool stuff happen shortly after I move!?!

wildgoose

about 5 years ago

"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 were distractions to the operation of the building" Yes. Completely true in my case. Although I was only there for less than a year I think we would have had a small profit if the building had been up to code and if it was energy efficient. The other huge problem was being undercapitalized but we did ok with sales anyway, the problem was that the building, structural and regulatory problems ate up all of the sales and then some. With a stable management team at the helm, access to a decent operating budget and most importantly, in an appropriately renovated building it will be sustainable if not profitable. I just wish this would have happened five years ago when I was there or 10 years ago when Rick Boo was.

E.

about 5 years ago

This is tangential ... sort of ... but something I could use some clarification on. Didn't the City use eminent domain to tear down the Muffler Clinic for the grand entrance to Lake Place Park? If so, why is there a big fat sign there now saying the property is for sale by A&L Properties? Any history or information about that downtown redevelopment chapter is welcomed.

Mike Scholtz

about 5 years ago

Many years ago, I lived in a faraway land called "Fargo." If anyone would like to see a real-world example of how investment in an Art Deco theater property can revitalize an entire downtown district, check out the Fargo Theatre.

Bret

about 5 years ago

Or check out Hennepin Avenue in Minneapolis. When I lived there the State Theater was the Jesus People's Church and the Orpheum was in total disrepair (although owned by Bob Dylan, that was cool). Detractors said it wouldn't pay to invest in those properties, but look at them and that area now! Successful outcomes have happened in Minneapolis and Fargo; it will happen in Duluth as well.

Don Ness

about 5 years ago

The Muffler Clinic was purchased by A & L, the City did not have a part in that sale. I still would like to see a plaza style development on that lot with a significant public easement going through the middle for access to and from Lake Place Park. We are seeking federal dollars to help with the purchase of public easement. If we generate enough activity in old downtown, we hope that a private developer will see the potential of the site to build there. (Imagine a Chipotle on that site!) There is no question that a revitalized Lake Place Park and stronger connection between Canal Park and Old Downtown is another key to the success of the district.

E.

about 5 years ago

Don, Thanks for the Muffler clinic clarification. E.

rnarum

about 5 years ago

When I was last in Fargo... I visited the theater that Mike writes about... and I dreamt of the day when our theater would become so grand... When I read the press... I once again thought of Fargo. These are very interesting and exciting times to be part of Duluth...

baci

about 5 years ago

For those of you with questons, I offer some examples of the Economic Impact of Historic Theater Renovation.

Terry G.

about 5 years ago

I like Don's idea of a public easement through the old Muffler Bldg. as another connection between Lake Place Park and Old Downtown. That park has been horribly maintained and poorly policed but I walked through there last weekend and was surprised at the number of people using it for legit purposes. Hopefully that's not just due to the ripped up Lakewalk. Getting tourists to venture into Old Downtown will ensure its success.

Eric

about 5 years ago

Although I don't live in Duluth anymore, I sleep better at night knowing that the town I will eventually come back to has a pragmatic leader who is unafraid to treat the citizens of Duluth as if they were adults. Thank you, Mayor Ness. We need more leaders like you.

digit3

about 5 years ago

Thanks for your efforts Mayor. I do hope that this is the catalyst for additional development of the Superior Street corridor. Would be nice to get the touristas to move over the highway to see what downtown offers. I respectfully disagree with you however in that a Chipotle downtown (or in Duluth for that matter) is not needed. A local (read:non-chain) restaurant would be ideal. If you want to bring in a grubby chain, take a look at Wahoo Fish Tacos!

Claire

about 5 years ago

Rubio's, digit3, Rubio's! I agree with digit3, I am thrilled at the explosion of new locally-owned eateries all over Duluth and would prefer that downtown not become infested with chains like Chipotle.

natalie

about 5 years ago

what about Noodle & Company then? mmm... noodles....

Terry L

about 5 years ago

When will he pay the 38,189.08 he owes in deliquent property taxes to the county?

Sam

about 5 years ago

If only the Duluth News Tribune discussion was so calm and thoughtful as the discussion at Perfect Duluth Day! Many of the DNT posters seem really upset about spending 2.6 million on this instead of roads (or whatever the poster thinks it should have been spent on). Check out the DNT posts at http://bit.ly/9Q1qoH

Josh

about 5 years ago

Speaking as a former Duluthian and current Minneapolitan, this is exactly the kind of thing that will get me up North more often, spending my godless big city money in Duluth. I used to LOVE that place -- the Black Eyed Snakes shows, the happy hour, the movies with couches... can't wait!

adam

about 5 years ago

There was never a happy hour at the NorShor, per se. As Boo used to say it, "Every hour is happy hour."

huitz

about 5 years ago

There's nothing BUT good that would come from this incentive. Don't get me wrong; the "lady dancer" thing didn't ruin the area, but strategically, that building could be put to better use.

wildgoose

about 5 years ago

Adam, I'm no Rick Boo, I know that, but we did have a happy hour, Monday - Friday with live music and drink specials. Once a week, Tuesdays, I think, we even had $2 pints of Guinness and music by Sassanach. It was pretty happy, but not happy enough to feed the beast, obviously.

vicarious

about 5 years ago

Tonight, a couple of my passengers asked if anything exciting had happened in Duluth in the past week. When I told them about the Norshor they squealed with delight. Literally.

jill

about 5 years ago

Will the current businesses in the Temple Opera building be supported?

Carla

about 5 years ago

In some ways this makes me want to shout hooray - but in others it makes me want to scream with anguish. How is it possible that after the last 10 years our city government does not know that real estate is not the way to go when it comes to economic stimulation?!? Moreover, if the city subsidizes a new downtown restaurant, another one will fall by the wayside. The eating pool is limited. Can we please - now that Eric has agreed to move forward - let private capital make this move!!!??? If government wants to do something - let it tend to people's basic needs - health care, child care, education. Let enterprise take care of development. And if you're gonna flame me about this - know that A&L has full-time staff devoted to getting TIF money and other concessions from the government entities.

dbb

about 5 years ago

It appeared that one of the issues which caused DEDA to balk the last time they considered this building was the lack of any business plan or analysis regarding fiscal sustainability of the project. Has any of this work been done, or is DEDA just going to put that money down on the strength of community optimism? I applaud that optimism by the way but wonder if it makes for the best policy. After all, optimism got us the Tech. Village and Aquarium, both of which were far less successful than originally touted.

Mike H

about 5 years ago

Since the beautiful venue at Bayfront isn't properly utilized to bring in "bigger name" bands, I look forward to seeing the Norshor outfitted to be a place where a band would love to come to Duluth. Sure, Luce and the Rex put on some good shows but neither are large enough to accomadate bands like The Black Keys or Fleet Foxes. "Build it and they will come."

edgeways

about 5 years ago

Carla, (this is not a flame) I suspect Eric is "ready to move forward" because it is specifically done this way. I understand what you are saying here, but personally I would add some small measure of historic preservation to the list, as well as providing space for cultural development. (I'm not entirely sure where the subsidizing a new downtown restaurant comes into it.)

Jude

about 5 years ago

Carla's post said: "Can we please – now that Eric has agreed to move forward – let private capital make this move!!!??? If government wants to do something – let it tend to people’s basic needs – health care, child care, education. Let enterprise take care of development." I completely agree with Carla on this. This situation seems a bit like the whole mortgage fiasco in the way that overpriced real estate was sold to buyers who did not have the means to afford it. Will these development funds pay for the taxes for the next twenty years? For the insurance? For the salary of the long-term manager? And who in the city has time to manage the managers? When I look at the zoo and the aquarium that is evidence for me (a Duluth newcomer) that the city should not venture into any other businesses. I certainly do not know these details but I can see all the emotion involved in restoring an old building, etc and that is great. But like the bank saying we can afford a $2.6 million dollar house, there is more to owning and managing a property than just buying it on emotional appeal. Let's really dig beneath the surface and make all the details public first, that would make it easier for me to jump on a renovation band wagon. Starting with a business plan would be good.

Barrett Chase

about 5 years ago

DNT: Strip club could sink NorShor deal

The manager, Tina Jackson, who took over running the strip club after the death of her longtime boyfriend, Jim Gradishar, said her lease runs until 2015 and indicated she didn’t plan to leave until then. ... “And if they don’t want to get out of their lease,” Ringsred said, “the deal is off.”

Sam

about 5 years ago

Have you ever seen "It's a Wonderful Life"? We see what the city would be like if private enterprise took over (it becomes Pottersville). As in the movie, there would be a lot of strip clubs, drugs, alcohol, and gambling in Duluth with minimal government and control by private enterprise, since that is what makes the most money for private enterprise. Fargo is a good example of a city where the government development of downtown made the community stronger. Government should provide for basic needs – health care, child care, education - and for any other communal good that the people want. Most Duluthians want more than a minimalist government, and so there are democratic reasons for the government to do more than the minimum. Government can do good beyond the minimum, and I think "It's a Wonderful Life" gives us a sense for what that is. We want Bedford Falls, not Pottersville.

Terry G.

about 5 years ago

Jude and Carla, Please re-read the Mayor's details in this post and an earlier post. I think a number of concerns have already been answered by the Mayor.

beryl k gullsgate

about 5 years ago

And an alley runs behind it... Don't forget the 'alley behind' could just be another form of development. I had a friend, a mad poet named A.P. Bradford who plastered his alley poems on the backs of old brick downtown buildings in Somewhere, U.S.A. City fathers putting out the garbage one fine day (they do that sometimes,eh?), spied the back-wall coloratura in chalk and bright pastels like a sunset bursting in verse, maybe ... so building owners opened their back doors and turned sooty, neglected basement space into a second round of shop connections ... cobblestone corridors became places for walking and talking and riding bikes and pushcart wares etc. One such alley that did develop in the 1960s or 70s in good ol' St Paul, was "Alley 29" complete with a courtyard water fountain, Fujia Cafe - Classic Japanese cuisine ... plus an art school looking over from their balcony plus a well stocked bookstore and flowers and pots everywhere ... yup one block developed from both sides now could be quite a gem..

Nathan Ness

about 5 years ago

Please email the City Council by Monday, April 26th. Ask them to vote to approve the purchase by DEDA. Also, please join the "Save the Norshor" group on Facebook. council@duluthmn.gov CONFIDENTIALITY NOTICE: E-mail sent to that address are considered public information according to the Minnesota Data Practices Act and will be sent to the media, who have requested access to e-mails sent to the City Council.

Rob

about 5 years ago

Case in point: Fargo Renaissance? Oh yah, oh yah Smart hotels, unique boutiques, teeming downtown streets -- Wood-Chip Marge would be totally impressed I think vision is important and as the mayor said, there is risk in everything, but to me this is a no-brainer people.

Rob

about 5 years ago

Not sure who the new Rob is above.

huitz

about 5 years ago

@Carla To quote -- not exactly, actually paraphrasing -- the CEO of McDonald's once asked a bunch of students, "What is McDonald's in the business of." A student answered, "Well, food, of course." "Wrong!" he responded. "We're in the business of real estate." You can take this idea one step further. Forgive me Paul and Barrett and others for saying this. PDD vies for journal real estate, as an example.

huitz

about 5 years ago

Wanted to add that, where did the Enger Tower project come from? Look it up.

Sam

about 5 years ago

Please, read Don Ness' reply in the DNT Buzz. Ness clears up a lot of misinformation about this that I've read lately... http://bit.ly/aXSjDl

Claire

about 5 years ago

People, please post comments supporting the sale on Brandon Stahl's blog, we want to make sure the naysayers don't dominate the discussion over there. www.areavoices.com/buzz.

Danny

about 5 years ago

This is very quickly turning into an ugly "Us Vs. Them" situation.

Danny

about 5 years ago

For those who want the city to be very, very careful about this: Facebook: Inspect the NorShor...then maybe save it!

gingerbliss

about 5 years ago

This is a business deal, and it isn't just between DEDA and Mr. Ringsred. Mayor Ness, in his previous post, alluded to other business owners who have chatted with him about this project. It must be nice to buy a historic commercial property and get all kinds of taxpayers money to fix it up through the city.

Dusty Olson

about 5 years ago

Oh great, the city of Duluth is going into another black hole. Who is going to pay for the needed repairs? Rod and Tim don't pay for anything. Can the city really afford this? I am so glad I don't live here year around. Looking so forward to removing myself full-time and being in areas where the local business people don't suck from the city and give nothing in return but low-paying jobs.

Dusty Olson

about 5 years ago

Just what Duluth needs, another black hole for the tax payers to pay for. I am sure when the bill comes Rod and Tim will not be around. Let's have a moment of silence for the end of Donny's career.

adam

about 5 years ago

Quit calling me with your ass, Dusty.

P.S.

about 5 years ago

Armory or NorShor?

baci

about 5 years ago

Both! Why not? Is there some form of limit to how much of the beautiful character of the past we can preserve/enhance? Keeeerist in a nighty people ... treasures like these building CANNOT be "built" again. Legacy has value beyond economic.

Duluth Tax Payer

about 5 years ago

Seriously. Why? The city jumping into more business, something they shouldn't be involved in. Ringsred should have put a for sale sign in the window, and the highest payer could have had the building. This will end up like the infamous Tech Village, Fish Tank on the lake, and the Herbie Parking ramp fiasco. A perfect day in Duluth will be when all the lights are finally shut off. This city is dead.

P.S.

about 5 years ago

So there is no limit to the past that must be preserved. Who will take on the Walgreens expansion and their razing of historic homes?

zra

about 5 years ago

"The City Is Dead!" Dude, I've been hearing this "sky is falling" bullshit for going on ten years (as long as I've been living here). Where? When? Seriously? Much to the contrary, Duluth just keeps getting better and better, and as a denizen of the later days of the old NorShor under Boo, I'm excited that my kids'll have a similar place and chance to haunt, rather than looking at a dilapidated old building with "FOR SALE" in the window.

Claire

about 5 years ago

I agree with Zra. I worked on 1st and 1st 1995-2000 and had a front row seat (literally, as my office overlooked the alley between Superior and my office building). I think the Tech Bldg, while not ending up exactly as envisioned, paved the way for Duluth's rehabilitation. This city is SO MUCH more alive than when I moved here 16 years ago, and the downtown is so much more pleasant without the porn store and the "antique" junk stores lining both sides of the street near the city's main intersection. Duluth is indeed getting better and better, and maybe you should just get onboard, Duluth Tax Payer, b/c Zra and I are just as invested in this city as you are, and we want our kids to stay here and thrive here and be proud of the city we are handing off to them.

Duluth Tax Payer

about 5 years ago

Can someone tell me how the city is getting better without any business expansion, and no tax base expansion. The city is expanding with non-profits, which, alas, do not pay taxes. The city still has an unfunded liability of 250 million. Donny was complaining a few months back when Pawlenty was cutting LGA, but when Pawlenty came out and said Duluth has got more and more LGA, Donny hasn't made any public comments about LGA. Private business should be investing in the city, and not using the tax payers money. When Duluth gives money to the aquarium, and spends money on the NorShor, this is a bail-out on a smaller scale.

Ramos

about 5 years ago

I've said it before and I'll say it again: No matter what happens in real life (who's in office, the state of the economy, the size of the city's deficit, etc.) the list of Duluth city projects continues to grow and grow. It's like a Whack-A-Mole game. As soon as one group jumps up and receives money, another group jumps up and asks for their share and receives it. In a dozen-plus years of observing Duluth politics, I have not seen this dynamic change at all. What happened to all the concern about closed community centers and slashed library hours? They're still closed and slashed, as far as I know. But suddenly all is forgotten and we're rich again. I have been writing about the pitfalls of unfounded optimism for years. I despair of ever having the slightest effect. I was going to speak before the council tonight, but on second thought, I won't ruin your party. Have a great night.

Paul Lundgren

about 5 years ago

Duluth Tax Payer, I won't argue your essential point. But I think your details are off, and I have to wonder why anyone who claims to be a taxpayer would want to a) perpetuate a worse financial situation for the city than actually exists and b) suggest that shutting off the lights and calling the city dead would be a good thing. Anyway, I don't have time to examine city budgets all afternoon, but I will say that the unfunded health care liability was down to $207 million the last time I checked. It was $254 million in 2007. You ask "how the city is getting better without any business expansion, and no tax base expansion"? I suppose we could debate whether there has been any business or tax base expansion or not, but I'll answer your question anyway. A city can get better in an infinite number of ways: less crime, cleaner water, improved education, a better hockey team, stronger beer, fewer ornery bloggers, etc. I'm sorry you feel Duluth is getting worse. A lot of us think it's getting better -- regardless of what happens with the NorShor.

Claire

about 5 years ago

John Ramos, you know I'm your biggest fan. I'm also very concerned about the situation with the libraries and the parks, believe me. I've spoken out many times in support of the libraries, because I regard it as an essential city service. BUT. . . I had lunch with Sharla Gardner today and she said the money to be used to purchase the Norshor is earmarked for economic development, and it can't be used to fix the streets, or keep the library open longer hours -- it's got to be used for economic development. It's use it or lose it, and I prefer to use it to further rejuvenate an area that is bursting with activity. I feel like the people who remember the city when it thrived as a manufacturing area are the ones who think it's dying -- whereas those of us who moved here -- like Zra and me -- when the city really did seem dead are rejoicing now to see the excited changes happening. Duluth Tax Payer, I wish you fully realized how this city has changed so much for the better since the mid-90s. I see a lot of businesses opening downtown and elsewhere. I know some entrepreneurs doing cool things, and the artists and writers are bursting with creativity. It's an exciting time to live here.

Ramos

about 5 years ago

Of course, people always have reasons to spend the city's millions. I would just like everyone to acknowledge that the dynamic driving this project is EXACTLY THE SAME as the dynamic that drives every other project. Six days after a multi-million dollar project is announced, and without seeing any further information, the community and council are poised to approve it. This seems idiotic to me. This is why the city's debt load always grows and never shrinks.

HoseDragger

about 5 years ago

"And the artists and writers are bursting with creativity." Dang ... the town is saved.

Paul Lundgren

about 5 years ago

Hey HoseDragger, the sentence you are quoting from Claire begins with "I know some entrepreneurs doing cool things." But maybe that won't save this town either, depending on what you think it needs to be saved from.

Jude

about 5 years ago

I took a good hard look at the NorShor today after having a great lunch at the Norwegian place, and I took a good look at the rest of the businesses there and frankly most of that street still looks very seedy. The whole exterior of the NorShore seems to be in decay and looks like a nightmare to renovate. There seems to be only two camps: for and against, and it seems that most of the arguments for are based on emotion instead of financial logic. I really want to see some evidence that shows how many tourist dollars will support the renovation in 2010, and then in 2011 in February and March--and when will the outside of the building be the "showplace" of Duluth? In September? November? Is there a deadline for when the citizens of Duluth can see progress and know where our money is going? And I do think that the majority of regulars on PDD are supporters of the renovation, so it is easy for the voice of reason--some of you have called those folks the nay-sayers--to feel silenced. I would suggest that this whole project needs a lot of input and a lot of scrutiny---something we are not getting and that is riling up a lot of people.

The Phantom

about 5 years ago

"I have been writing about the pitfalls of unfounded optimism for years." -- Yeah! Damn that horrible optimism ... it ruins my finely crafted sense of abysmal desperation.

Ramos

about 5 years ago

Unfounded optimism.

wildgoose

about 5 years ago

ok ok ok I have been trying to sit on my hands in this discussion as the thread plays out, because I know I have been a big cheerleader and sometimes even cheerleaders get tiresome. (No reference to Ramos there, although I'm sure he might get tiresome at times, too but not to me, yet) Anyway I just can't do it, I have to say this again. I operated the NorShor as a business and according to my books, there were two big problems that kept us from success. These issues will be eliminated with DEDA backing for the project. First, the buildings innefficiencies, regulatory and code issues ate up just about everything that we had. Second, I was undercapitalized, this means that when an expense came up or inventory needed to be purchased or people needed to be paid for their efforts I had to draw the funds from gross receipts rather than from a dedicated budget. Yes, I did keep books, and I do know a thing or two about business from both the school of reality and the graduate school of management at the College of St. Scholastica. A 3rd problem wasn't really much of a problem, that is community support. We had a lot of support from the community, but not as much as we could have had. I found it maddening that so many people "loved" the theater and were happy with what we were doing but things like parking, busy lives or even skeevishness about parking and sharing the sidewalk with "Red Lion" patrons kept them from coming out and spending $. Anyway, that issue too, has been eliminated, after 4 years of "NorShor Experience" I think people have had their fill of the alternative and will be interested in returning to the block. So we have more support now, and some people who were hanging back for various other reasons (such as resentment founded or unfounded at Dr. RIngsred, or issues with the "wrong" type of programming) will be coming around now, too. Also, I have often said that downtown arts and entertainment businesses should stop trying to compete with one another a much as they do, and join forces to compete against satellite TV and netflix to get people off of their couches and out into the city. Obviously the city is now fully behind that logic as well. This is an economic development project, after all. So each of those 3 problems will be dealt with in the city's plan as I understand it. In that case, according to my experience, the theater can be operated sustainably, I think it could actually turn a profit actually if the people REALLY support it, and I think they will. Oh, and I'm just tlaking about the theater, the annex and the temple opera building are all profitable, no one has argued against that, but for the last 20 years, managers have not had access to that revenue, now they will. So that is a 4th "bonus" reason that it will work, I think. I know that I am no paragon of business sense or economics, it's true that for the reasons I listed above my run at the NorShor ended in personal and financial disaster. But at least I'm not an arm chair quarterback, naysaying for the sake of naysaying, either. I'm also not just a blind, emotional cheerleader, either. I really believe in this. I agree that reason needs to come into the discussion of this project, too. And now you have some more to chew on.

Resol

about 5 years ago

Refreshing reason... thanks Wildgoose. PDD is starting to strike a chord similar to comment sections elsewhere, and that is disappointing.

chadp

about 5 years ago

Perhaps unfunded optimism is more appropriate. I don't want to come off as a nattering nabob of negativism because I really want to see this a success. However, the money issue really unsettles me a bit. I don't necessarily understand the "this money can't be used for schools or roads" argument since I feel they are as vital to economic development as a vibrant cultural center. The future cost of this also seems overly vague to me. How much and how will we pay for it are legitimate questions that should be asked. And if people ask them in a respectful way they should not be criticized for it.

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