Sale of former school building pending
NEW ULM – A significant chapter of local history will likely close – and a new one likely begin – as District 88 completes a long anticipated sale of the former high school/middle school building at 15 N. State St.
The School Board is expected to approve the sale on March 27. The building is expected to pass to a group called Cenate, LLC.
Cenate, LLC, is comprised of people with a strong, long-term commitment to New Ulm. Several of them also have a vivid interest in the arts, especially theater, and ties to NUACT, the local community actors’ group. The interim president of Cenate, LLC, is Reed Glawe, an attorney with Gislason & Hunter, LLP.
The group’s stated intentions match the district’s goal of preserving, restoring and upgrading a beloved community asset, by finding viable new uses for it, indicated both Reed and Superintendent Jeff Bertrang.
The sides have been negotiating the sale over the past several months.
Cenate, LLC, in some ways revives – although it does not completely replicate – an earlier proposal for the building made by NUACT. Several years ago, the district invited bids for the property, and NUACT was involved in two of the top three, but not the highest, bid. The bids associated with NUACT at that time involved either a $50,000 conditional purchase of the building or else a $25,000 outright purchase. The group’s primary interest focused on the building’s auditorium, the only one in the school district.
At that time, the district chose to negotiate with the highest bidder, a different group, which offered to buy the building outright for $100,000.
Negotiations with that group made significant progress, but eventually fell through, over unanticipated complexities and fine print.
All proposals, past and present, have called for preserving and updating the auditorium while also converting the rest of the building into apartments.
The current proposal – first floated at the end of former Superintendent Harold Remme’s tenure and developed during Bertrang’s first few months in office – is based on similar concepts, with a few new twists.
Cenate, LLC, would buy the building outright for $25,000. The property would be subdivided into two sections, resulting in two different property titles: one for the auditorium, small gym and freezer section, and the other for the rest of the school. Ownership of the auditorium portion would eventually pass to a separate group comprised more specifically of the theater enthusiasts among the Cenate, LLC, members. Ownership of the rest would eventually pass to a developer, who would re-purpose it into a market-rate apartment complex.
Two lease agreements go hand in hand with the upcoming sale. One is a two-year, $5,000 per month, all-inclusive lease for the offices currently occupied by the district (located in the potential apartment complex section). The other lease is a $1 a year, 10-year lease for the auditorium and accompanying space. The lease documents stipulate that the buyer can end the office lease, and the district can end the auditorium lease, both on a six-month notice. Minor repairs would be handled by the tenant, and major projects by the new owner.
The office-space lease amount, $5,000 a month, is about the same as the district currently spends to operate the offices, says Bertrang.
Under the lease agreements, the school district would receive priority treatment in terms of auditorium scheduling and use. Cenate, LLC, will try to accommodate other current tenants using classroom space in the future apartment section (a music school, etc.).
Cenate, LLC, intends to retain the larger portion of the building for only about two years; it would then sell it to a developer, explains Reed. The group would use the two-year period to try to obtain a historic designation for the property – which would make it feasible to repurpose it via the use of historic-preservation tax credits. The tax credits are one of few available tools to make the repurposing feasible, notes Reed.
Unofficial, preliminary estimates put the cost of repurposing the building as an apartment complex in the $8 million range.
The key difference between the current and earlier proposals is that, in the present case, no developer has as-yet been identified, notes Reed. The community members involved in the effort are, in a sense, putting their reputations on the line to make the concept work.
The pending agreements address the historic murals in the auditorium, adds Reed. The murals would not be removed or destroyed. In the future, ownership of the murals may be transitioned to an as-yet unidentified historic preservation agency.
District 88 is selling the building in part because it is too costly to maintain and/or remodel. It would cost some $4.7 million (in 2007 prices, the latest estimate) to complete maintenance and upkeep projects (such as roofing), says Bertrang. It would be even more costly to update the building to current building standards for functioning schools (schools that hold daily, regular classes). The building is landlocked which means modern green space standards for schools cannot be met.
Even theoretical demolition would be costly ($1 million, 2007 estimate) because of asbestos issues.
The current costs to operate the building (heat, cooling, trash removal, other utilities) are in a $60,000-$75,000-per-year range. Property insurance adds another $15,586 per year in costs.
The former school closed to regular classes in 2007. The oldest section was built in 1915, with additions completed in 1939 and 1957.
The sale comes on the eve of an anticipated pitch for a referendum that would potentially enable the district to build a new high school on a still-to-be identified site.