Duluth's prime hilltop former school site back on the market

DULUTH — For the second time, a developer has backed out of a purchase agreement to buy Duluth's former Central High School property, a hilltop gem with views that span the city.

The district said Monday night that Saturday Properties would not proceed with its purchase of the 55-acre site, which it agreed to buy in July for $7.4 million.

"While we are disappointed by this news, we are completely confident that the property has unique value for a future developer," Superintendent John Magas said in a news release.

The dissolved agreement is a blow to the school district, which has struggled to close on the property for more than a decade and recently has been paying annual maintenance costs of $105,000.

Saturday Properties said it no longer saw "a path forward" in developing the site, blaming rising construction costs, market conditions and city expectations that created "too many barriers to ensure success of housing on this site."

In February, the developer revealed plans for nearly 450 units of housing, a park and perhaps a brewery and outdoor amphitheater with ground to be broken at the end of the year. Saturday Properties also bought downtown's Historic Old Central High School, the 129-year-old former high school that has housed school district offices and alternative education classrooms in recent years. That $3 million sale closed last month and is not affected.

The city of Duluth, which has worked closely with Saturday Properties, said Tuesday that it has "done everything we can to facilitate and support this development on behalf of the community" and will continue to work with the school district on future plans.

But the city isn't able to "exempt the project from legal requirements in statute, code or ordinance associated with the size or scope of the project," said chief administrative officer Noah Schuchman.

The district still plans to demolish the centrally located 50-year-old school this year and develop the back section of the property for its administrative and transportation buildings. Construction is expected to be done in 2023.

District leaders ensured its plans for the Central site would still proceed if the sale faltered, said School Board member Kelly Durick Eder.

"We know these development deals are complicated, and we knew it was a possibility," she said, but the district is in a better place than when the property first listed.

The school board in 2021 voted to levy local taxpayers $31.5 million to pay for demolition and its new buildings.

The school closed in 2011 as part of the district's long-range facilities plan, known as the Red Plan, which downsized schools and replaced decaying buildings. It was first on the market for $13.7 million. A $10 million deal with a Chicago-based developer fell through in 2015 because of the "extraordinary" costs involved with developing the difficult site, with its rocky, marshy landscape. Those are features that have deterred other serious buyers, the district's broker has said.

In 2016, the K-8 Duluth Edison Charter Schools offered the district $14.2 million to turn Central into its own high school. The school board, which has a policy not to sell properties to competitors, essentially rejected the offer when it voted against waiving that policy. Chief concerns were fears of ongoing enrollment losses and the effect on the public school system.