As with many other relationships, committing to a historic preservation project is part romance and part reality.

When St. Paul-based developer CSM Corp. was courted by a firm that wanted to put a pair of ice-hockey rinks under the train shed at the long-vacant Milwaukee Road Depot in downtown Minneapolis, “we got caught up with the romance of skating rinks,” said CSM President Gary Holmes.

Holmes had driven past the decaying landmark for decades as various proposals for developing it fizzed and fizzled. Intrigued by the rink project, CSM agreed to go into it with two hotels, Courtyard by Marriott and Residence Inn. Some of the rooms would be in the former depot, the rest in new buildings at the site.

But reality eventually set in. The ice-rink operator abandoned the plans last year, leaving CSM alone on the project. Today, the development is at least $10 million over its original $50 million budget.

While parking and a figure-skating rink will open there next month, the hotels won’t be ready until June 2001 – missing the guaranteed burst of bookings from the NCAA men’s basketball Final Four that begins March 31 at the Metrodome.

In hindsight, CSM executives said they wish they had taken a couple more years to research the cost and scope of the massive project.

“There’s a good reason it sat for 30 years,” Holmes said.

Given the regions healthy economy and demand for well-located space, the Milwaukee Depot is one of several high-profile historic preservation projects underway or planned near downtown Minneapolis.

Another is the Minneapolis Armory, which reopened this year as a two-level parking garage. A Los Angeles company is finalizing plans to buy the building and retrofit for space to store telecommunications equipment.

Minneapolis-based Ryan Companies US Inc. is trying to rehabilitate both the Grain Belt Brewery and the Essex Building for architectural firm offices.

And there are several smaller projects, such as the proposed renovation of the Ivy Tower.

Developers who undertake historic preservation work often find the projects to be more expensive and time-consuming than conventional new construction.

Although federal tax credits and other public incentives can be available, there are limits to what can be done to historic structures. The greater degree of risk and the unusual nature of these projects can make lining up private financing more difficult.

“Every corner that you turn is a challenge. The key is how you deal with that challenge,” said Mike Kraft, vice president of architecture and interior design at Shea, a Minneapolis-based firm that has worked on the Milwaukee Depot, Minneapolis Armory and many other historic preservation projects.

The Right Use

One of the basic challenges of historic preservation work is determining how best to reuse an existing, and often troubled, structure.

At the century-old Milwaukee Depot, for example, the spacing of large windows on the upper floors meant that hotel rooms there had to be configured as oversized suites.

CSM also has struggled to find a restaurant to occupy the main floor of the building. That tenant, which will occupy up to 10,000 square feet, probably will have to embrace a train-themed décor.

The location of the depot development – at Washington Avenue near the 3rd Avenue Bridge – poses a leasing challenge. The complex is not in the midst of either the lunch business of the downtown core or the night-time entertainment options of the Warehouse District.

In contrast, the central location of the Minneapolis Armory lured parking operator Doug Hoskin to the project. A year ago, he bought the building at the corner of 5th St. and 5th Av. S. from Hennepin County for $2.6 million.

Hoskin since has spent another $1.5 million to spruce up the building’s exterior and update it electrical, plumbing and ventilation systems. The 340-space parking garage opened there in March, in part to generate cash flow to help fund improvements.

“As I got involved, I really became attached to the building,” said Hoskin, who had thought it would take as long as five years to settle on a long-term use for the structure. He was approached by more than a dozen groups, with plans including office, hotel and residential uses.

“Parking can sustain the building, but it isn’t the highest and best use,” he said.

A Los Angeles firm, PRD Catalyst, plans to pour a concrete floor that will add another level to the main room where the Minneapolis Lakers once played. It will create a total of 110,000 square feet of telecommunications storage space for lease to telecommunications operators, said Stephen Ovian, a vice president with the developer.

“The location and connectivity to fiber-optic cables makes this ideal for our use,” Ovian said. He said the firm will spend about $7 million on the project, including replacing the Armory’s roof and restoring a number of interior architectural elements.

Hoskin will maintain about 140 parking spaces in the basement of the Depression-era building.

Among the likeliest users of historic properties are businesses that have a creative focus. For example, the unique space needs of architectural firms make them good candidates to occupy vintage buildings, according to Ryan spokeswoman Ellen Breyer.

RSP Architects approached Ryan about the Grain Belt Brewery site in northeast Minneapolis, Breyer said. Another local architectural firm, Perkins & Will, expressed interest in the vacant space above the Local restaurant in the Essex Building on the south end of Nicollet Mall.

“We had tenants that wanted either the location, image or functionality of the sites,” she said.

The Unknowns

Even after the use of a historic building is determined, the suspense about what construction will reveal and the need for adjusting to such surprises are far from over.

“New construction, while it has a lot of unknowns, doesn’t have as many unknown’s as with a restoration,” said Jeffrey Laux, who recently purchased the Ivy Tower. He and a business partner also did historic preservation work at the Lumber Exchange building in downtown Minneapolis.

The preliminary plan for the Ivy Tower calls for converting the Narrow nine-story building near the Minneapolis Convention Center into space for catered events and business services center use. Laux also proposes adding a 40,000 square-foot office building to the tiny lot and buying the adjoining parcel for future office expansion. The added office space could dilute some of the higher expenses associated with historic preservation work, Laux said. He estimates that restoring the Ivy Tower and adding a small 12- to 16-story office building will cost at least $15 million.

The 16,000-square-foot local landmark has many issues that need to be addressed. For example, Laux said, there is a significant amount of asbestos in the building, including pipe insulation and floor and ceiling tiles.

Which a vacant piece of land, most questions can be answered after soil testing. An old building probably holds many more secrets, including hazardous waste and structural problems.

Developers embarking on historic preservation work must “presume a reasonably worst-case scenario,” Laux said.

But even with that kind of pessimistic assumption, hidden problems can add time and money to rehabilitation projects.

The steel train she truss at the Milwaukee Depot needed extensive re-welding, which wasn’t clear until the old roof was removed.

“You have to open it up and see what you’ve got,” Holmes said.

While stabilization work at the Minneapolis Armory was less eventful, therer still were surprises. A lack of hear in the building caused pipes to burst soon after the sale closed. And Hoskin said replacing the electricity and plumbing has cost about two-and-a-half times what he expected.

In addition to the physical issues that developers encounter with historic properties, there often are differing opinions in the community about appropriate uses for a structure.

In Minneapolis, for example, most exterior changes require approval by the city’s Heritage Preservation Commission. Its 10-member panel oversees nine historic districts with about 2,000 buildings. There also are about 130 buildings in the city that are individually designated as historic, said Amy Lucas, Minneapolis’ preservation planner.

The city’s preservation commission also monitors new construction in historic districts, making sure that it is compatible with historic structures. For example, there were design and set-back standards for the new hotel buildings on the Milwaukee Depot site.

Besides the city’s preservation commission, the State Historic Preservation Office also has oversight on some projects, such as the Armory.

At the Milwaukee Depot, the developer tried about 10 shades of paint before there was a consensus on the proper tint of gray for the train shed truss.

“There’s a huge community ownership in historic structures,” said Dave Carland, CSM vice president of development. “For better or worse, everyone has a vision of how to do” renovation work.