The stately old brick building held luxury townhouses near Duluth's bustling downtown more than a century ago.

But like so many structures in the Lake Superior city, the Pastoret Terrace saw years of decline and deterioration, dwindling from high-end residences to dozens of smaller apartments to an abandoned, graffiti-filled blight.

Now, city leaders say, it's prime time for development in that spot, which sits a block uphill from multimillion-dollar renovations at a historic theater and new businesses on re-energized Superior Street. Duluth's leaders are aiming to spread the revitalization from the city's already-transformed pockets, going from rusted industrial town to vibrant destination.

The Duluth Economic Development Authority bought the parcel from the state and St. Louis County for a reduced price of $75,000 after it went into tax forfeit. The authority is inviting developers from around the region to submit proposals to either renovate the historic structure or tear it down and build something new there and possibly on surrounding parcels.

"This is the time to get into the changing market and be a part of history," Mayor Emily Larson said. "This is a premier redevelopment opportunity in Duluth."

Constructed in 1886 by Michael Pastoret, the three-story building first held six luxury townhouses. It was later converted into 50 apartments and had a tavern on the lower level. A fire in 2010 left the building vacant, drawing squatters and crime. It went into tax forfeit this year.

An 1880s photo shows the Pastoret Terrace building, which started its life as luxury townhouses and later was broken into rental units.

The economic development authority is offering the property for a negotiated price to the right project developer, and leaders say other funding from the government could be available for parking structures and large redevelopment. The property is zoned for mixed downtown development, allowing for up to 15 stories adjacent to the sidewalk.

In its request for proposals, the authority suggested its three development preferences: restoring the building to housing or mixed-use; demolishing the building and constructing a new housing or mixed-use building; and renovating or demolishing the building and developing the entire lower and/or upper block, including garage parking.

While much of Duluth's renovations have improved historic buildings, Larson said preservationists acknowledge that might not be best for the Pastoret building.

"There has been recognition that this may not be one of the sites that we can actually save," Larson said. "This building is very far eroded."

On a 14,000-square-foot parcel, the building takes up about a sixth of the block at E. 1st Street and N. 2nd Av. E. Down the block next to it are some empty parking lots and a small one-story building. City officials said they've talked to owners of those parcels, who are interested in selling.

Duluth has been experiencing a housing shortage, officials say, with the overall housing vacancy rate for the city at 3.3 percent, and the downtown/Central Hillside vacancy rate at just 1.6 percent.

Officials said they believe there will be a lot of interest from people who want to live near the revitalizing downtown, in particular, with restaurants, brewpubs, theaters, hotels and retail nearby. The Pastoret site is about two blocks from Lake Superior and the city's Lake Walk trail.

There are waiting lists for people trying to get into existing housing units near downtown, said Heather Rand, the city's director of business and economic development.

"Our sense is there's quite a demand for people who'd like to live in downtown Duluth," Rand said. "We think it's going to be a great opportunity for somebody."

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