Costly upgrades to a city-owned building on the Maine State Pier in Portland are at the center of negotiations over future use of the building as an incubator for ocean-related businesses.

A group of international and local investors wants to transform the second floor of the former municipal transit shed into a home for up to 18 marine-related businesses. The project has drawn interest from Icelandic entrepreneurs, who with their ambassador met with city and state officials and business leaders on Tuesday at a reception intended to deepen the relationship between Maine and Iceland.

Portland officials and proponents of the proposed New England Ocean Cluster have been discussing lease arrangements for the building for months behind closed doors, but neither side is ready to reveal details. What has emerged, though, are high renovation costs, particularly for adding a new entrance and stairwell to the second floor. The current entrance is located behind a security fence and is off-limits to the public.

The rehabilitation costs are too high for the backers to absorb on their own, said Patrick Arnold, a South Portland man who is one of the investors in the proposed New England Ocean Cluster House.

“That property is in need of collaboration,” Arnold said.

He said he hopes a deal is reached with the city in time for construction to begin this summer.

Arnold is partnering with Icelandic businessman Thor Sigfusson, who owns a similar incubator – the Iceland Ocean Cluster in Reykjavik, Iceland’s capital. The Iceland facility, which was established in 2012, now hosts 50 businesses and is expanding, Sigfusson said.

Eighteen businesses have expressed interest in locating their operations in the former transit shed on the Maine State Pier. The 30,000-square-foot space would include shared spaces to foster an exchange of ideas, Arnold said. He identified only one prospective tenant, Ocean Solutions, an Icelandic company that uses new technology to dry and process waste from fish processing plants for use in other products.

Greg Mitchell, Portland’s development director, said the city wants the project to succeed because it will attract businesses that will add new energy to the waterfront.

“This is nothing short of phenomenal in bringing us into the international scene with a brand that recognizes and supports Portland’s waterfront,” he said.

Any deal would need the approval of the City Council.

One potential source of funding for the Maine State Pier project: $7 million in state bond funding approved by Maine voters in November, Mitchell said. The money must be used to enhance Maine’s marine industry and requires a 100 percent matching grant. It’s a competitive grant and applicants must be a coalition that includes a marine research entity and a community-based organization.

Mitchell said architects are still working on the design and have yet to develop a cost estimate for the transit shed’s rehabilitation. The first floor is partially occupied by Ready Seafood, a wholesale lobster company. The shed was constructed in the 1920s when the 1,000-foot-long pier was built.

DEEPENING TIES

On Tuesday, Iceland’s ambassador to the U.S., Geir Haarde, and U.S. Ambassador to Iceland Robert Barber attended a public event at the U.S. Custom House in Portland intended to show support for the project as well as the growing economic and cultural ties between Mane and the island nation of 325,000 people.

That relationship deepened two years ago, Haarde said, when the Icelandic steamship line Eimskip made its “masterful move” to relocate its North American headquarters from Norfolk, Virgina, to Portland.

He said the Icelandic government wants to encourage more business and cultural exchanges between Maine and Iceland.

“We want to make things evolve,” he said.

Iceland is making an effort to establish business ties in New England, particularly in marine-related enterprises, said Brian Beckmann, spokesman for the U.S. Embassy in Iceland. He said the two ambassadors, Barber and Haarde, met with officials in Gloucester, Massachusetts, on Monday and will meet with officials in New Bedford on Wednesday.

On Tuesday, the group also toured of the International Marine Terminal in Portland, the Brunswick Landing campus in Brunswick, and the Peary MacMillan Arctic Museum & Arctic Studies Center at Bowdoin College. The group also met with Gov. Paul LePage in Augusta for an hour.

Beckmann said there is noticeably more enthusiasm about Iceland in Maine because of Eimskip’s presence in Portland.

“Eimskip provides a platform for investment,” he said. “It has really brought things together.”

Ari Jonsson, president of Reykjavik University, and five students from the university also attended the reception. Jonsson said the university, which has 3,700 students, is looking to develop exchanges of students and professors with colleges and universities in Maine.

“We need to get together to figure out how we can work together,” he said.

While other states offer more glamour and better weather, Maine is a good fit because of its climate and small population, said Rebekka Gunnarsdottir, 23, who graduated last year from Reykjavik University with a degree in business management.

“We are used to the cold. It doesn’t matter,” she said. “This is more like home.”