What's Up With Uptown?

Like a boreal forest regenerating after a fire, Calhoun Square was born in flames. On June 26, 1975, the Thirty O Five Building at 3005 Hennepin burned to the ground. After the fire, Martha Head, who represented the Junior League of Minneapolis—one of the building’s tenants—on the newly formed Hennepin–Lake Business Association, got the association’s consultant, Ray Harris, to help find the League a new home. Shortly afterward, the Minneapolis Public Schools closed Calhoun School, which also occupied the block. Recalls Harris, “When the school board decided to sell the school, Martha and I said, ‘Why not make a proposal [to develop the corner]?’ ”

It took five years to run the gauntlet of neighborhood opposition—the corner drugstore hung DUMP UPDALE signs in its windows, a jab at the “mallification” of the mom-and-pop urban corner—but by its 1984 opening, Calhoun Square had literally absorbed its opponents. The mall may appear to be a single building; but it actually incorporates three original structures: the old drugstore, which now houses Figlio and The Independent; a bowling alley, which became Odegaard Books and later Borders; and a third building, in which Kitchen Window is now located.

Today, Calhoun Square’s top product is butcher paper, since so much of it covers up once-thriving storefronts. The low point may have been last Christmas, when a liquidator vended piles of $5 pajamas and sweats where Borders once stood. Two decades after the controversy, irony abounds: Neighborhood activists wish for nothing more than the mall’s good health in the wake of a bizarre skein of ownership changes that left the place rudderless and increasingly without tenants. They even lament the loss of reviled chains such as Borders.

In April, the Star Tribune twisted the knife, arguing that the Calhoun Square contagion was spreading throughout Uptown, noting the exit of longtime draws The Gap, reliable franchises Panera Bread and Cold Stone Creamery, and local originals Josi Wert, Gabriella’s, and Tibet’s Corner. As reporter Chris Serres artfully observed, Calhoun Square was once so hip Prince wrote a song about it (“It don’t matter clothes U’re wearin’/Or your hair/If U’re freaky, they don’t care . . . Meet me there/If U dare/Calhoun Square”). Another line: “Don’t be shocked 2 see your mother,” gives a nod to the indisputable fact that two generations have honed their funkiness in Uptown. There’s a little Uptown in most of us, but Uptown seems to be at a crossroads. What will it take to make it great again?

When seventeen-year-old Billy Rae Deshawn Johnson gunned down twenty-five-year-old grad student Michael Zebuhr a half-block south of Calhoun Square in March 2006, the tragedy also became one of Minneapolis’s costliest murders. Ross Lewis, owner of The Great Frame Up next to Calhoun Square, says of his business, “Everything, all of a sudden, dropped 50 percent.” Neighbors told him their sales were off 20 to 30 percent. Phil Roberts, Parasole chairman and CEO, whose holdings include Figlio and Chino Latino, says the murder resulted in “about a 7 percent hit that lasted well into the year.” A month after the slaying, Borders—Calhoun Square’s biggest draw—was gone. Next to depart was longtime tobacconist Golden Leaf, Ltd.

It was a huge comedown from just two years earlier, when Harris and Martha Head and her husband, Douglas, put Calhoun Square up for sale (Harris owns 50 percent; the Heads own 50). The mall had its struggles—second-floor space had long gone begging—but the trio received twelve bids and reaped $28.1 million, according to county records. Harris says local bidders came close, but he thought Cincinnati-based North American Properties would do a good job “managing and maintaining the excitement level of Uptown.”

Harris says he was shocked when, just a few months after the sale, North American divested its Minnesota properties. Jay Scott, North American’s local representative, stayed with the project and formed his own company, financed by giant Des Moines–based insurer Principal Financial. Scott then went on a buying spree. According to the county, Principal paid $15.5 million for a hodgepodge of other parcels on Calhoun Square’s block, including the former Music Go Round site at Lake and Girard and the buildings housing The Lotus and Orr Books fronting Hennepin. Stuart Ackerberg, Uptown’s largest property owner and a losing Calhoun Square bidder, says the purchase price was “top dollar—beyond top dollar.”

Principal had upped the ante, and took a big gamble to pay it off. The bet: condos, 108 of them, priced from $200,000 to $700,000. The timing stunk: As the project wound its way through neighborhood meetings and city approvals, the condo boom busted. Bay Street Shoes & Accessories owner Darrel Besikof, an original Calhoun Square tenant, said condos became a fatal problem because Scott (who didn’t return calls for this story) never had a real plan. “They got the city to sign off on the project, then they told us the preliminary costs came in high, so they had to rethink it,” says Besikof. To buy time, Scott put existing mall businesses on month-to-month leases—which, according to Besikof, resulted in too much uncertainty for merchants who must order their inventory months in advance.

Borders “wanted a two-level bookstore, which would have really helped solve the second-floor problem, but they got tired of waiting,” he notes. Besikof believes Scott “wanted to chase out tenants, to have a clean slate.” Lewis’s ten-year-old frame shop became collateral damage; it closed this spring. “We had eight good years and two lousy ones,” he says. “I attribute most of that to the mismanagement of the management company.”

No one denies Calhoun Square’s struggles. But some Uptown folks say the bigger gloom-and-doom picture is media hype.

Aaron Rubenstein is no Babbitt. He’s the zoning chair of CARAG, the neighborhood group that includes Calhoun Square and has cast a critical eye at local development. Nevertheless, he says, “what tweaked me about the Strib story is that the day after it ran, they did a very positive story on the two hotels scheduled to open here. It’s like the Strib was schizo—one day, Uptown is headed down the toilet; the next day, it’s headed for stardom.”

The story also omitted the “why” behind many retail departures: redevelopment. For example, Tibet’s Corner closed so that clothier North Face could build a sparkling new “entertainment-retail” facility next to Urban Outfitters. Josi Wert, which was located just east of the Lagoon Theatre, closed because of MoZaic, The Ackerberg Group’s $150 million development featuring a ten-story condo tower, retail, a Graves hotel, 800 underground parking spots, a bridge over the Midtown Greenway, and a public plaza. Panera Bread was quickly replaced by Amazing Thailand, a locally owned restaurant that—unlike its cookie-cutter predecessor—is as vibrantly decorated as some of the human peacocks on the street.

The one-step-backward/two-steps-forward pattern was repeated less than a month after the story ran. The national chain American Eagle Outfitters announced it would close its doors in the former Pier 1 space after just a year. Another resounding failure? Not exactly; its replacement, American Apparel, is the buzz-worthy retailer of the moment and will open next month. And even better news is on the way: Victoria’s Secret will take over the dormant Gap space and debut a “Pink” concept targeted at college-age women, according to commercial real estate sources.

Jeff Herman of Minneapolis-based Urban Anthology, who brokered the American Apparel, North Face, and Gap deals, says solid fundamentals overcome dire circumstances. “When you look at commercial corridors, you ask, ‘What is the foundation?’ ” he observes. “The Uptown area has amazing housing stock—as upscale as it gets, yet as creative as it gets. You have mansions, and you have houses chopped up into six units with twelve people in them, full of young people on their way up. Forty percent of the [metro’s] creative services industry lives around Uptown. The lakes are the third-biggest tourist draw in the state, behind the Mall of America and, believe it or not, Cabela’s.”

When The Gap opened its first nonmall Minnesota store in Uptown in 1992, it was the American Apparel of its day. By 2007, the chain wasn’t just failing at Hennepin and Lake—it had closed 300 of the 1,600 stores it operated in 2002. Express, a women’s apparel store in Calhoun Square, is expected to leave. It also has financial troubles: Limited Brands, its owner, is struggling.

What’s helping Uptown stay on its feet, Herman says, are unique retailers who know that the area is still the best place for urban retail concepts. Uptown is now a beauty mecca, he argues: M.A.C. cosmetics, kitty-corner from Figlio, is a major success, as are many spas and high-end clothiers, such as Intoto. Chains that everyone thinks are independents—such as Paper Source at 31st and Hennepin—are thriving. When it comes to  the endless argument about chains versus independents, Herman is agnostic. He thinks what matters are exclusivity and community sensitivity, no matter where the headquarters are located. North Face and American Apparel plan their only Minnesota stores at Hennepin and Lake. While both could morph into a Gap, Uptown will reap several years of competitive advantage. And Herman adds that, unlike American Eagle or Express, the newcomers give local managers autonomy to customize and market their stores. “American Eagle did absolutely no marketing, none, to the surrounding populace,” he says.

The price of a prosperous Uptown is massive rent increases, often described as an impediment to local businesses and startups. The Great Frame Up’s Lewis, for example, saw his rent go from $3,000 a month in 1997 to $6,900 when he closed, a good chunk of the hike due to rising Minneapolis property taxes. The nut for the next newcomer will be bigger and harder to crack, but the economics still work for the right small business, says Tom Harlan, owner of Golden Leaf, Ltd. His tobacco shop has about $1 million in revenues, and just racked up its best sales since the cigar boom of the mid-’90s. That’s partly because in 2005 he moved across the street to a Hennepin storefront not controlled by Principal.

Calhoun Square’s bumbling may have trampled little guys such as Lewis, but in a typically 2007 way, the big money got out whole. In May, Principal signed a deal to sell its Uptown holdings to BlackRock, Inc., a global investment firm that manages $1.3 trillion worth of assets. BlackRock won’t name its price, but the best guess is in the high $40 millions—covering Principal’s land acquisition costs and expenses from its failed plan.

While Uptown denizens are relieved to have Scott and Principal out of the picture—and pleased that the shopworn shopping center still has substantial value—they are panicky over what BlackRock will have to cram into the site to make its investment pay off. Although the condo plan faltered, Scott raised the value of the two-story mall and adjoining sites by getting the city to exceed its four-story height guideline. The city council approved a plan featuring seven stories on the Figlio corner and five stories on 31st Street. But even with the zoning givebacks, the likely sale price doesn't make sense, says Ackerberg, who again bid unsuccessfully: “To me, there’s no logic in the sale price—everyone will tell you there’s no way that price works economically.”

BlackRock acquisitions director Ryan Smidt says he can’t comment about Calhoun Square’s future because the sale won't be closed by presstime. “Once the closing is behind us, we’ll be eager to talk about this exciting project,” he offers.

The company’s website provides some clues: BlackRock’s priorities for “Neighborhood and Community Centers” include “strong anchor tenants” and “a preference for market-dominant grocery and drugstore anchors.” Informed sources believe BlackRock will pursue tenants such as:

Trader Joe’s. Ralph Remington, one of the area’s city council members, says, “They definitely want to get into Calhoun Square because their St. Louis Park store is overburdened.” The problem: Trader Joe’s business model requires wine sales, but the city forbids competing liquor stores within 2,000 feet—which in Calhoun Square’s case already includes Hennepin–Lake Liquors. Remington says the city would have to change its “silly law,” which likely means overturning the limit citywide. He acknowledges that existing liquor sellers and neighbors worn out by the late-night boozing crowd might make that politically impossible.

Best Buy. The Richfield–based electronics giant moved out of the area a decade ago, but the former owners of the Music Go Round property had announced an “urban concept” for the site, which seemed to imply Best Buy’s return. Best Buy is not encouraging. Spokesperson Justin Barber says, “We’re actively looking at downtown,” while relegating Uptown to the less-active “we’re always looking for opportunities” category.

A fitness center. According to sources, LA Fitness—a competitor of locally based Life Time Fitness—is hungry to get into the area and could conceivably solve the mall’s second-floor traffic problem. “There’s more demand than the Y and Calhoun Beach Club can meet,” Ackerberg says. “It would be a good way to drive traffic into Calhoun Square.” Complication: Life Time Fitness, looking in the area (but reportedly not at Calhoun Square), could get there first.

A drugstore. Uptown has been without one since Snyders Drug closed in 2004. Rapidly expanding megapharmacy CVS is a logical possibility.

A bookstore. Barnes and Noble is interested. Sources say Borders, which hopes to sublease its downtown store, could return if it gets a bigger slice of the mall.

Ackerberg says another logical component is office space—he tried but ran out of time to secure local advertising powerhouse Colle McVoy as part of his MoZaic development. “The supply of high-end office space doesn’t meet the demand,” he argues. Real estate insiders say the development could include apartments, which have become the housing du jour following the condo bust, perhaps with some condos in the mix.

How long this will take is anyone’s guess. The good news is that some local brokers and real estate interests who worked on Scott’s plan are involved, reducing the learning curve for the new owners. The bad news is, those folks worked on Scott’s plan and it failed.

In the Ackerberg Group’s contemporary offices near Lake Calhoun, Stuart Ackerberg pulls out a paper map—it looks more like a place mat your kids get at a restaurant—of Uptown between 28th and 32nd Streets, from Lyndale Avenue west to Lake Calhoun’s shore. Many of the bigger parcels are marked in red; they’re labeled “potential projects.” Just across the Greenway from MoZaic is the “Acme Tag” site; developer Arnie Gregory says he will “definitely build housing of some sort” and is trying to encourage efforts to build a streetcar to connect with new housing going up near Lyndale. Another developer with similar intentions purchased the three blocks to the east, where Bennett Lumber was located. One block west of Calhoun Square is the Sons of Norway Building and another block west is Wells Fargo Home Mortgage; Ackerberg and others have tried to buy both.

Call it a realistic dreamscape: Stuff won’t sprout there overnight, but the influx of developer cash means things won’t sit still. But owning a plot doesn’t guarantee success, even for a second-generation developer such as Ackerberg, whom Remington calls the “king of Uptown.” More than half of MoZaic’s seventy condos are sold—an accomplishment postbust—but Ackerberg says that amounts to 42 percent of the “sellout value,” which is below the 50 percent his financiers need to approve groundbreaking for the building. Some details are in flux, but Ackerberg gestures at the map and insists MoZaic will begin to rise this year.

Uptown may be at the epicenter of creamy demographics, but it’s also at the crossroads of Minneapolis’s most active neighborhood groups, who see the same map Ackerberg does. The natives are restless and pushing the city to more effectively plan the area’s growth even as private capital floods in.

In response, city hall has initiated a “small area planning process” for Uptown and Hennepin Avenue north to Franklin Avenue. Small in area, but not in process. The exercise involves dozens of “stakeholders” and months of deliberations: Land use, traffic management, parking, transit planning, and streetscapes are all on the agenda.

Residents can be forgiven their skepticism because when it comes to developers, city hall has often rolled over like a pliant basset hound. One example: The zoning code requires city approval for anything over four stories; the city council rejected neighborhood opposition and approved seven for Calhoun Square. Ackerberg’s building will rise ten stories (although three floors were forcibly lopped off the original proposal).

Then there’s the area’s biggest growth industry: club-restaurants aimed at a younger, hard-drinking crowd. Nearly every liquor license was approved. Neighbors were long used to shoppers parking on their streets, but as retail struggled and alcohol replaced it, the crowd spilled out later and drunker. Ralph Remington, who lives near Calhoun Square, says, “It’s two at night, and you have twentysomethings stumbling back to their cars, talking loud. And then they get behind the wheel and drive away!”

Although CARAG’s Rubenstein says the height controversy prompted the small-area plan, consultants have floated early “case studies” with taller buildings throughout the area, though with more rhyme and reason. For example, allowable buildings would “step back” in height, appearing smaller from the street. Buildings on corners would be “primarily three to six stories,” with “taller mid-block buildings.” Around Hennepin and Lake would be a mix of retail, hotel, residential, and small-office uses; west toward the lake, “neighborhood scale” housing, retail, and galleries; east toward Lyndale, taller multi-unit housing with retail and offices. The carrot: More density leads to better transit, which means fewer cars in the neighborhood. Reality check: Metro Transit is cash-strapped and a new southwest light-rail line or a Greenway trolley is years, if not decades, away. Plans for Calhoun Square and MoZaic take no chances: Both include hundreds of new parking spaces. No one has a good way for decongesting traffic around major intersections. But point to any city’s most vibrant nondowntown commercial node—congestion inextricably comes with urban vibrance.

Rubenstein says neighborhood skeptics believe that the cash-strapped city’s priority is inevitably maximizing property taxes, but he’s not quite as cynical. “Some of us are saying we don’t want to fight projects on a project-by-project basis; it’s tiring and not helpful to the business community. I really think most people in the neighborhood understand Uptown needs to change and grow in order to succeed. BlackRock paid $40 million for Calhoun Square, so we’re not going to see parcels remain the same; it’s just not economically feasible. We hope to have a more collaborative approach.” He says the consultants might be wearing down residents’ antagonism toward height. And, of course, building taller might just be a good idea.

The process has churned up at least one nugget likely to stun anyone who’s driven around in circles looking for a place to park on weekends and summer evenings. “We found in our parking study that there’s more than enough parking in the lots, but they all have Cedar Towing signs on them,” Remington says, meaning they are restricted to certain tenants and uses and often empty. He’s not the first council member to advocate a shared system where the lots’ disparate owners pool their spaces. He also has a nightmare to wield in such a proposal’s defense: Michael Zebuhr had to park down a shadowy residential block instead of a well-lit lot where customer traffic was high.

Unlike a mall, Uptown is controlled by countless independent and sometimes eccentric business people who aren’t exactly team players. The Uptown Association, the business group that puts on signature events such as the sprawling Uptown Art Fair, has seen the departure of senior executives such as Ackerberg, Roberts, and Lunds' CEO Tres Lund. New executive director Maude Lovelle says, “Obviously, contributions from business are not what they used to be.”

Bay Street Shoes’ Besikof, with twenty-three years on the corner and some bile about former landlords, insists the storm will pass. “In retailing, you need to give people an experience—and let’s face it, Calhoun Square stopped giving people an experience a long time ago. It’s been a long time since we’ve had directed, committed ownership, and we’ve only done poorly because of that.”

He’s putting his money where his mouth is, and is talking to BlackRock about a Calhoun Square space that’s 50 percent bigger. “Principal grabbed defeat from the jaws of victory,” he notes. “It bought a building it needed to improve and did the opposite. From everything BlackRock has told me, you’ll see action fairly quickly [after the sale closes in July]. When it announces its first six tenants, businesses are going to stampede here. The neighborhood is still so great.” 

David Brauer, who lives about a mile from Calhoun Square, formerly edited Southwest Journal, the area's community paper. He writes regularly for Mpls.St.Paul and is the media analyst for Minnesota Public Radio.