Minneapolis's Block E already failing?

trailerkid · Post by **trailerkid** » Wed Jul 02, 2003 11:09 pm

As a peer city, many had their eye on Minneapolis' Block E retailtainment project downtown across from Target Center. The Star Tribune ran a story on the front page detailing how the project is not doing what it was supposed to in attracting destination retail (Niketown, Virgin). Basically Block E is becoming a neighborhood shopping center with stuff like Applebee's, a drug store, theaters, Borders and Jimmy John's mixed with destination stuff like Hard Rock and Le Meridien hotel. Kinda like half Ward Parkway Center and half Plaza. The city has plugged $39.1 million into this project which looks to be severely misguided. It marks the latest in a long line of failed/struggling retail projects in downtown Minneapolis (Gaviidae, Conservatory, City Center, etc.) By the way, for those of you interested, the city subsidized $62.1 million for that downtown Target store(still want one?) See the article for yourself...

E, as in elastic: City's hopes for Block E had to bend in face of economy, downtown's troubled retail history

Terry Fiedler
Star Tribune
Published 06/29/2003

Rich and Megan Schlueter wanted to do something special for their eighth wedding anniversary, so the Roseville couple headed to downtown Minneapolis' new Block E complex for a Saturday night date.

At the Hard Rock Cafe they immediately got a seat on the patio next to First Avenue. Afterward, it was on to the neighboring Sega GameWorks, a two-level video and game center, where there was no wait for the snowmobile and motorcycle simulators.

The Schlueters had a nice time, but the biggest impression the thirtysomething couple may have taken away was what they didn't see -- large numbers of people.

"There's not much of a crowd," Rich Schlueter said.

Block E, Minneapolis' long-planned attempt at remaking an entire downtown block into an entertainment complex, is still in the process of opening all its stores and clubs. It's clear, though, that Block E is a compromise of the city's original vision for a unique "destination" site that would bring and keep people downtown.

Developer Dan McCaffery has attracted movie theaters, bars and a four-star hotel. He has also signed a Snyders drug store, an Applebee's and sandwich shops to get Block E fully leased.

Retail consultant Jim McComb thinks the difficulties McCaffery has encountered reveal a disconnect between how Minneapolis is perceived by top retailers and how city officials view it.

"Our city fathers are out of touch," McComb said. "Their perception is that downtown Minneapolis is a great retail center. As I look at the market and trends around the country, I don't think retailers share that view."

McCaffery acknowledges some difficulties in finding tenants and that Block E isn't exactly as he would have it, but said he's still "thrilled" that 95 percent of the 220,000 square feet of retail and entertainment space is leased less than a year after opening.

"I'm thrilled with the performance because I don't believe my job was made particularly easy by the perceptions of the downtown," McCaffery said.

Some upscale national retailers and restaurateurs, McCaffery said, simply won't consider Block E because of Minneapolis' less-than-stellar retail track record, which includes the failed Conservatory complex and struggling retail in the City Center and Gaviidae complexes near Block E.

"Cheesecake Factory? I've been fortunate to have it in two of my projects, but Abe Lincoln couldn't have talked Cheesecake Factory into coming into downtown Minneapolis right now," he said.

Restaurateur Wayne Kostroski, an owner of the upscale Goodfellow's downtown and a developer of restaurant concepts such as Tejas and the Bar Abilene, thinks Block E is more like an F.

With the exception of the new Le Meridien hotel, McCaffery has totally "missed the mark" at a "key location," Kostroski said.

"It's probably the biggest disappointment for any good larger purpose that I've seen in the downtown in the last 20 years," he added. "The vision is blurred. Somebody needs glasses."

The city of Minneapolis has bet $39 million in the form of land and tax-increment financing for the three-story complex and a 550-space parking ramp. As a result of the subsidy, Block E will be off the city's sales and parking tax rolls for 25 years.

It's not the biggest downtown retail subsidy in recent years -- the flagship Target store got $62 million -- but Block E has had a profile like few other projects in the city's history, in large part because plans for the space have been under discussion since the '70s.

In the early days, the goal seemed as much about cleaning up downtown as making it a destination. The old Block E sported Moby Dick's, the Hennepin Avenue bar famous both for criminal activity and as the home of the "Whale of a Drink." A number of adult entertainment enterprises also made Block E home.

During the '80s and '90s, a grander plan took shape. Block E was to become the entertainment-themed link between downtown and the Warehouse District, with city officials and others envisioning customers elbow-to-elbow at the hottest retail and entertainment properties -- Niketown, Virgin Records, ESPN Zone.

The attractions would be unique within the Twin Cities and put Minneapolis on the map with other cities having vibrant retail and entertainment areas.

After a number of trial balloons, the city completed a development contract in 2000 with McCaffery, a well-regarded Chicago developer who previously worked in Minneapolis for what is now Brookfield Properties. McCaffery, who has done retail and residential projects everywhere from suburban Washington, D.C., to San Francisco, lined up $58 million in financing from ULLICO Inc., the former Union Labor Life Insurance Co., to fund most of the project.

Expectations were high.

"Expectations have evolved that somehow Block E was supposed to save downtown," said Tom Hoch, president of the Hennepin Theatre Trust, a group that promotes downtown theaters. "Those expectations are completely unrealistic, if in fact the downtown needed saving."

McCaffery said the lineup at Block E is shorter on star power than some hoped for in part because he chose to play to the growing number of downtown residents. A 15-screen Crown movie complex is one of the anchor tenants, occupying more than 80,000 feet.

McComb said the theater was a no-brainer: The rule of thumb is that it takes 10,000 people to support one screen, and Minneapolis has few first-run venues despite a population of 382,000.

Officials of Connecticut-based Crown did not return calls about the performance of their Minneapolis theaters.

Another tenant, the Hard Rock Cafe, is more in keeping with the original vision for Block E, though it doesn't match the Hard Rocks that Minnesotans will remember from trips to Orlando and elsewhere. The 8,000-square-foot restaurant, which opened in September, is about a fifth the size of the Orlando outlet, and half as big as the Hard Rocks in many other large cities. Hard Rock said it opens the small-format stores in "less tourism-dependent" markets.

Sega GameWorks, a video arcade, nightclub and restaurant, was also the first of its kind in the Twin Cities market. One of 14 worldwide, the two-level, 25,000-square-foot store has two bars, a restaurant and the chain's first 10-lane bowling alley.

By far the most high-end aspect of Block E is the 225-room, $60 million Le Meridien, built by Graves Hospitality after McCaffery sold the development rights.

"We needed something with some kick-ass power to keep the energy level up for the elitists. That's my nod to them," McCaffery said.

Other elements are anything but distinctive: a Borders books store, one of eight in the Twin Cities area, and the Applebee's, one of 48 in Minnesota and western Wisconsin.

McCaffery said the complex is negotiating to add a comedy club, which he wouldn't name, has signed a nightclub called Escape, and a one-of-a-kind Italian restaurant called Bellanotte.

Assessing the tenants, consultant McComb said GameWorks could be considered "a score."

"Hard Rock is choosy, though it covers a lot of markets. A bookstore is an obvious tenant."

The Snyders doesn't seem to fit the original plan, but McCaffery called it "a coup."

"I wanted a Snyders and a grocery store," he said, mentioning another departure from the city plan.

The Applebee's, he said, is turning "fantastic numbers," capturing big lunchtime crowds and evening traffic from events and movies.

"There's a perception that the only thing worthwhile is an elite-ery vs. an eatery. But month after month, year after year, some places have proven that people like to eat there," McCaffery said. "Which is more appropriate for Block E."

McComb said a number of issues hurt Minneapolis in the competition with other markets for top stores and restaurants: It won't subsidize individual retailers, and it doesn't offer the amount of street frontage that has become popular in the industry. The well-known struggles of the City Center and Gaviidae don't help, either.

Andrea Christenson, a retail specialist at the real estate brokerage Colliers Towle, said she's confident Block E will be a success long term, though McCaffery had to make some aggressive deals to fill the complex.

McCaffery said he "believes in Minneapolis" but thinks it has to face facts about the design of its downtown that discourage retail.

The closed-to-cars Nicollet Mall creates an unusual traffic grid and the mall itself is a "dismal failure," he said.

"All great shopping streets have traffic."

Meanwhile, the skyway system splits traffic and robs street-level retail of vitality, he said.

"The streets of Moscow are full. They don't have skyways, and it's colder there."

Nevertheless, Block E's anchors say they are happy.

Clint Manny, vice president of marketing for California-based GameWorks, said the location is exceeding expectations.

Minneapolis is a "real seasonal business. As soon as the weather is nice, people want to be outside. If it's too hot or to cold, we see spikes in business," he said.

Craig McIntyre, vice president of design and construction for Hard Rock, said the company is pleased with its Minneapolis restaurant.

"We came out strong in Minneapolis, exceeding expectations, and we've settled back to where we want to be," he said.

At Le Meridien, general manager Ben Graves said occupancy was about 70 percent last week. Average downtown hotel occupancy is 63 percent. The hotel opened two months ago with introductory rates of $249 a day during the week and $189 during the weekends. Rates are expected to climb to as high as $349 within a few weeks.

Kirby Payne, CEO of the Minneapolis-based American Hospitality Management Co., sees "challenges" for Le Meridien. The hotel faces away from the central business district and toward the Target Center, which isn't expected to bring it a lot of business.

Steve Sherf of GVA Marquette Advisors said that after airport hotels, high-end, urban center hotels have been the hardest hit by the economic downturn. However, he believes business travel is poised for a comeback.

"Their timing is good, believe it or not," Sherf said.

In front of Le Meridien on a recent night, a Porsche and a limo sat in wait of their well-heeled masters. There appeared to be little overlap between the hotel patrons and other Block E customers.

"We enjoy having it as a neighbor," said hotel general manager Graves, but "our clients are definitely a different demographic from the rest of the block."

Terry Fiedler is at tfiedler@startribune.com.

Post by **dangerboy** » Wed Jul 02, 2003 11:21 pm

Seems like lots of cities have a hard time learning that it is difficult for the government to create these mega destinations from scratch. Especially downtown retail.

If the city focuses on the basics like zoning, policing, and infrasturcture, then businesses will come to these areas on their own. Look here in KC at the Power and Light District versus the Crossroads or West 39th St. These places were not designed to be regional destinations, but they became that with little to no help from the city, and without the big chains that have city councils starstruck.

KCgridlock · Post by **KCgridlock** » Thu Jul 03, 2003 12:40 am

Thanks for the update. I agree with trailor, but KC needs to find a right mix of fabricated (arena district) and real (freighthouse district). Hope the city is looking at other cities and with do this right.

ShowME · Post by **ShowME** » Thu Jul 03, 2003 6:59 am

Figures the most successful part of the project is Applebee's. Imagine a metro area just barely larger than St. Louis but with twice as many suburbs. That's MSP. Your right Trailer 62 mil from the city for a downtown Target. What a damn shame to since Target is based out of MSP. The only advice I can give Kansas City is to just keep on focusing on downtown and urban core housing and maybe one day unique and upscale retailers and the city will come up with a plan for a new development closer to downtown. Until then I'll take the Plaza which is a better project than any city similar in size in the midwest has.

Post by **mean** » Sun Jul 06, 2003 5:56 pm

What will hopefully happen is that people will continue to move downtown while the city comes up with stupid ass expensive megaplan after stupid ass expensive megaplan, and by the time they (the city) get around to actually building anything, nothing will need to be done because people will have already done all the work themselves. City Hall is interested in money (i.e. pleasing corporations) and votes (i.e. pleasing corporations) first, and I don't see that changing anytime soon. Megadevelopment pleases corporations with its spectacularly huge budgets and long development times, thus a megadevelopment is what we "need" according to the people who want to please corporations.

But it's not what we need, not at all, and hopefully this business in MSP wakes some people up to the reality that spending lots of money on development is the job of developers -- not taxpayers -- and no matter how good City Hall says a megadevelopment is while they're selling it to you, they're really only interested in being able to say they "brought development" to an area while blindly handing your money over to consultants and contractors and developers and builders et al.

I mean, come on, what is holding downtown back? It is obvious that the PEOPLE want something to happen. They're slurping up condos like candy, and businesses will inevitably follow wherever people go. More people = more density = more opportunity to make money = more businesses. I submit that the city is and has been willfully stalling development "by the people" (smaller businesses, retail, restaurants, etc) with red tape so they can develop what they want (arena, megadevelopment, big bux for big companies) rather than what would otherwise happen naturally (W. 39th St, Westport). At the risk of sounding like I need a tinfoil hat, this is truly what seems to be happening, and it's extremely frustrating to watch.

QueSi2Opie · Post by **QueSi2Opie** » Tue Jul 08, 2003 5:19 pm

I was in Minneapolis a couple of years ago and enjoyed the downtown area around Nicolete Mall (pedestrian friendly/rapid transit/retail district). Downtown Minneapolis would be a beautiful place to live and shop, but is it possible that their core is already saturated with retail development versus housing? Retail districts were in the Minneapolis core before "E"...whereas KC has nearly no downtown retail at all.

QueSi2Opie · Post by **QueSi2Opie** » Tue Jul 08, 2003 5:21 pm

In other words, don't jump to negative conclusions.

trailerkid · Post by **trailerkid** » Wed Jul 09, 2003 9:12 am

Uhh...."saturated" with retail? Did you go in Gaviidae or City Center? Those places are struggling big time. Retailers know that downtown is not where they want to be. Downtown Minneapolis has many anchors (Saks, Neiman's, Dayton's, B&N, Target) but little filled in after that. KC's retail engine, which is the Plaza, wipes downtown Minnapolis off the map.

Let's remember that it is the Star Tribune (newspaper of the Twin Cities) that is doubting the validity and quality of Block E, not me. I really had no idea this project wasn't going as expected until I saw the front page spread. I saw the actual print copy and the way they presented it they did everything (compared it to now torn down Conservatory shopping center) but say it was a failure.

QueSi2Opie · Post by **QueSi2Opie** » Thu Jul 10, 2003 11:39 am

trailerkid wrote:Uhh...."saturated" with retail? Did you go in Gaviidae or City Center? Those places are struggling big time. Retailers know that downtown is not where they want to be. Downtown Minneapolis has many anchors (Saks, Neiman's, Dayton's, B&N, Target) but little filled in after that. KC's retail engine, which is the Plaza, wipes downtown Minnapolis off the map.

Let's remember that it is the Star Tribune (newspaper of the Twin Cities) that is doubting the validity and quality of Block E, not me. I really had no idea this project wasn't going as expected until I saw the front page spread. I saw the actual print copy and the way they presented it they did everything (compared it to now torn down Conservatory shopping center) but say it was a failure.

The Plaza? I was comparing downtown Minneapolis to downtown KC in terms of retail. We need a downtown retail & restaurant district. Minneapolis already had them prior to Block E. There's no reason to shoot down a downtown KC retail district based on the success of Block E in Minnesota. We should make a complete pedestrian friendly district offering not only unique experiences for visitors, but also more common places for residents to dine and shop.

trailerkid · Post by **trailerkid** » Thu Jul 10, 2003 3:26 pm

I guess I don't see the Downtown KC vs. Downtown Minneapolis comparison being that KC has no major retail within the loop. KC's retail hub is the Plaza. Minneapolis's retail hub is questionable as downtown hosts many "Plaza-like" upscale chains (Saks, Cole Haan) but has failed to bring in a quarter of the number of upscale specialty chains as the Plaza. There is no way downtown (loop) can succeed in the Plaza's upscale game.

I have no problem with a "destination" downtown retail district. But it must be a true destination. The point of this post is to show that Block E has had mixed results creating a destination environment. Let me break it down...
Le Meridien + Gameworks + Hard Rock = destination
Applebee's + Borders + Jimmy John's = Independence Center parking lot

It's a culture clash.

The idea is parallel to Village West in KCK. If downtown is to create an retailtainment district it MUST be bigger and better than anything in the metro or in the region. If we're not prepared to go big or go home, then the district will fail. It is not a neighborhood center, but it is a knock-your-socks off center. If we can't get Virgin, Niketown, ESPN Zone, Hard Rock and other mega-retail we should stick to stuff like Eckerd, Applebee's and T.G.I. Friday's-- which isn't bad if that's what downtown needs. KC's had enough mistakes and it's time we come up with a successful plan.

KCPowercat · Post by **KCPowercat** » Thu Jul 10, 2003 3:29 pm

Gameworks would be one of my #1 priorities....and House of BLues

Post by **dangerboy** » Thu Jul 10, 2003 4:04 pm

I second that GameWorks. Sadly HOB doesn't seem very likely, since they recently pulled out of the KC market. We used to have a HOB affiliate that managed places like the Uptown Theater and the City Market concerts, and that was kindof a stepping-stone towards a full-fledged HOB club. Unfortunately HOB sold the KC operation to Clear Channel.

KCPowercat · Post by **KCPowercat** » Thu Jul 10, 2003 4:07 pm

didn't know that....it always seemed that HoB wanted to be in the market...I still drive by Empire theatre and imagine them there.

mpls · Post by **mpls** » Fri Aug 29, 2003 12:59 am

trailerkid wrote:Uhh...."saturated" with retail? Did you go in Gaviidae or City Center? Those places are struggling big time. Retailers know that downtown is not where they want to be. Downtown Minneapolis has many anchors (Saks, Neiman's, Dayton's, B&N, Target) but little filled in after that. KC's retail engine, which is the Plaza, wipes downtown Minnapolis off the map.

Let's remember that it is the Star Tribune (newspaper of the Twin Cities) that is doubting the validity and quality of Block E, not me. I really had no idea this project wasn't going as expected until I saw the front page spread. I saw the actual print copy and the way they presented it they did everything (compared it to now torn down Conservatory shopping center) but say it was a failure.

saturated does not refer to how busy business' are; saturated refers to how how much of something there is. the minneapolis retail market is highly saturated with upscale retailers. i don't think you saw enough of minneapolis to say that kansas city "wipes" us "off the map." but hey, maybe this plaza is better than all of downtown minneapolis.

i disagree on the take of the article. the star tribune was opposed to this development and still regrets it since its chain base and lack of focus.
let me tell you from my own experience block e is anything but a failure. all of the shops are doing well, the hotel is filling up nicely, and new tenants are moving in. i believe there is only one occupied slot, and that is spoken for.

trailerkid · Post by **trailerkid** » Fri Aug 29, 2003 9:10 am

Just because it's full doesn't mean it's a success. It was supposed to be an entertainment district, but they failed in that area so now they're bringing in drug stores and sandwich shops.

Last time I was in Mpls...3 to 4 years ago...the massive City Center had 3 stores (a Champ's, a Starbucks, and a Jumba Juice) and Gavidae looked like @%#$. They had stuff like Office Depot and Marshall's mixed in with Banana Republic....great combo. Nicollet Mall(this was before Target) had a few stores, but more empty ones. The people downtown were mostly loitering and not shopping and I was the only one using the glorious skyway system. I'm not trying to diss Mpls, I'm just giving an honest impression from an outsider.

mpls · Post by **mpls** » Fri Aug 29, 2003 11:24 am

i don't know what you are talking about. there are practically no noticeable empty store fronts on nicollet. the skyway system is always bustling. nicollet mall has a lot more than a few stores, you gaviidae 1, gaviidae 2, city center, target, marshall fields, barnes and noble, and lots of small stores in between. maybe when you visited you mistook, say 5th street for nicollet mall?
i never said block e being full means its a success. and it still is partly an entertainment block with a theaters, hard rock, game works, soon to be nightclub, and the le meridien.
the city center has a lot more than 3 stores. fyi, they are doing a multiple phase reinvestment in the city center, the first being $15 million dollars.
i gurantee when you came the gaviidae did not look like shit, it is and absolutly beautiful block. again maybe you mistook somethin else for this when you visited???
you comment about people "loitering" downtown was pretty dumb.
my ass you aren't trying to diss minneapolis.

trailerkid · Post by **trailerkid** » Fri Aug 29, 2003 4:23 pm

Seriously let's put it to rest. I do give little digs to Minnapolis, but you can't handle it? I'm giving my opinion and perspective on what I saw when I went (3-4 years ago). I mostly comment on Omaha and Twin Cities because I'm most familiar with them in the middle to upper Midwest. I'm sure things have changed for the better (hopefully!!) and wish your city the best of luck with Block E and the Mall of Hell...er America's expansion. Definitely not a fan of Dinkytown, but don't completely hate Uptown and I heard St. Paul is nice. If it makes you feel any better I think Chicago sucks too.

QueSi2Opie · Post by **QueSi2Opie** » Fri Aug 29, 2003 10:25 pm

I think Omaha, Minneapolis, Chicago and St. Louis are all great cities and I enjoy them each time I visit.

mpls · Post by **mpls** » Fri Aug 29, 2003 11:20 pm

trailerkid wrote:Seriously let's put it to rest. I do give little digs to Minnapolis, but you can't handle it? I'm giving my opinion and perspective on what I saw when I went (3-4 years ago). I mostly comment on Omaha and Twin Cities because I'm most familiar with them in the middle to upper Midwest. I'm sure things have changed for the better (hopefully!!) and wish your city the best of luck with Block E and the Mall of Hell...er America's expansion. Definitely not a fan of Dinkytown, but don't completely hate Uptown and I heard St. Paul is nice. If it makes you feel any better I think Chicago sucks too.

if you honestly think chicago sucks i have no respect for you.

truce called.

kcmajik · Post by **kcmajik** » Fri Aug 29, 2003 11:31 pm

i actually love the twin cities and here's why:
-beautiful recreational parks are found EVERYWHERE throughout the urban core and suburban neighborhoods.
- it's probably the cleanest city i've ever been to with more than a million people
-green, green, green, green, green, - none of this droughty brown crap
- LOTS of diversity
- milder summers(compared to my previous New Orleans and Houston and even KC)
- stunning skyline

i haven't really explored downtown a WHOLE LOT but i do like it quite a bit. this may be nerdy but i think the american swedish institute is fascinating too.