Don’t get your hopes up.
But go ahead and get your hopes up.
That contradiction pretty much summarized the sentiments of Minneapolis city officials Thursday while announcing some significant developments in its long-running effort to reverse a 70s-era urban planning mistake.
Yes, the city is on the cusp of getting control of the 10-acre superblock that runs between 1st Avenue South and Blaisdell Avenue South from the Midtown Greenway and Lake Street. The city council later this month will likely approve a $5.3 million purchase of the segment that recently held a grocery store and a large parking lot. It also will likely approve a purchase option for the rest of the site, which now holds a Kmart and an even larger parking lot.
Those would be two big steps toward fulfilling a dream of reopening Nicollet Avenue once again between 29th and Lake Streets.
Neighborhood residents — some of whom fought the decision to vacate the street, and some who have come to despise the way the Kmart site physically divides the neighborhood — have been agitating for years to reverse the closure.
“This is a huge deal that we have been able to get three of the four private entities here assembled,” said Council Member Lisa Bender, whose Ward 10 includes the north side of the surrounding neighborhood.
So why shouldn’t they get their hopes up? Because even if Kmart gets a new landlord, it will still have a legal right to keep its store right where it’s been since 1977, because its lease still has 38 more years to run. Only if the city can convince the corporation that owns Kmart, Sears Holding, to give up the lease — perhaps in exchange for a new store on what might be a newly reopened Nicollet Avenue — will the deals produce the desired result.
“It’s worth saying that this is many years of planning and effort by mayors and city council past and especially mayor and city council present,” said Minneapolis’ economic development director David Frank. “We should also say this is an important step — one staff is recommending — but it is far from the last step.
“It’s not like we’re yet scheduling the bulldozer party,” he said.
But Frank said the two real estate transactions could change the dynamics of negotiations. In past talks with Kmart officials, there were too many moving parts: two different private owners held the two large parcels, and the owner of the grocery store parcel was in talks with private developers who had other ideas for the land. With the city in control of the entire superblock, negotiations can be more specific and less speculative.
What comes next
Kmart officials have expressed interest in doing something different on the site, perhaps a smaller, more-urban store that would work well once the site is separated again by Nicollet. Frank said the company claims the store is profitable and that it wants to remain part of the neighborhood. Still, Sears Holdings has suffered losses nationally. The company has been closing its Kmart and Sears stores of late, not building them.
Knowing the city wants to reopen the street and holding a lease with decades yet to run means Kmart “has a lot of leverage,” Frank said.
“They tell us the store works for them,” Frank said. “The evidence of that is that the store is still open. Whether that is because the rent is so low or because they are holding on because they know that Minneapolis and the community is interested in having our street grid here, I can’t speculate.”
Darin Broton, a senior consultant with Tunheim public affairs in Minneapolis, released a statement from Kmart calling the purchases, “an important first step to redeveloping Lake Street and Nicollet Avenue.
“We look forward to seeing a new workable redevelopment and financial plan for the site that includes a new Kmart store,” the company’s statement said. “We continue to appreciate public commitments by Mayor Hodges and Councilmember Bender to ensuring Kmart remains a vibrant neighborhood asset, and hope city staff partner with us on a final plan.”
The store employs about 100 people with a quarter working full time. The company says it is one of the chain’s most successful stores, and reports that 62 percent of customers live within five miles.
The grocery store site is less important to the city because the former Nicollet right of way does not pass through that parcel. The city could reopen the street even without ownership of the smaller site, in other words. But controlling it all could make it easier to entice redevelopment proposals if and when the city can issue a request for proposal. The city was able to purchase the site for $5.275 million after its owners failed to reach a deal with Semper Development working on behalf of Walgreens.
The Kmart site is owned by the Kadish Family. Under the agreement, the city will have several months to conduct an examination of the valuations of the property and begin its talks with Kmart. It can then trigger a two-year option to purchase by giving the owners an $800,000 deposit that, if the sale is completed, will apply to the $8 million purchase price. If the city decides not to purchase the land, it would forfeit the $800,000.
Not the city’s finest hour
Scars that call to mind lost fights perhaps are the most galling, and the act of having to detour Nicollet Avenue as it hits the back wall of Kmart is a depressing reminder of another time for many in Minneapolis.
“There is nothing more commonly agreed upon — in terms of what the city has done well and what it has done poorly in urban planning — than the closure of Nicollet in the 1970s,” said Peter Wagenius, policy director for Mayor Betsy Hodges.
Council Member Elizabeth Glidden, whose Ward borders the Kmart parcel, said she still runs into residents who organized to oppose the closure. “The memories are long in this neighborhood,” Glidden said. “With this step, we are showing that the city has staying power. The city is willing to engage in correcting mistakes that we were a part of making. I think collectively as a community we say we wish that had not happened.”
City economic development officials might hope the person they will be negotiating with for the Kmart site isn’t the same person who got it built in the first place. In exchange for placing a Kmart in the neighborhood, the company convinced the city to vacate a major arterial so it could build a store and massive surface parking lot. It also signed a lease that runs until 2053.
In a MinnPost story on the history of the site, Iric Nathanson wrote that the city was financially strapped at the time Kmart made the offer. A tax increment financing district formed to remake the then-struggling neighborhood wasn’t working as hoped, costing the general fund hundreds of thousands of dollars.
“City officials had ambitious plans for the Nicollet-Lake district,” Nathanson wrote. “Some said it had the potential to become a mini-Southdale, with a large shopping center surrounded by apartments, offices, restaurants and a movie theater…But at Nicollet-Lake, the city began acquiring sites and clearing them without any firm assurances that development would, in fact, take place.”
It didn’t. And with demolitions outpacing new construction at the time, none of the increased property taxes needed to pay off development bonds were produced, forcing the city to dip into the general fund to service those bonds. Another TIF district at Loring Park was also underperforming. Facing a financial mess — and despite protests from neighborhood residents and businesses — the city council voted 10-2 to agree to the demand that Nicollet be vacated.