Downtown St. Paul’s latest crossroads

Inside Dunn Bros. at Fifth and Wabasha on a snowy morning, a half-dozen patrons chat softly in easy chairs facing the gas fireplace. Others studiously tap at laptops on nearby tables, occasionally glancing up at those coming in for a warm cup of caffeine. Coffee grinding, milk steaming, background music — it’s harmoniously, white-noise peaceful. And then a noisy crew of teenagers tumbles in — a bunch of chattering, artsy-looking, cell-phone-checking kids. They electrify the place for about a half-hour before flowing back outside and down the street, followed by a comet’s tail of exuberance.

The kids may have come from the Saint Paul Conservatory for Performing Artists or McNally Smith College of Music. They may have visited because of the hipster businesses around the corner: Big Table, a poster shop and studio, and Eclipse, a used vinyl-record store. Either way, their mere presence in downtown St. Paul is a marked change from years past, and a metaphor for the wave of fresh energy coming into a central business district (CBD) that has been too quiet in recent years — and shed thousands of jobs in the past decade.

Construction is humming once again. Crews are continuing work on the Central Corridor light rail line; when completed next year, it will connect central St. Paul with downtown Minneapolis. Workers also are preparing for the St. Paul Saints ballpark, which is scheduled to be ready for the 2014 season. Elsewhere, ground has been broken on the Penfield, a recession-delayed residential building that also will house a Lunds supermarket.

To some, the new ballpark for the Saints — technically not even a minor league team — might also be a metaphor for a city that has resigned itself to a minor league downtown, especially compared with its Minneapolis counterpart. The closing of Macy’s, the city’s last downtown department store, points to slim retail pickings. (It also adds a big challenge: What’s to be done with the five-story windowless building smack in the middle of the city center?) And in mid-January, there were reports that Infor Lawson, the chief tenant of Class A office jewel Lawson Commons, might move most or all of its 630 workers out of the city.

On the other hand, St. Paul remains home to employers Ecolab and Securian Financial Group, as well as the Capitol complex and related state government activity. And more importantly, other employers, mostly smaller, have been moving in or expanding here (see box, page 34). As they do, they support the refreshed vision for this city center, one that sees downtown as an intimate neighborhood as well as a business hub, and one whose future relies on its ability to lure back some of those kids who came into Dunn Bros. just now, once they’re a little older.

Compared with Minneapolis’ CBD, downtown St. Paul is an introvert. Its streets are narrower and less trafficked, its buildings are smaller and older (many beautifully so), making it a gratifying area for walkers. Outside of the Xcel Center, its entertainment venues are focused more on higher-brow culture (the Ordway, public television and radio, theaters, and museums) than on clubbing and cocktails. It’s a city with quirks, notably its charmingly (or infuriatingly) idiosyncratic numbering system. Looking for 345 Cedar St.? It’s between Fourth and Fifth streets. The DoubleTree Hotel at 411 Minnesota St.? Between Sixth and Seventh, of course.

To visit the mayor, you enter the hushed interior of City Hall on Fourth Street, underneath a bas-relief of a stylized downtown scene from the 1930s, when the building was constructed. A leisurely elevator takes you to the third-floor office of Chris Coleman, mayor since 2006. Outside of a few computers, the somber, sepia-toned interior looks unchanged from, oh, 1959.

On that same winter morning, Coleman and Cecile Bedor, the head of the city’s Department of Planning and Economic Development, sit down at a large conference table and talk optimistically about their city’s core. “Downtowns aren’t the only game in town, but in many ways they define the overall vitality of the community,” Coleman says. If a city’s downtown in struggling, “first of all, you lose a tremendous economic base,” he says. What’s more, downtown “is a first impression for people for whether they want to invest in your community, if a business wants to come in.” A city’s CBD “can define your community in a way that no single neighborhood can do.”

Coleman’s observations trigger memories of St. Paul’s past efforts to jump-start development after its downtown began declining as a retail destination in the ’60s and ’70s. Town Square (1980), Galtier Plaza (1986), and the Minnesota World Trade Center (1987) were big projects combining retail space with office or residential components. All flopped, at least as they were originally envisioned. That said, both World Trade (now Wells Fargo Center) and Galtier (renamed for its anchor tenant, Cray, Inc., which moved there in 2009 from its suburban location) have become successful office towers.

St. Paul has also had major league victories: the Ordway Center for the Arts, a refreshed riverfront featuring the RiverCentre complex and Science Museum, and the Xcel Energy Center have stimulated development down West Seventh Street and brought business to restaurants in downtown proper. What’s noteworthy is that the city isn’t looking to land major wins going forward. “We’ve hit the home runs,” Coleman says. Now it’s time to fill in around anchors such as the Xcel Center, the Ordway, Ecolab’s headquarters, and the recently renovated Union Depot.

Some may dispute that the Saints ballpark and the Central Corridor Green Line are home runs, but they at least have the smack of solid triples. Coleman credits his own salesmanship, as well as crucial support from the St. Paul Area Chamber of Commerce and the Port Authority. “You had the Port Authority, who was our partner in acquiring the [ballpark] site,” he says. “You had the Chamber of Commerce, who was our key partner in rallying the business community and to lobby at the Legislature. You had our planning and economic development staff and our park staff, who put together the pieces of that. Every one of those partners that came to the table was vitally important.”

Coleman says that he’s in regular contact with the leadership of the Port Authority and the chamber, and representatives from each partner organization meet monthly with the city, taking turns as host. “I think the glue really is that [the hosts] are required to provide treats at those meetings,” jokes Bedor, who often represents City Hall at the confabs. “It’s not a hard partnership to maintain anymore because we all appreciate what we bring to the table.” Compared to what she suggests were less-than-chummy relations among these three entities in the past, “I think what has really changed is that we realize that we all want the same thing.”

The office of Matt Kramer, CEO and president of the St. Paul Area Chamber of Commerce, is in the modern yet somehow cozy headquarters building of Securian Financial Group Inc. The insurance firm is one of downtown’s oldest and largest businesses. Kramer, who was Governor Tim Pawlenty’s chief of staff and later, economic development commissioner, grew up on the Minneapolis side of the river; from that vantage point, he observes that “for a community of 350,000 people, St. Paul is a small town in some ways. And it’s a lot easier to have those informal contacts that get business done, both at the political and business levels, than I think it is in Minneapolis.” He tells the story of lunching at the Downtowner Woodfire Grill on West Seventh. His lunch partner, a business colleague, looked around the room, then turned to Kramer and said, “We know about three-quarters of the people in the room.”

Because of this intimacy, Kramer thinks that it’s easier to get businesspeople aligned on issues and points to the ballpark project as an example: “We made it very well-known . . . to a Republican-controlled Legislature that this was the business community, of which a significant number were donors to the Republican Party, asking for this.”

The St. Paul Area Chamber isn’t focused on traditional civic boosterism, Kramer says, but rather on civic engagement — pushing for ways to improve the business environment. To that end, it’s pleased with the creation of the Central Corridor and the moves toward a more vibrant downtown. But to Kramer — who’s by no means alone in this opinion — there is something of a visual dead zone between the pastoral charm of Mears Park in Lowertown on the eastern edge and the European grace of Rice Park on the west end: a cadre of office buildings with no street-level appeal and largely blank façades. Kramer can imagine Saints fans after a game deciding to stroll from the ballpark to one of the attractions to the west, such as the Science Museum: “They’ll get two blocks into the walk and say, ‘Ewww! This doesn’t feel right.’ ” It’s a part of downtown that will need to be made less off-putting before the Saints fans and train riders arrive.

Besides the mayor, Kramer describes Louis Jambois, president of the St. Paul Port Authority, as “a key partner for us.” Jambois’ public entity runs 21 industrial parks and business centers in St. Paul, as well as the city’s riverside port facilities. “What we can do is help [Jambois] on some of their industrial development by not only bringing in members who might be interested in space, but chamber members who can tell the story of how important the Port Authority is to them,” Kramer says.

Jambois describes his organization as “a support player to the city of St. Paul” with respect to downtown. The Port Authority acquired the Diamond Products site in Lowertown as the location of the new ballpark. Upon closing the deal, the Port Authority flipped it to the city, receiving in return Midway Stadium. Once the ballpark’s built, the Port Authority will tear down Midway, put in infrastructure, then sell the site to a business for redevelopment. Jambois hopes to have “at least a 200,000-square-foot-building on that site, with at least 200 to 300 good-paying jobs.”

That deal was just one reason Jambois describes 2012 as “a really good year” for the Port Authority. Another of its wins: the recruitment of Matsuura, a Japanese machining equipment firm, to occupy a Port Authority-built and -owned building in the Authority’s River Bend Business Center about a mile southwest of downtown on Randolph Avenue. Matsuura will bring customers from throughout North America to Minnesota to show off its equipment — and, he hopes, “show off downtown St. Paul.”

For Jambois, industrial development is allied with downtown development. “St. Paul is home to people who rely on the industrial development for jobs,” he says. A diverse economic base helps downtown by generating more economic activity. Many of the businesses using the city’s port are in sectors — agribusiness and manufacturing — that have generally done well in recent years. And the city, with about a third of its land mass occupied by tax-exempt structures, needs the tax revenue these businesses generate.

“It’s truly an integrated system,” Jambois says. “The more diversification we have as an economy — city, state, region — the stronger we’re going to be.”

Rebuilding St. Paul In August 2010, St. Paul Mayor Chris Coleman announced Rebuild St. Paul, a program to launch 15 building projects using $15 million in city money to leverage more than $100 million in investment from state bonding funds, federal stimulus funds, and other sources. Here’s a list of the Rebuild projects and where they stand:
IN AND NEAR DOWNTOWN	ELSEWHERE IN ST. PAUL
Lofts at Farmers Market Project: 58 units of market- rate housing and 2,000 square feet of retail space on a vacant Lowertown site. Status: Completed in March 2012 The Penfield Project: A long-contemplated, long-delayed project combining 256 market-rate apartments and a Lunds full-service supermarket. Status: Under construction; to open December 2013. Cossetta Alimentari Project: Expansion of existing West Seventh Italian dining and food-retail institution. Status: Completed in January Central Corridor LRT and Streetscape Improvements Project: Includes upgraded street lights, enhanced sidewalk treatments, boulevard pavers, and additional trees. Status: Under way Westside Flats Apartments Project: 178 affordable and market- rate housing units with 11,500 square feet of restaurant and retail/office space. Status: Cleared for construction in October J&J Distributing Project: 20,000-square-foot expansion of Rice Street produce distributor will include a rooftop greenhouse. Status: Under construction Schmidt Brewery Project: Conversion of historic West Seventh brewery into affordable housing, commercial, and retail space. Status: Cleared for construction in November; scheduled for completion in 2014	Lafayette Bridge Replacement Status: Under construction; scheduled for completion in 2015. Bridge replacement over 35E and new Cayuga Street interchange Project: Replacement of bridges and a new interchange over Interstate 35E north of downtown. Status: In planning stages Frogtown Square Project: Mixed-use project including commercial space and senior rental units at LRT station at Dale and University. Status: Completed Como Aquatic Center Project: Demolition of existing pool, replacing it with a new aquatic facility and tennis courts. Status: Completed Highland Park Aquatic Center Project: Renovation with new electrical and plumbing systems. Status: Completed Hamm’s Brewery Project: Renovation of portion of East Side landmark that city owns. Status: Tilapia and produce farm being built; expected to open mid-2013. Suite Living Care Clinic Project: New health clinic serving assisted-living residents and surrounding community on East Side. Status: In planning stages Payne Maryland Town Square Project: 36,000-square-foot multi-use facility with recreation center, library, and parking. Status: In planning stages

Source: City of St. Paul

One of downtown’s longtime economic pillars is Securian Financial Group, Inc. “A flick of a switch can get me to another state, unlike 40 years ago, when it was much more difficult,” says Securian Chairman and CEO Robert Senkler, who grew up in St. Paul and joined the company in 1974. Cities “need to be mindful and remain competitive to attract the kind of businesses that we need. It doesn’t mean you have to be the lowest cost, but you have to have a value proposition that holds up over time.”

Senkler asserts that downtown St. Paul’s current value proposition is a good one. The city is “safe, it’s easy to get in and out of, and it has outstanding education, especially upper education, and medical care.” He also sees a marked improvement in downtown nightlife in his 40 years in downtown, though he also jokes that “we would still be accused of not hurting anybody if a bomb went off in St. Paul. So we can still work on that. Making St. Paul a destination is a journey that is not complete.”

For some employers, St. Paul and its small scale has proven an attractive destination. That’s been the case with GovDelivery, a tech firm that Founder and CEO Scott Burns terms the “leading digital communications platform for the public sector.” Started 13 years ago in Lowertown, GovDelivery now employs 103 people; 73 of them work in the company’s offices in the Hamm Building, whose first-floor retail tenants include a tiny pet shop, retro-cool men’s clothier Heimie’s Haberdashery, and well-regarded French restaurant Meritage.

GovDelivery’s biggest client is the federal government; it also works with state, municipal, and European governments. So why expand in St. Paul? “It basically comes down to, can we get the quality of employees we want and grow the company in this environment with those people?” Burns says. GovDelivery has been able to attract and keep tech talent who live all over the metro. Those employees like the easy commute downtown, “where you are often going against the prevailing traffic patterns,” and good bus connections from the suburbs. What’s more, there are lunch options close by, including Meritage and Kincaid’s in Lawson Commons. “Thirteen years ago, people wondered why we were in St. Paul,” Burns says. “Now they’re glad we’re here.”

St. Paul needs to actively build on businesses such as GovDelivery, argues Mike Zipko, who has worked in downtown “off and on” since 1993. Zipko, who was Mayor Norm Coleman’s communications director before joining St. Paul public affairs consultancy Goff Public in 2002, describes downtown as “a neighborhood that also has businesses.”

“People get involved, people get things done, you know your neighbor,” he says. Ecolab and Securian, with their low-key image and active community involvement, both fit that ethos. Downtown St. Paul, Zipko believes, has “a growing creative-class appeal.” But how do you attract the emerging companies that hire the members of that class? “Who goes and gets them?” he asks. “What does it take to get them to come here?” That’s the next phase in promoting downtown, he says: actively selling the city center as a cool space for up-and-coming entrepreneurial companies and the young knowledge workers they employ.

According to downtown expert Christopher Leinberger, a former real estate developer who is now a nonresident senior fellow at the Brookings Institution’s Metropolitan Policy Program in Washington, D.C., that next generation is crucial to downtown’s prospects. The question that cities such as St. Paul should ask is “Do your young people stay, and can you attract new young people? Because it’s the millennials that are driving [downtown rejuvenation],” Leinberger says. “And if you care about your future economy, you’d better want the millennials to be there.”

St. Paul’s downtown business establishment, which vigorously supported the Saints ballpark and Central Corridor LRT, may need to step up its game. Leinberger notes that while St. Paul has kept its major employers and is boosting downtown residents, it lags behind “peer cities,” which include Oklahoma City and Austin, Texas. These cities have increased desirability by establishing downtown improvement districts—business-led and -funded organizations that keep streets clean, help visitors find their way, and work on beautification projects. Minneapolis established such an entity in 2009. Business improvement districts “are essential to bring about a downtown turnaround,” Leinberger says. “That’s not something the city [government] does, but it’s something that the city can encourage.” (According to the St. Paul chamber’s Kramer, local leaders have discussed establishing one.)

A downtown project that Coleman wants to encourage—one that could be considered a swing for the fences—is a new Class A office tower. He recently noted he prefers an office building to replace the soon-to-be-vacant Macy’s structure. Bedor, his economic development chief, offers several other sites, notably one now occupied by the soon-to-be-vacant old West Publishing building on Kellogg Boulevard overlooking the river. The views would be spectacular. But would that be enough to lure a private developer and a big tenant? The city, which began developing the Penfield and the Lofts at Farmers Market (an apartment project completed last year) when private money dried up during the recession, would prefer to leave development to the private sector, Bedor says.

Is there demand for a new Class A structure? “That question is asked every year by someone,” says Peter Dufour, a vice president with commercial real estate firm Cassidy Turley in Minneapolis. “And the answer is always a resounding no.” As of mid-2012, the office vacancy rate in downtown St. Paul was around 21 percent. Class A vacancy was much lower, about 13 percent. Still, “an awfully large user would have to come along with a substantial commitment to get a Class A building off the ground,” Dufour says. “Rents would have to be in the range of low to mid-20s [per square foot] net to justify new construction. The St. Paul market just doesn’t support those rental rates.”

A similar kind of critical mass is missing when it comes to retail, notes Andrea Christenson, another vice president at Cassidy Turley. “It’s going to be hard to replace Macy’s with another retailer until you have a stronger residential population,” she says. “They just didn’t have the density of office workers to support that.” With Macy’s gone, “you really don’t have any retail” in downtown St. Paul, Christenson adds. “You have convenience shops, restaurants, and bars. You have a few boutiques, but that’s about it.”

Still, she says, “I’m actually optimistic about downtown St. Paul.” The Penfield, with its Lunds store, and the Pioneer Endicott, a historic office building being converted to apartments, will add 232 more living units downtown, and she believes more young professionals could choose downtown, particularly once the Central Corridor line opens in 2014. “There’s a lot more positive than negative going on in St. Paul,” she says.

On a cold, sunny December afternoon, David Brooks is sitting amid the refinished hardwood floors and exposed brick of his office, which overlooks Mears Park. Brooks, the younger brother of legendary hockey coach Herb Brooks and a former puckster himself, has been buying and fixing up historic buildings in Lowertown for nearly four decades. The area used to be thought of as “a dumpy place to office,” he says. “Now I’m filled up. People want to be in Lowertown.”

While the Central Corridor and the Saints ballpark are driving much of that interest, Brooks himself built some buzz by luring the owners of Minneapolis’ Bulldog and Barrio restaurants to open outposts in Lowertown a few years back. “I went to them and said, ‘Come to St. Paul.’ They said, ‘Ah, we don’t like St. Paul. There’s nobody over there.’ I said, ‘I’ll make you a deal you can’t refuse.’ ” What clinched the deal? “The rent and the park,” Brooks says.

Brooks currently owns seven buildings in Lowertown and is looking at buying two more. All of his properties are offices, with some space occupied by restaurants. As for his office tenants, “right now, it’s all geeks—the computer guys,” he says. “They all sit there and they stare at their screens. In any of my buildings, there’s no noise. Before, you used to hear people talk. I go in now and I don’t know if anyone’s there! Kinetic Data, I don’t know what they do. Blue Earth Interactive, I don’t know what they do,” he says with a joking smile. To Brooks, a big catalyst for Lowertown’s upward trend was the arrival of Cray, which moved more than 200 workers into more than 50,000 square feet of space in Galtier Plaza four years ago.

Can St. Paul lure more Crays and Kinetic Datas downtown? The answer may become clearer when the Green Line trains roll and the Saints come marching in. See how many young people show up, and how many stick around.

Gene Rebeck was a TCB senior editor for 13 years and is now TCB’s Northern Minnesota correspondent.

This article is reprinted in partnership with Twin Cities Business.