Bill of Goods

Ten years ago Minneapolis officials turned the heart of downtown into a parking lot. Now they've got an even better idea

Upon first hearing it sounds like a grand plan. A city-block-sized three-level entertainment/retail complex crammed with theme restaurants, virtual-reality game centers, leisure stores, and a state-of-the-art cinema multiplex; a 250-room all-suite hotel tower soaring above, and a 600-space parking garage below; and all that on one of Minneapolis's hottest and most hotly debated pieces of real estate.

If you believe city officials and their favored developers, this vision will make the black hole between Hennepin and First avenues and Sixth and Seventh streets an urban wonderland, drawing visitors from Apple Valley to Sioux City. Millions in public dollars are expected to be spent on the project, and there's talk of expanding it to swallow two more blocks.

What no one seems to be talking about is whether this makeover will work--or whether, as some experts believe, Minneapolis is about to jump on yet another bandwagon just as it's getting ready to crash. "It seems to me that you're going for the quick fix," says Margaret Crawford, an expert on urban shopping centers who reviewed the project at CP's request (see accompanying interview). "It's very glamorous and appealing. But I think if you want to build a downtown that will work over a period of time for a lot of different groups of people, this is not the way to go... The likelihood of this being another dead mall in 10 to 15 years is very high."

That's not what city officials want to hear right now. From the beginning of the debate over Block E in 1988, City Council President Jackie Cherryhomes says, the plan has been to build some kind of entertainment complex on the site. The question has always been how to pay for it, and how big it should be. After 10 years of failed plans, the Council has given exclusive rights to the block to one of downtown's biggest retail developers, Brookfield Management Services, LLC. If everything goes according to plan--and if the city agrees to kick in upwards of $20 million--ground on Block E could be broken next summer.

Once a collection of adult-entertainment shops and downtown fixtures such as Shinder's Books, Sun's rock & roll memorabilia, and Moby Dick's, Block E began to make headlines in 1987. That year, city officials calculated that it was the site of 25 percent of all crime in downtown Minneapolis. The area was a come-as-you-are red-light district, what Judith Martin, director of the Urban Studies Program at the University of Minnesota, calls a "profound civic embarrassment" to city officials.

The City Council decided to get rid of the problem in classic form--by razing the block. But relocating businesses and demolishing buildings took money, more than $9 million in all. And that, Martin says, decided the block's future: Whatever took the place of the old Block E would have to recoup the city's investment.

The first developer to come forward with a plan for the block was Calhoun Square creator Ray Harris. His plan, dubbed the Pageant on Hennepin, was well ahead of its time, calling for a hotel, megaplex, restaurants, nightclubs, and "fun-type" shops years before the term "entertainment-based retail" entered the developer's lexicon. But Harris missed his first financing deadline for a two-block project. A subsequent one-block plan also failed to pass muster, and in 1989, the city blacktopped the space to make a parking lot. Then came the recession of the early '90s, the slump in downtown property values, and competition from the Mall of America. It wasn't until 1995 that the city once again asked for developer proposals.

This time it got three distinct ideas. FORECAST Public Artworks, a nonprofit group, wanted to create a park-like public space that could host exhibits, outdoor walk-in movies, a skating rink in winter, street performers, and more. TOLD Development pitched a one-block "urban entertainment complex" much like the current Brookfield plan. And Loon State Ventures, a company created by Minneapolis architect John Cuningham and Valleyfair developer David Sherman, proposed a three-and-a-half-block "urban entertainment complex." Both the TOLD and the Loon State plans introduced virtual-reality amusement parks, motion-based simulator rides, and entertainment boutiques that have proved popular draws for other urban venues such as Boston's Faneuil Hall.

But if the two plans--variations of which remain the basis of debate over Block E--had certain similarities, they differed dramatically in scope. The one-block proposal amounts to a smaller version of the Mall of America, featuring a cinema multiplex, hotel, theme restaurants à la Rainforest Cafe, and virtual-reality venues on the order of the megamall's NASCAR Silicon Motor Speedway. The Brookfield version also could include Barnes & Noble-style bookstores and sporting-goods retailers like Oshman's Supersports USA with indoor basketball courts and tracks.

Like the megamall, this development would have a fortress look, its square lines broken only by a three-story glass rotunda opening onto the corner of Hennepin Avenue and Seventh Street. A skyway would cross Hennepin to connect the complex to City Center, which happens to be also owned by Brookfield. Jeff Essen, the company's vice president of development, says Brookfield would like to satisfy a city request to get people out of the skyways by creating storefronts accessible from the street.

By contrast, the three-block proposal--dubbed "Hennepin Crescent" in Loon State's original pitch--should not be compared to the Mall of America in any way, Cuningham says. Eschewing retail stores, he envisions an entertainment behemoth featuring one or two hotels, a 120,000-square-foot cinema megaplex, a Sony Virtual Reality theater, an IMAX 3D Motion Based Theater, and a live community theater, as well as dozens of theme restaurants, nightclubs, and the like. "I want to have 90 reasons for you to get out of your chair," he says. (As for the obvious question--why this should work any better than the failed riverfront complex Mississippi Live--Cuningham says his proposal has broader appeal, offering everything from dance venues to "family entertainment.")

Unlike the one-block project, the Crescent would feature about half a block of enclosed "community space" as well as some smaller pocket parks outdoors. The original proposal also envisioned restoring the Shubert Theater, downtown's oldest remaining playhouse. But the clock is running out on that idea, Cuningham says: The theater "is deteriorating as we sit here. By the time decisions are made which are beyond our control, it will be too far gone to save."

City Council members were clearly enamored with Cuningham's proposal, but expressed doubts about its financing. A drawn-out argument concluded last October with the city opting to give Brookfield exclusive development rights to build a one-block entertainment complex and office tower. The Council also granted Brookfield rights to part of Block F (the one that contains First Avenue) for a hotel.

But that wasn't the end of it. Last month the Council revoked Brookfield's rights to Block F and asked the company to join with Anaheim, California-based developer DDRM Entertainment to work out a three-block plan. Never mind that the city tried to arrange a similar two-developer marriage before, and failed; never mind that DDRM had originally been brought to the dance by Cuningham. The Council, insiders say, is set on Brookfield's money, but it wants Loon State's glitz. The deadline for a new proposal is December.

DDRM and Cuningham are just two of the many developers who have found entertainment real estate a lucrative business. In the post-Mall of America retail climate, experts say, malls designed mainly for shopping may be a thing of the past. The department stores developers used to count on as anchors are expanding slowly, if at all. And mall-marketing experts have found that the average amount of time people spend in shopping malls is just 45 minutes, down from three hours in 1980; reversing that trend is one of the industry's chief preoccupations.

One popular approach, says Cuningham, is to make malls more city-like. Where once you crisscrossed downtown to shop, bank, and see a show, the new malls offer all those things in one convenient package. And just like some cities, they've become tourist attractions: The Mall of America averages 42.5 million visitors per year, more than Disneyworld.

Other venues are emulating the megamall's "entertainment-based retail" concept. Southdale, the first mall in the nation, was recently sold; the new owners are formulating a "Southdale of the 21st century" game plan that could include a multiplex cinema and "family game center," according to marketing director Lisa Glenna.

Downtowns so far haven't seen much of this trend, perhaps because they had plenty of entertainment to begin with. Instead, urban malls have been convenience-shopping centers, serving people passing through on their lunch break or on the way home. "We seek to enhance the shopping experience, not elongate it," says Stacey Cunningham, a senior marketing manager for Brookfield.

But Block E, she adds, would be a different story, drawing a clientele far beyond downtown, or even the metro area. "We're not talking about attracting people from St. Cloud," Cunningham says. "We're talking about attracting people from Fargo, Des Moines, or Madison, or Winnipeg."

In other words, notes Judith Martin, whatever arises on Block E won't be designed for the people of Minneapolis. Ask residents what they'd like to see on the block, she notes, and they'll probably say "a park." The entertainment complex will be a playground for conventioneers and tourists, a landmark linking other themed segments (the theater district, the Warehouse District, Target Center, Nicollet Mall) and making the city easy to navigate for outsiders.

But if the development is designed for visitors, it's city taxpayers who will probably help build it. Brookfield's Jeff Essen says the company is negotiating with the city about financing for the project; preliminary figures for the city's contribution hover around $20 million. In addition, a plan Brookfield submitted to the Minneapolis Community Development Agency calls for the MCDA to buy the land and sell it to Brookfield at a discount price. The development's total cost has been put at $98.2 million for the one-block proposal and some $263 million for the three-block version as proposed by Loon State (by way of comparison, that's close to the proposed price of a new baseball stadium, sans retractable roof).

For now, Minneapolis politicians hold out hope for the bigger project. "I don't necessarily think the [one-block] plan is right for downtown," says City Council member Lisa McDonald. "It's just boring. It's like what you can get in the suburbs, so why would you go downtown?"

But Brookfield, says Essen, is looking at the bottom line. "We still don't know if we can amass enough venues to make it more than one block," he says, adding that other mega-entertainment projects have generally been built in milder climates. While working with DDRM on a grander plan, Brookfield is still negotiating with possible tenants for its one-block project, Essen says.

Brookfield's decision to keep moving hints at another problem haunting Block E development: Right now, no one knows how long the entertainment model will continue to make money. Had the city built Harris's development when he first proposed it in 1988, it would have gotten in on the ground floor of a budding industry. Now, putting a entertainment complex on Block E might be a race against time.

Neil Begley, vice president and senior analyst for Moody's Investor Service, says the entertainment-real-estate boom started out slowly, but in the past year has reached a new plateau. Companies entering the industry are expanding conservatively, preferring locations in established malls with strong anchor tenants. "They tend to be doing well," Begley says, "but at some point it will reach the saturation point and then we'll have to worry about overexpansion."

There is, of course, another option--passing on "retail-based entertainment," building a public space, and waiting for new ideas. FORECAST's art park came with a construction price tag of about $30,000--pocket change by city standards. "Personally, I think a park might still be a good option," McDonald muses. "Minneapolis holds a lot of festivals in that part of town. It might be nice to have some place to have them."

But, says Martin, the city has its mind set on getting its investment back, even if it involves spending more first. And that means a mega-complex of some description remains the most likely outcome for Block E. "The best model for getting money out of people is Disney," Martin says, "and as long as the entertainment model is making money, that's what will be planned."

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