Shell Game

The old Sears complex isn't filling up with new tenants, but there's more than enough rancor to go around

Says Cramer: "I think they're simply quoting rates that are way, way above market." The MCDA executive declines to get specific but says he is familiar with the negotiations involving Allina and Hennepin County.

Harris disagrees. "I think there's some real confusion here," he says, in reference to his asking prices. "I don't think that that's the case at all. I think we're very competitive."

One tenant who has signed a lease can't get access to his space. Tom Reynolds, executive director of the Whittier Community Development Corporation, says his nonprofit leased 40,000 square feet to house a subsidiary, Southside Ventures, which aims to serve as a small-business incubator. Reynolds says that he had hoped to be up and running by September 1 but had to push back the date to January because he has been denied access to the freight and passenger elevators. "There are so many internal problems that are occurring within the development itself that we are basically on hold," he says, mentioning the MDI lawsuit as a factor. Still, Reynolds, whose agency has an option to lease additional space, is optimistic about the long term: "We have a great interest in becoming an equity partner in the development."

While its owner clashes with the city, the Sears building languishes
Michael Dvorak
While its owner clashes with the city, the Sears building languishes

Barry Bosold, a minor partner in STA who later sold his interest in the venture to Harris and STA executive vice president David Jasper for an undisclosed sum, brought Reynolds to the project. Bosold says that while he greatly admires Harris, he thinks his former partner is stretched too thin. "It's been pretty disorganized," says Bosold, who now runs his own real estate firm. "I think they've been trying to cover too many bases simultaneously. I have enormous respect for Ray Harris. My loyalty to him notwithstanding, it takes more than one guy to make something like this happen.

"We signed the lease and we walked in and they couldn't deliver," Bosold says of the Whittier deal. "That's an internal problem--they've got an internal management problem that's pretty severe if you can't deliver. It doesn't encourage people like me to bring you deals."

Though sales have been slow, STA turned down at least one potential tenant. Michael Krause, executive director of the nonprofit Green Institute, says he was interested in space to house the group's ReUse Center, which sells donated building materials and provides jobs for neighborhood residents. "I told Ray that I was ready to sign a letter of intent for 30,000 square feet," Krause recalls of conversations this past spring. "They basically said they weren't interested--that we weren't the kind of tenant they were looking for. They didn't even want to negotiate with us."

Harris confirms Krause's version of events. "It would set a tone," the developer explains. "It would set an image for the project that is just not right for the rest of the things that we're thinking of doing."

Harris also says he's close to working out a deal to give Tom Reynolds access to his space, and that he has leased space to four additional tenants, all of them tech companies. All told, he asserts, he has leased more than 120,000 square feet in addition to MDI's space (which encompasses more than 440,000 square feet). But he has so far been unable to lease space in the tower building (which includes more than 1.1 million square feet), Harris complains, because there aren't enough existing parking spaces and Minneapolis city officials are dragging their feet on their commitment to construct a garage. (Earlier this summer city officials refused to go forward with the garage because Harris hadn't lined up enough tenants to justify the expense.)

"Do I think STA can pull off that development? My answer is no," says the MCDA's Steve Cramer. Would the city consider attempting to wrest control of the project from Harris, or trying to buy the property from him? Responds Cramer: "There are, I believe, some options."

Harris, too, professes to be reviewing his own options. "I guess we're looking at some other alternatives that I'm not prepared to talk about at this point," he hedges, alluding to a "different mixed use" for the site. But he hastens to add, "There's no intent to close the door on a future working relationship with the city."

At this point, it's unclear what might possibly break Harris's stalemate with the city. "We're at an impasse," sums up Minneapolis City Council member Brian Herron, in whose ward the site is located. "I don't know if STA has the wherewithal to do this or not. The bottom line for me as a council member is that this project has to get done. This is one of the most significant and important projects for south Minneapolis, not just for the Eighth Ward. I'd hate to see the work that they have started have to be finished by someone else, but at the same time we have to be reasonable and fiscally prudent."

Harris says he's undaunted by the skeptics and the legal problems. "The Great Lake Center still needs to happen," he insists. "This is a very much underserved part of the Twin Cities. We're looking at ways to make this project work. Our mission has not changed."

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