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Come See the Loftier Side of Sears

By most accounts, the abandoned Sears buildings in South Minneapolis constitute a headache of mammoth proportions. The sprawling complex at Lake Street and Chicago Avenue is too big to ignore; geography, history, and demographics, on the other hand, make it a difficult candidate for redevelopment. The last developer to take a crack at Sears gave up after two years without even getting a plan beyond trial-balloon status.

Enter Ray Harris, preceded by a reputation for taking a hard-nosed approach to challenging, one-of-a-kind projects others won't touch. The Minneapolis native, for instance, built high-end townhomes next to Loring Park when the neighborhood was considered a downscale dump. His highest-profile gambit transformed a vacant public school at Hennepin Avenue and Lake Street into Calhoun Square, which in turn spurred the gentrification of the surrounding area.

Now Harris says he has a plan to turn around the Sears site, and in doing so keep everyone happy: budget-minded city officials, preservationists who want to keep the more historic parts of the complex intact, area stores that want to draw more customers to the neighborhood, neighbors who want a uniquely urban project instead of a strip mall. Difficult? Sure, he says, but then so is everything he does. "Those of us who do this are a rare breed," says Harris. "If we had listened to everybody, we would never had done any of the projects we've done before."

In truth, though, Harris has had a harder time getting things done during the last 10 years than he suggests. His biggest claim to fame in the last decade, for instance, is his failure to redevelop Block E in downtown Minneapolis--an endeavor he started in 1986 and abandoned in 1991 after financing fell through. Less publicized are Harris's efforts to rehab the modest Plymouth Penn strip center in North Minneapolis in 1991, which fizzled a year later. And then there's the Harris project that did get built, but later turned sour: In 1994, Harris defaulted on a personally guaranteed $1.7 million mortgage for a Nicollet Avenue strip mall he built. He was forced to eventually hand the project back to Ohio National Life Insurance Co.

In fairness to Harris, he isn't the only developer to struggle with tough projects. The city of Minneapolis has been soliciting proposals for Block E since 1994 but has yet to approve a plan; the Plymouth Penn center is still trying to land a grocery store, an amenity that's been at the top of the neighborhood's wish list for more than five years. And builders who had to relinquish ownership of their property to lenders during the real estate slump of the early 1990s are the rule, not the exception.

Still, it's worth asking why Harris, age 68, would be gearing up for an immensely complicated project that's guaranteed to be exhausting, at the very least. Some observers suggest that Sears is his last chance to cap his career with a show-stopping, told-you-so project.

Harris insists his interest in Sears is fueled by economics, not ego. "I'm not trying to impress anybody at all," he bristles, but in the next breath makes it clear that redeveloping the 18-acre site means more than the chance to collect rent checks. A successful project should help revive a moribund stretch of Lake Street, he argues, which in turn can boost the city as a whole. "Nothing else is going to bring more jobs, and revive the area and decrease crime," Harris says. "There isn't anything that's more important than that."

The size of the Sears properties alone gives Harris's claims some credence. Taken together, the buildings total nearly 2 million square feet--bigger than any Twin Cities skyscraper. "To do a building like Sears, it's almost like a neighborhood," says Caren Dewar, a Minneapolis consultant who's surveyed the property.

Built in 1928, Sears comprised the hub of a major shopping district up through the 1960s, when it began to trail off like other inner-city stores competing with highways and suburbs. By the early 1980s, Minneapolis officials were already trying to solicit proposals to redevelop the area; in 1989, Canadian developers proposed and later abandoned an $80 million renovation. In 1992, Sears opened a major new store at the Mall of America; two years later, it shuttered the Lake Street building.

What Sears left behind--the retailer still owns the property, last offered for $5 million--is a collection of real estate that's alternately attractive and repellent to potential developers. Some of the land itself is valuable--neighboring Abbott Northwestern Hospital, for instance, needs more parking space--and parts of the complex can be used as is. Minnesota Diversified Industries, a nonprofit that employs disabled and disadvantaged workers, already rents much of the warehouse space and recently signed a five-year lease.

The original store itself is another matter. Real estate experts say the space is too idiosyncratic to simply fill with a single user, but figuring out exactly who could use the building calls for creative thinking: Most of the the ceilings are too high to accommodate traditional offices, for instance, but too low for most warehouse operations. And the asbestos-ridden building simply needs work. One estimate provided to the Minneapolis Community Development Agency (MCDA) calculated it would cost $16 million to bring the building up to speed.

Patrick Daly, the Chicago developer who held an option on the property up through 1996, said from the start that rehabilitating the original Sears building would be impractical, and planned on demolishing it to make way for a strip mall. Daly's plan drew lukewarm approval at best, and was eventually quashed when city officials said it required at least $8 million more in public subsidy than they were willing to pay.

Now Harris says he and partners Barry Bosold and David Jasper, who run two business incubators near the University of Minnesota, think they can redevelop the entire site, 1928 building and all. Harris hasn't outlined his specific plans but suggests they'll include a smattering of well, nearly everything: shops, office space, a jobs center for the neighborhood, parking for the hospital, perhaps even housing. The plan is premised on buying the complex cheap enough so Harris can offer below-market rents; the MDI lease will provide the partners with a steady, if modest, amount of cash to keep the building operating. And, Harris says, he'll need a considerable--but so far unspecified--amount of public aid.

So far the ambiguity of Harris's plan works to its advantage. There's nothing for neighborhood groups to find fault with, no subsidy requests for government agencies to turn down. "The preservationists are happy because the building is going to be saved, the people who want something to be done now are happy, the businesspeople are happy because it's one of their own," says R. Scott Hawkins, executive director of the Powderhorn Park Neighborhood Association. "You don't really have a segment that's unhappy. Everything is doable."

And past disappointments aside, locals say they're happy Harris is taking a run at the building. Harris is a known commodity--he has been a fixture at neighborhood group meetings during the last two years--and many say they hope he can repeat his work at Calhoun Square.

"He did Calhoun Square, but he made Uptown," Hawkins says. "If he does the Sears building, which is way bigger, it will boost the intensity of the surrounding area."

That's long-term, at best. In the near-term, Harris and his partners say they need to buy the complex from Sears by the end of 1997. And in order to do that, they'll need a dizzying array of commitments: from tenants, from private lenders, from public agencies. Simply lining up the latter will be difficult enough; a preliminary wish list Harris hashed out with MCDA staff includes 38 budget items, but so far only one has a price tag, making it impossible to assess how much the whole project will cost.

And Harris already has plenty of demands on his time. He has commercial-consulting contracts with a number of Minneapolis neighborhood groups, and he's also working with St. Paul officials on devising a plan to bring new housing developments downtown. Simply overseeing Calhoun Square will keep him busy: Harris seems to be constantly trying to figure out how to fill up the anemic second floor of the mall and how to create more parking for the center. In addition, Harris will be trying to refinance about $8 million in city-issued revenue bonds at the end of the year.

Harris says he'll make the time to pull Sears off. He's optimistic, he says, in part because of the response from city, business, and neighborhood representatives: "I think there is a recognition at all levels that this has to happen." But observers like Dewar caution against committing to a proposal simply in order to get something done. With a project the scope of Sears, she says, it's important to move prudently. "I think one of the things you get with underserved neighborhoods is this attitude that something is better than nothing," she says. "You have to guard against that."

Point taken, says City Council member Brian Herron, whose 8th ward includes the Sears site. "It doesn't make any sense to just jump on the bandwagon, and then it ends up vacant again," he says. "We should be choosy."


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