Shot in the Dark

The Usual Suspects

Grand Avenue in Saint Paul.

It was gentrified well over forty years ago – before the term really existed.

It’s been one of Saint Paul’s most durable commercial corridors since as long as I’ve lived here, and then some.

And it’s been having trouble lately.

Well, parts of it have. We’re told that some parts are doing quite well, all in all. Which, lets be honest, doesn’t surprise me; the parts of Grand that work, work well.

But it’s on the verge of becoming a “Berg’s Law” – whenever there’s a social or economic problem, look for a Public Employee Union.

Bingo:

“The problem isn’t the avenue, it’s that group,” [Golden Fig Fine Foods’s Laurie] Crowell said, referring to the out-of-state pension fund that owns some of the corridor’s largest retail spaces.

The State Teachers Retirement System of Ohio, known as STRS Ohio and based out of Columbus, has invested some of its teacher pension funds in real estate, including four buildings along Grand Avenue that it has owned since 2006…Salut, Pottery Barn, Lululemon, J. Crew, J.W. Hulme and Anthropologie, which closed late 2022, were all in buildings owned by STRS Ohio.

When looking for a storefront for Evergreen Collective, Hall said she was interested in the building where J.W. Hulme used to be, but said the rent would have been twice as high as her current location.

The vacancies along Grand Avenue are “not a sign that the avenue isn’t working,” Crowell said. “It is a sign that [STRS Ohio] isn’t working with the avenue.”

Of course, it’s not just businesses in STRS-owned buildings that are having trouble. And STRS pleads innocence, or at least competence.

Like most stories re Twin Cities business, there are two sides to the story.

It’s just that there really didn’t used to be a downside on Grand.

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9 responses to “The Usual Suspects”

  1. jdm Avatar
    jdm

    I don’t understand. I know there are some (former?) landlords amongst the readers here. Can you help? It seems to me that having no renters is worse than not getting the rent you expected or require to service the debt or something. Wouldn’t it be better to work with a property management company that knows property, management, and maybe even the local market?

  2. SmithStCrx Avatar
    SmithStCrx

    When I was on the Highland District Council fifteen years ago, parking plans were always an issue with proposed business plans. As a Board, we didn’t have the leeway to recommend a project to the St. Paul City Council if the project didn’t have the required number of parking spaces. When we would tell people about that it was common for them to respond, “Well they do that on Grand Ave!”
    My standard response to that was “And that’s why the neighboring streets all require parking permits. It’s not easy to find parking in most sections on Grand Ave.”
    Growing up in St. Paul, I look back at Grand Ave and I think the best description is your term “Urban Life Theme Park.” There were several restaurants my family used to go to regularly when I was younger, but even my parents don’t go to Grand Ave nearly as often as they used to. A large part of it is there are more, cheaper, and better options closer to their home. Another is that when my sister and my family join them for dinner, it’s much easier to find 3 parking spaces outside of St. Paul, even if we are in a “fully developed” suburb like Roseville or Falcon Heights.
    Grand Ave’s issues have been a long time coming. The Ohio Teachers Union treating their properties like the goose that laid the golden egg and having rents higher than the rest of the market is just exacerbating things.

  3. SmithStCrx Avatar
    SmithStCrx

    The only grace I will grant the Teachers Union is that St. Paul property taxes and high, and the City’s opinion of what your property is “actually” worth, will set a floor to the rents you can charge just to cover the City’s “cut.”

  4. John "Bigman" Jones Avatar
    John “Bigman” Jones

    I don’t claim to be an expert, but the answer may be NO, it’s not better.

    In residential tenancies, you could get stuck with someone you can’t evict but who does more damage than the deposit covers and leaves behind mattresses and busted electronics for you to pay to dispose of.

    In commercial tenancies, you pay to “build out” the space to the tenant’s specifications but if their business fails, you pay to “build out” the space to the new tenant’s specifications. Since it’s non-homestead space, everything must be done with building permits/inspections plus depending on the business, restaurant licenses and zoning conditional use permits which require a specific number of dedicated parking spaces but only if the neighbors don’t protest too much . . . remember the Cupcake fiasco? Owner lost $150,000 fighting with the city and the neighborhood before pulling out of his Grand Avenue proposal and heading to the Mall of America.

    The problem with Grand Avenue might be greedy out-of-state union pension fund managers, but I wonder how many niche restaurants, how many candle shops, how many imported leather goods stores can the neighborhood support in the Lesko Brandon economy? Tavern on Grand is closing in June, for crying out loud. If declining customer traffic isn’t enough for them to make it, with their reputation and experience, who can?

  5. Greg Avatar
    Greg

    Is not the value of a commercial property tied to the potential revenue it can generate? So if property (x) can charge rent (y), than it’s value is (z), but if the rent falls to (y – 50%), does not the value drop as well?

    So by that logic, a pension fund might decide it is better to keep the property vacant and lose money gradually, than to write value off its books.

  6. bikebubba Avatar
    bikebubba

    What Greg says. If they accept a lot lower rents, then their baseline is down even when retail rebounds. I can list a number of properties in Rochester, office and retail alike, that seem to be waiting for a boost as Mayo grows immensely here. The big scandal, IMO, is that retail is so weak overall years after the end of the epidemic.

  7. bosshoss429 Avatar
    bosshoss429

    As more older retailers continue to fail, there will be a lot more vacant retail space, along with the commercial property that has been vacant for years. I know a few commercial and residential developers, most of them holding those types of properties, as well as buildable land. They are all very worried.

  8. Bill C Avatar
    Bill C

    When I was on the Highland District Council fifteen years ago, parking plans were always an issue with proposed business plans. As a Board, we didn’t have the leeway to recommend a project to the St. Paul City Council if the project didn’t have the required number of parking spaces. When we would tell people about that it was common for them to respond, “Well they do that on Grand Ave!”

    My standard response to that was “And that’s why the neighboring streets all require parking permits. It’s not easy to find parking in most sections on Grand Ave.”

    With the anti-car metro DFLers firmly in control of state gov’t, this may soon no longer be an issue:

    https://bringmethenews.com/minnesota-news/people-over-parking-act-would-eliminate-minimum-parking-requirements-in-minnesota

  9. mjb003 Avatar
    mjb003

    There may be a small part to blame on the Ohio State Teachers Union, but I’m guessing most of the blame falls on the people who run the city. They do their best to chase away businesses and people. I remember when Merriam Park people were so proud that they stopped a Home Depot and so proud when Walmart finally left, but most small business owners that I know looked from afar and said, “If Walmart can’t make it there, I surely can’t.”

    For Grand Avenue, the people running the city started with their fights over more density and even less parking than they had before, bike lanes on neighboring streets, and a push for “traffic calming” which is really just code for “we don’t want people who aren’t from around here coming into the neighborhood.” The business owners’ opinions didn’t really matter in all this “anti-car, anti-parking, anti-customers from outside the neighborhood” rhetoric. So, a few businesses moved out, in favor of cities that want them and their opinions. And as they move, so goes others- we’re back to “if they can’t make it here, will I be able to?” It’s a domino effect that the city council doesn’t care about. As long as they have power, they don’t care. It still amazes me that anyone who votes for this can look around and say, “things are going well, I want more of this.”

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