business

Before opening Figlio's restaurant in Calhoun Square 25 years ago, Phil Roberts used a very down-to-earth method to research eating habits in the Uptown area. He went to the Lund's supermarket about a block away and watched what came down the checkout lanes.

"It was all over the map," he said recently. "Half the people were getting expensive gourmet items, and the other half were buying Alpo -- and you weren't sure it was for the dog."

Roberts says Uptown is still a splintered market, despite housing and retail development that's displaced some tumble-down properties over the years. "The little shops run by people who'd close up and go to the beach if it was a nice day aren't there anymore," Roberts said. But the area still attracts a mix of 20-somethings on tight budgets and older, more affluent shoppers.

Deciding how to serve those two markets presents a challenge for Calhoun Square, in the midst of a long-awaited renovation to revive the struggling shopping and entertainment complex. The project has gotten a lot of attention, partly because of Calhoun Square's prime location at Lake Street and Hennepin Avenue and because the redevelopment -- the first major redesign since the center was built -- took so long to get underway. The delays were due mostly to the property having three owners since 2005.

BlackRock, a New York-based investment company, bought the center for $47.3 million in 2007 and began work on the renovation last year. So far, it's spent about $20 million on changes that include expanding the parking ramp, adding extensions to the mall along both Lake and Hennepin and rebuilding much of the interior.

The inside now is more open, without the little corridors that sometimes made it hard to find stores -- a layout that existed because Calhoun Square was crafted in the mid-1980s from a series of buildings, including a bowling alley and two apartment houses. Work on one section on the Hennepin side that has a slightly higher elevation than the rest of the property will likely begin next year. That part of the project will create storefronts that open on Hennepin as well as on the center's interior.

But much of the construction is set to be completed in about a month. When it's finished, Calhoun Square will have more than 200,000 square feet of space for shops and restaurants, an increase of about 45,000 square feet. The challenge will be how to fill it in a way that's compatible with the Uptown area. "It's more upscale that it used to be, but it still has that grit. This isn't Minnetonka," Roberts said.

"We are looking for retailers who are unique, under-represented in the Twin Cities market and are interested in the Calhoun Square demographic -- diverse, edgy, hip, adventuresome and urban" said Jim Larson, a broker for NorthMarq, which manages the center. That's an especially tall order right now because of the depressed retail economy that has centers of all types scrambling to fill vacant space.

Calhoun Square has lost several tenants in recent years -- Borders Books, Urban Traveler, Starbucks, Caruso's Gelato Cafe -- and has a lot of space to fill. Ken Seifert, vice president/retail property management for NorthMarq, said the complex currently is 65 percent leased. That's significantly lower than the 85 percent average occupancy rate for Twin Cities area specialty retail centers, a category that includes the Galleria in Edina and retail hubs like Grand Avenue in St. Paul.

The only significant new tenants signed at Calhoun Square since the renovation began are LA Fitness, which will open a sports club next year, and a second restaurant for Roberts adjacent to Il Gatto, an upscale Italian restaurant he recently opened in the former Figlio's space. Some longtime tenants, like the Kitchen Window cookware store and Bay Street Shoes, have expanded, but the remodeled central courtyard still sports stretches of empty storefronts. Seifert declined to comment on how close NorthMarq is to signing other new tenants but acknowledged it is a challenge in the current tough retail economy.

Russ McGinty, an area real estate broker who specializes in retail properties, thinks LA Fitness is a strong addition to the tenant mix. "It will drive repeat business to the center," he said. The sports club will share space on the second floor with the Independent and Sushi Tango restaurants and an expanded cooking school for Kitchen Window that has an outdoor balcony for grilling classes.

Kitchen Window president Doug Huemoeller said he's always preferred to remain in Calhoun Square but admitted he considered relocating while the center changed hands and redevelopment plans stalled. Several tenants, including Borders, moved out after becoming frustrated with delays and uncertainty over whether they would have space in the complex when renovation was complete.

What's needed now, Huemoeller said, are more merchants that can make Calhoun Square a unique destination rather than just another place to shop. McGinty agreed and said that doesn't have to mean just local, independent operators. He said there are national chains that avoid suburban malls, preferring to be in urban neighborhoods. One example, he said, is Urban Outfitters, which has a store across the street from Calhoun Square. Siefert said NorthMarq is having discussions with some of those national chains, but declined to elaborate.

Looking over the renovated interior recently, occasional shopper Cyndee Lee Taunton was relieved Bay Street Shoes was still there, albeit in a different spot. She said the complex needs more edgy apparel stores like Heartbreaker, an original tenant that relocated not far from Calhoun Square several years ago. A friend who lives in the area, Nathan Santos, said the complex could use more nightlife spots, especially since the Uptown Bar across the street recently closed.

"It's the downtown of Uptown," said Santos of Calhoun Square's location at Hennepin and Lake. Both in their 30s, Taunton and Santos said they'd like to see the center bring back the kinds of shops where people could linger, like a bookstore, art gallery or coffee shop. A lounge area in the renovated courtyard has comfortable chairs but is not equipped with Wi-Fi. (Siefert said a plan to add it is under consideration.)

Stuart Ackerberg, a developer and property manager who's been active in Uptown for years, said he welcomes the prospect of a rejuvenated Calhoun Square. It's one of several Uptown area projects that have either recently been completed or will get underway soon, like the redevelopment of the Rainbow Foods supermarket, an apartment building at Lake and Knox Avenue and a retail complex planned for the Uptown Bar site.

Ackerberg, whose mixed-used project Mozaic has stalled because of difficulties securing financing, said his and other properties will be helped if Calhoun Square can put together a mix of shops and restaurants that will draw traffic to the area. The Mozaic, planned for the block bounded by Lagoon, Hennepin and Fremont avenues and the Midtown Greenway, originally included condominiums, retail and office space and a hotel. Ackerberg said revised plans may now only include retail and office development.

Calhoun Square's previous owners had planned to add more than 100 condominium units to the complex in addition to the retail renovation. BlackRock has had plans for a seven-story residential building approved by city planners but has said it won't proceed with any housing development until the residential market improves.

Susan Feyder • 612-673-1723