Twin Cities developer Bob Lux is buying most of the troubled block in downtown Minneapolis from its current owner, Union Labor Life Insurance Co., Lux confirmed Thursday.

Terms of the deal were not disclosed. Lux would say only that he has signed a purchase agreement to acquire Block E and plans to close on it by late summer. People familiar with the contract said there's a 60-day due diligence period before it's final. The agreement includes 213,000 square feet of space on three levels plus underground parking, but does not include the Graves 601 Hotel Wyndham Grand, which is separately owned.

"With the opening of Target Field, there is an excitement on Hennepin Avenue, and Block E is at the center of it," Lux, principal of Minneapolis-based Alatus LLC, said in a prepared statement. "We intend to significantly invest in Block E to attract tenants that complement the neighborhood's new energy and opportunities."

Lux is best known as one of the developers behind two successful, upscale condo towers in downtown Minneapolis -- Grant Park at 500 E. Grant St. and the Carlyle at 100 3rd Av. S.

Lisa Goodman, the Minneapolis City Council member for the area that includes Block E, said the retail and entertainment complex will benefit from having a local owner.

"It's perhaps one of the best things that could happen," she said.

Andrea Christenson, a downtown retail broker at Cassidy Turley, agreed.

"Bob lives in the community, he offices downtown. It's going to be personal for him," she said. "I think he understands downtown retail and I'm sure he has some great ideas."

Lux has other projects in the pipeline. One is near Block E -- a mixed-use project on what is now a parking lot at Hennepin Avenue S. between 10th and 11th Streets. Lux has proposed apartments, senior housing and a Lunds grocery there, Goodman said. Lux also owns the old Grandma's Saloon & Grill spot by the University of Minnesota, and his company has preliminary approval for a 25-story building with 369 apartments.

And his Alatus company is still working to develop the Penfield, now a proposed $50 million apartment building in downtown St. Paul with a Lunds grocery store.

Block E's original developer, McCaffery Interests of Chicago, opened the $134 million development in 2002 with a Hard Rock Cafe -- which remains -- and about $39 million in land and tax subsidies from the city of Minneapolis. The project never took off, and the recession exacerbated its troubles. Most recently, GameWorks closed its location there March 29. A few days later, the owners of the Hooters restaurant filed for Chapter 11 bankruptcy protection.

In December, McCaffery handed the ownership over to its main financial backer, Union Labor Life Insurance Co. (ULLICO) of Washington, D.C.

Goodman, who voted against the original subsidies, said that representatives from McCaffery and ULLICO visited her less than a month ago and asked whether the city would be interested in contributing more money to help revitalize Block E.

"I said I'd be happy to have a public vote on any additional city contribution," she said.

Goodman said Lux told her he won't ask for any public money.

Dan McCaffery said he thinks he's helped put the pieces in place to give the block a chance to do better, such as pushing for two-way traffic on nearby streets.

"We've been kind of an island up until recently," he said.

An island is one of many metaphors for Block E, with one writer likening it to a Frosted Mini-Wheat, with a plain Hennepin Avenue side and a fancy hotel side.

Christenson, the retail broker, said the configuration of the building doesn't work and one of the key issues Lux will need to address is public access.

Block E's market value isn't clear given that valuations on commercial property are typically based on rents. ULLICO's initial investment in the retail portion of the project was $56.8 million. Benjamin Graves, president of Graves Hospitality Corp., which owns the Graves 601 Hotel, said thinks the current value "would be much less than that."

Jennifer Bjorhus • 612-673-4683