Minneapolis block resists redevelopment despite location and traffic

The double lot where two houses were razed years ago sits empty across Interstate 94 from downtown Minneapolis, stubbornly resisting a city building boom that's adding more than $1 billion this year to the city's tax base.

The stagnation at each end of this high-visibility block of Park Avenue between the freeway and Franklin Avenue illustrates the difficult economics of bringing infill multifamily development to market in the inner city, especially when compounded by perceptions of crime and blight.

Ask developer David Crockett, who with his investors behind him had run up three straight successes in the Minneapolis housing market before the recession hit right as they were poised to build a 36-unit building on the lots with the spectacular views of the skyline across I-94.

They tried marketing the planned condos for six months. But a worsening economy forced them to pull the plug. Lenders shunned financing new condo buyers while they were foreclosing on others. Now Crockett is trying to unload the property.

His bad timing continued a string of goose eggs that have kept this corner of the heavily trafficked block of Park Avenue between I-94 and E. Franklin Avenue vacant for more than 20 years, through boom and bust economies. The two aging houses built in the block's Victorian heyday were razed by the early 1990s, one heavily damaged by fire.

It's one of two empty corners that bookend this heterogenous block in the neighborhood that calls itself Ventura Village, part of the ­Phillips community. Both resist redevelopment, despite high visibility and convenience to downtown, within walking distance of such major employers as Hennepin County Medical Center.

Some attribute that stagnation to the difficulties of developing multifamily housing in Minneapolis generally, excepting select areas such as Uptown and downtown, where higher rents are the norm. Some say the block's undeveloped lots are too small to generate the economies of scale that make a developer more comfortable with the financial risk.

This block on the east side of Park lumps together multiple housing types. There are fancy Victorians and a brownstone built as single-family mansions, large enough that even owner-occupants rent out rooms. There's a fourplex that was converted to a condo years ago. There's a larger apartment that serves as a transitional home for recovered alcoholics.

But there's a dearth of infill construction. The only recent building is an eight-unit condo completed 10 years ago by developer Jason Geschwind, who also rehabbed the fourplex for condos. He lived on the block for several years, joining other landlords in chasing away drug dealers.

He saw the potential in a block that's close to downtown and in attracting such condo buyers as medical residents or a buyer for Dayton's. Some who bought his condos were transplants from Chicago or New York, where condo prices made his units look like a bargain. "I think 'bad neighborhood' is probably a little bit of an overstatement from their perspective," he said.

But those who bought units still suffer from the vicissitudes of the market. Condos that sold for as high as $260,000 are now assessed at less than half of their pre-recession value.

Geschwind also once owned the corner lots up the street at 1801-1805 Park, the ones with a spectacular view of the skyline that's not likely to go away with the freeway as a neighbor. He'd bought them from area property owner Mark Orfield, who'd bought them mainly to protect his nearby properties. When Geschwind got overextended financially before he could build condos there, he sold them to Crockett for $465,000, considerably more than he'd paid.

Others with development experience suggest that the parcel is just too small at 18,000 square feet to spread the nonconstruction costs of developing a site over the limited number of units it can hold — a limit Crockett said was governed by the number of underground parking spots the lot could handle.

At the block's other end, longtime area landlord Robert Anderson owns a slightly smaller parcel of three bare lots that he's had on the market for two years. He started at $500,000, but he's down to $375,000. "It's high traffic," he said of the property that fronts on both Franklin and Park, across from Peavey Park.

Yet when asked whether the block has gotten better or worse, he answered, "There's not much good to say about it. There's a lot of drugs at Chicago and Franklin. You can see it when you drive through there. The people there look like drug dealers. That mother and child got shot in the park."

But there may be an opportunity for an opportunistic buyer. That's because the Ruter family, which owns other frontage on Franklin next to Anderson and more stretching around the corner on Columbus Avenue, also is selling its holdings. The combined 43,000 square feet available between the two adjacent sellers — about the size of eight typical city lots — would allow a developer to spread costs across more units.

Across Columbus, the Somali-owned Baraka Plaza has explored reconfiguring the corner shopping center it owns on Chicago Avenue with five adjacent publicly owned lots to build an 80-unit residential-commercial complex, but hasn't obtained financing.

Unlike Anderson, Sara and Andrew Howard live on the block, and their two oldest children attend a nearby Christian grade school. They're one of several younger couples who bought adjacent Victorians and share their backyards, including a weekly potluck that attracts several dozen people. That tradition has been going since Jon and Bliss Benson started it in 2004. The Bensons bought the ­gutted house of Donna Ellringer, a well-known activist who moved out, and have spent more than $275,000 improving it.

Although they've been willing to make that investment, Sara Howard said she's not surprised that developers don't take the plunge. "There's no sure bet if people rehab here that there's going to be that upswing," she said. The neighborhood still has a stigma, she said, but it's not bad and they're here to stay.

"Fear-based decisionmaking is never good decisionmaking."