On Broadway, nonprofit developer lays an egg

A proposed $70 million redevelopment on W. Broadway in north Minneapolis has proved a bridge too far for the celebrated nonprofit developer that resurrected E. Franklin Avenue on the South Side.

Great Neighborhoods Development Corp., formerly the American Indian Business Development Corp., filed for Chapter 11 bankruptcy protection after Franklin Bank, its longtime partner, began foreclosure proceedings. The bank sought to take over successful commercial properties on E. Franklin that Great Neighborhoods had pledged as collateral on about $2 million in nonperforming loans related to the W. Broadway project.

Suffice to say that CEO Theresa Carr, who has led Great Neighborhoods since 1997, is no longer the toast of City Hall.

"The city was a partner but lost faith in her ability to deliver the [W. Broadway] project in late 2009," said Mike Christenson, the city development director. "The project got too big for her. Many things happened to the economy and the project in 2009 to make it too difficult to complete. We had many conversations in 2009. Theresa went through too many stop signs."

In Carr's defense, the city, Franklin and other banks had put the gas in the tank and air in the tires for a deal that had traction and city support. That was, until the major prospective tenant, the Minneapolis YWCA, pulled out of a development agreement late last year. A second prospective fitness club pulled out of talks last winter. Carr couldn't meet the interest payments on several million in debt that Great Neighborhoods had used to buy several parcels on the two blocks that were expected to be under construction today.

"We were behind on loan payments," acknowledged Carr. "But we were trying to work with Franklin Bank."

Franklin Bank began foreclosure in the spring and started to seize rents from the cash-flowing Franklin Circle Shopping Center and Ancient Traders Market on the South Side.

"They put a piece of paper on the table and said we should hand over our fully leased property on Franklin Avenue and they would let us keep the real estate on West Broadway," Carr said. "Our board was unwilling to do that. The priority of our board is to preserve our ownership in Franklin Circle Shopping Center and Ancient Traders Market."

The W. Broadway project is on hold for now.

Commercial real estate has seen many projects around the country collapse in the last two years, including the failure of huge developers such as Opus Corp.

"Banks have to move forward with foreclosures when payments stop," said Dave Reiling, CEO of Franklin's parent company, Sunrise Community Banks. "If an Opus can go down, so can Great Neighborhoods. You've seen it in wealthy and poor neighborhoods. We're not the only creditor. Theresa basically leveraged everything she had for West Broadway."

Said Kate Barr, a veteran commercial banker who has headed the Nonprofits Assistance Fund for a decade: "It was an enormous project on West Broadway even in a good economy. I don't know if Franklin acted inappropriately. But Great Neighborhoods owes them a lot."

YWCA backed out

The $70 million "Broadway Plaza" was envisioned by Carr and the Minneapolis Department of Community Planning and Economic Development in 2007-08 as a game-changer for the lower end of W. Broadway, where a new Cub store, across the street, and other parcel-by-parcel redevelopment has provided hope for the neighborhood. Mayor R.T. Rybak and others have pledged to return W. Broadway to something approaching its 1950s status as a vital commercial artery.

The Minneapolis YWCA in 2007 entered into an agreement with Great Neighborhoods to be the anchor tenant of the two-block development through a 120,000-square-foot YWCA. An abandoned car dealership across Aldrich Avenue from the YWCA would be renovated as a 40,000-square-foot building for offices and retailers and a police safety center, with a 300-car parking structure adjacent.

Becky Rolloff, CEO of the Minneapolis YWCA, said, "Our due diligence showed that it would be a good location for a full-service health and fitness facility for us."

But the YWCA board backed out of the development agreement on the $45 million health club over a $1 million loan guaranty that it had made to Wells Fargo Bank with Great Neighborhoods and uneasiness over "financial commitments asserted by Great Neighborhoods that were not met."

Carr subsequently negotiated with the Minneapolis YMCA, which has been considering a teen-and-adult fitness facility on the North Side. However, the YMCA pulled out of those talks. When another prospective anchor tenant fell through weeks ago, and under pressure from Franklin Bank, Carr pulled the plug and filed for bankruptcy.

Christenson, Carr and Franklin Bank have had better days. The North Side and the city lose this year. A bankruptcy judge will decide who gets what.

"I don't think anybody needs to get blamed," said Don Samuels, a City Council member from the North Side. "It's just unfortunate. Theresa is an incredible entrepreneur. She did it on E. Franklin, she was starting to do it here. Insurmountable conditions turned against her. Her heart is in the right place. It will take more courageous people."

Somebody else may complete Theresa Carr's vision.