As Laurel Village grows younger, businesses fret

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October 29, 2002 // UPDATED 1:32 pm - April 30, 2007
By: Kevin Featherly
Kevin Featherly

A tough corporate economy forces complex to court younger renters with less disposable income - and nearby store owners feel the bite

Times have changed at Laurel Village. Not everyone is happy about it.

A flagging economy and other factors have meant that backpack-lugging college students are increasingly replacing briefcase-toting professionals around the 727-unit Hennepin Avenue apartment complex in the Loring Park neighborhood. They have done so to the chagrin of some nearby businesses.

"They are renting to a lot of college students," said Raed Kakish, co-owner of Indulge and Bloom, 1320 Hennepin Ave., an upscale floral shop that has seen its walk-in business all but disappear since the economy soured.

"These people wearing backpacks are not shopping in the stores," said Kakish. "They're not professionals with an expendable income to help support the retail businesses down here. That's the bottom line."

Others see the situation in a different light.

Laurel Village has changed, admits property manager Jim Baumgartner. Upscale renters in many cases have taken advantage of low interest rates and bought homes, leaving Laurel Village behind. A few neighboring businesses have relocated, taking their employees' shopping and dining dollars with them.

The neighborhood faces real challenges, he said.

"You can have a glass-half-full or a glass-half-empty attitude about it," Baumgartner said. "We've always looked at change as an opportunity."

It is, for instance, an opportunity for 24-year-old telecom technician Mychael Zick to live Downtown. Zick moved into Laurel Village Nov. 1.

If the area skews younger, he said, that's fine. He is taking advantage of rental enticements offered at Laurel Village and virtually all Downtown apartment complexes since the economy began withering two years ago.

While some Downtown apartments run upwards of $2,000 a month, Zick said, with such incentives as one month free and $300 off a second month's rent, he can live in Laurel Village for about $880 a month.

"I'm not a rich man, so I like that it's economic, and if it's economic to college kids, that's a good thing," Zick said. "Why shouldn't we be able to have a place Downtown, too?"

Upscale downscaled Laurel Village was conceived in 1985 as a yuppie haven.

"It was very much designed for single, upwardly mobile people who wanted to live in a trendy urban area," said Baumgartner, a vice president of the complex's property managers, Great Lakes Management Co.

The city helped fund the vision, issuing nearly $28 million in bonds in 1986, to be paid back by higher property taxes generated by Laurel Village. The city also agreed to back up another $71 million loan from Norwest Bank to Laurel Village's owners.

The plan was to form a self-sustaining community where young professionals could walk to satisfy their needs from food to dry-cleaning.

"The concept was that it would be like New York City, where you live and walk Downtown and don't need a car," Baumgartner said. "We've realized since that, in Minnesota, that's not a real reality."

Nonetheless, in other ways, Laurel Village worked according to plan. It opened in 1989, adding units and retail spaces over time. By the late 1990s, the complex was like other Downtown rental properties during an economic boom -- successful enough to charge premium rates for premium renters.

Neighborhood businesses reaped the benefits. Kakish says that after his store opened in 1998, he and his partner were able to pay their rent off the store's walk-in traffic. Their burgeoning order-by-phone business was gravy, Kakish said. Now, the phone business virtually is the business, he said.

About a year and a half ago, neighborhood people say, the area began to change. HGA Architects, a nearby business with more than 300 well-paid employees, relocated. The Billy Graham Evangelistic Association announced plans to gradually move to North Carolina.

Laurel Village itself was booming, especially its fully furnished corporate rental suites. Director of Marketing Kathleen Rosene said the Y2K computer scare meant that technicians flew into town to help ward off the bug, occupying Laurel Village's corporate units at near capacity.

However, Y2K passed; the computer specialists went home. Later, business travel slackened. Then came Sept. 11, and business travel ground to a halt. In an effort to spur the staggering economy, the Federal Reserve lowered interest rates several times, making the time ripe for those with the money to buy homes.

Rising vacancies took a toll on retail spaces in Laurel Village. One of them, Hardware on Hennepin, closed several years ago, and its space remains unoccupied. Bravo Burrito also folded, though that space has since been leased, Baumgartner said.

Tough times have forced Laurel Village property managers to drop apartment rents an average of about $50 a month, Baumgartner said, on top of various other incentives.

"We have hit that demographic of a younger, entry-level renter," he said. However, because of Laurel Village's prime location, he said he is confident of its long-term prospects as the economy improves.

"But in the short term," Baumgartner said, "we're kind of scrambling to say, 'OK, who's going to be living here in the next two years until the economy starts perking up again?'"

College students might be increasingly among the newcomers. Baumgartner said Laurel Village is in talks with The Art Institutes International Minnesota, 15 S. 9th St., to provide about 40 units of student housing.

Jay Hurley, manager at Espresso Royale, 1229 Hennepin Ave., which operates across the street from the apartment, said his business has dropped off about 20 percent in the last year. The students now living in the complex, he said, don't appear to be among the coffee shop's best customers.

"The neighborhood is definitely in flux," he said. "I don't think college kids could have afforded Laurel Village two years ago."

Coming improvements Baumgartner thinks that skewing younger doesn't mean Laurel Village is skewing worse. Calls for police service, he said, have actually gone down in recent years; Minneapolis Downtown Precinct police officer Craig Williams agrees.

"I've always known it as a nice area over there," he said. "Very little crime."

Crime is not absent, however. There was an armed robbery at the complex's Subway shop in late October. Baumgartner said it was only the second robbery in the six years that he has managed the property.

Also, there are several nearby homeless shelters, with residents whom Baumgartner refers to as the area's "urban color." For the most part, he said, they cause no trouble, though the complex maintains a private "courtesy patrol" to move vagrants along if they loiter.

Subway manager Scott Archibald dismisses his restaurant's robbery as one of those things that happens in the big city. "I'm not worried about the neighborhood," he said. "They keep it up very well. They're constantly doing stuff around here."

Most of that "stuff" is a $3 million, privately financed Laurel Village renovation project. By the time it is finished this year, Baumgartner said, there will be improved street lighting, new banners with new logos, a repainted parking ramp, and the removal of a brick wall that once separated retail stores from the street -- which inadvertently provided transients a place to congregate.

Kakish, who lives in Laurel Village, worries that the improvements won't be enough. He worries that by accepting younger, less wealthy tenants, the complex is abandoning its mission of catering to the upwardly mobile professionals. He frets that the village could degenerate into a kind of fancified low-income housing.

City Councilmember Lisa Goodman (7th Ward), who lives across from the complex, dismisses such predictions. She said renovations are solid evidence that Laurel Village is not giving up on its mission, and is instead simply maneuvering its way through a tough economy.

"Why would Laurel Village pump all that money into its streetscape if what they were trying to do is downgrade the wealth of their tenants?" she said.

Kakish, who has a long-term lease, isn't buying it. "I believe they've lost complete focus on what this apartment complex is supposed to be all about, and I believe they are making a drastic mistake by opening it up to student housing," he said. "Professionals do not want to live by college

students."

It's a point that Goodman, a professional of some standing, disputes.

"If there is a change in the demographics, that just adds to the diversity of this neighborhood," she said. "To characterize changes as negative because it's younger people or students, I think that's really unfair."