CEBC IN THE NEWS

Neal St. Anthony on Business

Chicago Developer Bullish 
on Minneapolis' Block E

Published Friday, August 2, 2002 in the Star Tribune.

By Neal St. Anthony

Dan McCaffery, the blunt Chicago developer who's putting the finishing touches on the soon-to-launch "Block E" retail-entertainment and hotel complex, makes no apologies for what some call a "suburban development."

"That's impossible," said McCaffery of the $150 million-plus complex. "Block E is urban. Fun. Family-oriented. But Block E, in this town, was born into a vindictive attitude. It's chic to criticize Block E.

"Why should the city resident have to go to the suburbs to see a movie, read a book at Border's, go bowling or eat at Red Lobster? And we'll have unique but not elite attractions, like Sega Gameworks and the beautiful Le Meridien hotel. And there will be fine dining, too."

For critics of the city-led Block E project, including me, it's time to shut up and hope this baby flies. The bets were placed when the Minneapolis City Council narrowly approved the controversial project in 1999 after 10 years of staring at a parking lot at Sixth St. and Hennepin Av.

A lot of parties have investments in this one. Let's start with city property-tax payers. The city has invested about $39 million in clearing the land, siting utilities and building an adjacent parking ramp.

The developers, McCaffery and hotel developer Jim Graves, have $10 million to $15 million of their own and partner equity in the deal.

Union Labor Life Insurance Co. of Washington, D.C., has a $60 million mortgage. And Graves is borrowing about $40 million to build the four-star Le Meridien Hotel, which convention-and-tourism promoters say is needed.

Retail tenants will spend $20 million-plus to build out their space.

The city gets repaid first for its project-related debt from the nearly $2 million in property taxes that McCaffery estimates Block E will generate annually.

You can't argue that McCaffery ducks a challenge.

He is the puckish, sometimes-profane 55-year-old son of working-class immigrants who quit a public-school teaching job to join what is now BCED Development 24 years ago. He ran the Minneapolis office of one of downtown's largest landlords for a few years before being promoted to the Chicago region and eventually forming his own Chicago-based firm in 1987.

The decade-long debate over what to do with demolished Block E ranged from nothing to a park to anything that would generate taxes. A few developers came and went. Some critics said there was too much subsidy. Others said the project smacked too closely of a strip mall tied to a 15-screen Crown Theater.

McCaffery's vision is almost done.

The Hard Rock Cafe in September will inaugurate a quiet, staggered opening among merchants and restaurateurs. Everybody should be open by January.

McCaffery, a hard-charging fellow, set a veritable BCED leasing record when he signed up loop tenants after the Northwestern National Bank fire two decades ago. He is respectful of people but critical of the city's byzantine planning-and-development process -- with multiple agencies and committees -- which the new mayor and council acknowledge needs streamlining.

And he has a national reputation for getting things done.

"I'm successful because I've known failure," McCaffery said. "That's how you become a successful developer."

He has ramrodded an attractive, two-level center, complete with 10 street-level entrances to shops and restaurants, that contrasts favorably with the stone-cold face of City Center across Hennepin Avenue.

"This is not a mall but a collection of buildings," McCaffery said. "By Friday, we'll be planting trees around here that are bigger than the ones on the Nicollet Mall. The sidewalks will be painted and there will be planters all over. This isn't the end. It's the beginning.

"People will have to decide whether this city will reach for a downtown quality that it still doesn't have."

Spoken like a true developer.

By the way, hotel developer Graves has settled, for an unspecified sum, a lawsuit brought by Marriott Corp.

Marriott sued Graves this year after he dropped Marriott Renaissance as the franchiser of the development's 256-room upscale hotel. Graves said it didn't meet agreed-to quality standards. Marriott said Graves Hospitality broke a contract.

Glanville bows out

Veteran money manager Peter Glanville, a guy never accused of having an oversize ego in a business that can boast a bull-market worth, is calling it a career after 33 years.

It's been announced internally that Glanville, 58, will retire as managing principal of Lowry Hill, the private money manager for affluent families, at the end of the year. He will be succeeded by veteran Jim Steiner.

Glanville started out in 1969 as an analyst, working on equity portfolios with Jim Jundt and Gene Sit at then-IDS Financial Services, now the American Express subsidiary that has spawned a lot of successful money managers.

Glanville spent about a dozen years as research director at what is now RBC Dain Rauscher, before joining Lowry Hill in 1992.

"I've been lucky," Glanville said. "I am not going to have to worry financially. I've got four grandchildren and a wife who loves to travel.

"I'll be more active in the United Way, church-related things and the Youth Enterprise Foundation that several of us set up at the Hospitality House in north Minneapolis. We work with inner-city kids on business. In fact, they've got kid-operated silk-screening businesses over there that could do $500,000 revenue this year. They know a lot about T-shirts and sweat shirts. And they work hard and do their homework. I get as much joy out of that as anything. And I'm going to work on my golf game."

Net, net: Glanville is just shifting his investment focus.

Lowry Hill manages about $5 billion in diversified portfolios for about 300 client families from offices in Minneapolis, Naples, Fla., and Scottsdale, Ariz.

Evans no-shows

A Minneapolis forum on corporate ethics featuring U.S. Commerce Secretary Don Evans was canceled Thursday for compelling reasons.

Evans was asked to remain in Washington, D.C., to deal with fallout from the corporate-fraud legislation signed into law Tuesday by President Bush.

Evans was scheduled to participate in a forum on business ethics, governance and the investment client at the University of St. Thomas business school with Ron James, chief executive of the Center for Ethical Business Cultures.

Previous events, designed to showcase the commitment of the Bush administration to fair play in the boardroom, were held in Philadelphia and Boston.

Here's my recipe for keeping the kitchen clean: If it doesn't pass the smell test, isn't in the long-term interest of ma-and-pa shareholders, and if you don't want employees to know -- don't do it.

The author

Neal St. Anthony reports on companies, people and trends in the Twin Cities business community. His column appears Tuesdays and Fridays.

© Copyright 2002 Star Tribune. All rights reserved.

Center for Ethical Business Cultures

1000 LaSalle Avenue, TMH 331 ▪ Minneapolis, MN 55403-2005 ▪ USA

Phone: 651 962 4120 or 800 328 6819 Ext. 2-4120 ▪ Facsimile: 651 962 4042

Email: mail@cebcglobal.org

© 1978-2008 Center for Ethical Business Cultures. All Rights Reserved.

Business Partnering with the University of St. Thomas - Minnesota