Unrest ruined their businesses, rebuilding may displace them for good

First came the pandemic that forced many of the small restaurants in St. Paul’s Midway Shopping Center to temporarily close. Then, as many were preparing to open again come June, the unrest following the police killing of George Floyd made its way to the Midway neighborhood, causing damage to the strip mall that many of the conjoined businesses there have shared for decades.

Now, because of a provision in their lease agreements called an “excessive damage clause” small businesses of the Midway Shopping Center are being kicked out to make way for upscale retail and residential that are coming with the construction of “United Village,” a mixed-use project on the nearly 35 acres around Allianz Field, home of the professional soccer team Minnesota United FC.

The excessive damage clause allowed Midway’s landlords to terminate the leases in the event of destruction or damage to an unsalvageable extent.

“We worked very hard to get to where we are now,” says Jenny Hui of Golden Gate Cafe, her family’s business, which had been decorated with positive reviews and lauded for its fast, friendly service of Americanized Cantonese favorites like Moo Goo Gai Pan. “We would never have thought [we’d] go out like that.”

Their displacement is not surprising to those who have examined Twin Cities development, however. Brittany Lewis, a senior researcher at the University of Minnesota’s Center for Urban and Metro Affairs, completed a recent study of the gentrification of the Hamline-Midway neighborhood and found residents are “finding that their ability to maintain residency, build community, and see a future in this neighborhood is often placed into question because of these targeted urban redevelopment approaches.”

Hui recounted the family’s decades in the neighborhood. “My dad has had the restaurant for 34 years. It was passed down from my grandpa, so we’ve been a part of the community for about 40 years,” Hui said. While Golden Gate Cafe was largely spared from damage to its particular space, other buildings in the mall were less fortunate. “Rioters set the mall on fire and being that we’re all connected with gas and power lines running through the mall, it wasn’t safe to have that stuff turned on and it affected us,” Hui said.

In late June, Hui’s family and the other shopping center tenants received an email from the property’s owner, Rick Birdoff of the New York-based RD Management, notifying them of the terminations and requiring them to be out by July 17.

“It was a sudden surprise,” says Manylone Luangrath of Thien’s Cajun Boiling Seafood. “First COVID-19, then the riots and looters. Then they shut down the water and everything and gave really short notice. Without any help from [the owners] we had to move out. So far,” she said in late July, “No one is helping. We’re moving out, renting storage and everything to put out stuff in there before they shut everything down and we won’t be able to go back again.”

Many tenants made significant investments in their space over the years, including custom equipment not designed to function elsewhere — costs that are now sunk.

“The damage to the building became impossible to repair,” RD Management’s Birdoff said. Terminations were “all under the provisions of the lease. We didn’t have the unilateral right to just terminate, we had the right under the lease.”

While Hui’s family decided to talk to other tenants before charting their path forward after receiving the eviction email, Luangrath attempted to contact the owners, but got no answer.

That’s when the city got involved.

“When an event like this happens that displaces people, it really upends people’s lives and reverberates throughout the community,” says St. Paul City Council Member Mitra Jalali, who tried to bring together a coalition of tenants, the mayor’s office and other city officials.

She and fellow City Council Member Dai Thao began to work with tenants to see what they could do.

“I kind of thought we might have an issue over there when it came out that the place was burnt,” Thao said. While a phased reconstruction for United Village planned for years down the road would have eventually required the tenants to move at least temporarily, “the fire and the civil unrest sped up that timeline,” he said.

Knowing they weren’t prepared for the sudden change, Thao reached out to tenants to let them know about city-based assistance programs like Pay It Forward to ease the blow through grant and loan relief opportunities.

But city programs can only go so far. Thao set up a call in late July with Birdoff and Bill McGuire, billionaire owner of the Minnesota United FC, which is also involved with the property and its future development.

“They said that due to the damage it’s unsafe, the amount of asbestos and mold, too many factors all leading it to be unsafe,” Hui says. But she thinks it has more to do with values and profit than feasibility. “It’s not worth it to rebuild it versus them demolishing and starting over.”

Birdoff said that they looked into the possibility of repairs. He declined to share an estimate of the repair costs but described it as “just not cost-effective.”

While the eviction would stand, the negotiations did result in several tenants receiving extensions to the move-out deadline as well as up to $10,000 in reimbursements from Birdoff and McGuire for the upfront costs tenants incurred. “We had no legal obligation to do that,” Birdoff said.

The duo has since offered tenants the ability to bring their businesses back to the area when United Village is complete years from now. But it’s not clear what that actually means or would look like, Hui said.

Lewis, the U researcher, said Hamline-Midway is a rich target for both developers and new residents “actively seeking out ‘up and coming’” areas like Hamline-Midway for their direct benefit when the neighborhood transforms from the blue-collar place it once was into the urban oasis projects like United Village look to create.

For her study of the neighborhood, Lewis talked to a variety of younger, newer homeowners “who were very explicit in their language about why they moved — ’We knew this place was going to boom,’” she says. “It had a lot to do with the intersection around Snelling and University being one of the most high-traffic intersections in the state,” which United Village touts in its promotional material.

Lewis said gentrification is the market behaving as one would expect — investors seeking out bargains in up-and-coming neighborhoods.

Development can come with certain benefits like healthy food in food deserts and increased walkability, according to the Rice Kinder Institute for Urban Research. Policymakers often view it as a way to address concentrated poverty and declining tax bases that plague areas like the unfinished spaces of America’s suburbs. But these changes can come with displacement in neighborhoods that are already home to businesses and residents who depend on its affordability.

Still, “I don’t necessarily believe development has to be this way,” Lewis said. “If we have an investment in ensuring that all communities have equitable access to investment, then you have to actually put policies in place to make sure they get that access.”

In other words, the small businesses at Midway Shopping Center need access to capital so they can be investors, something that the neighborhood is currently considering.

The Hamline Midway Coalition recently launched a survey to gauge community interest in creating a neighborhood real estate investment cooperative (REIC) that would allow residents to “pool their money … to invest in real estate for the benefit of their neighborhood.” It would be “an alternative investment option for neighbors who prefer to put their resources to work for a financial return closer to home.” They also view it as a way to reduce the “extraction” of local businesses paying rent to “far-off landlords.”

In the meantime, will the now displaced Midway businesses be able to afford to return? Birdoff said he imagines rent “would be more expensive, but it’s too early to say what the rent would be.” He said that he would consider finding ways to help make the prices more affordable, but ultimately “wonder[s] if maybe the city could help as well.”

Thao hopes to work with fellow city and state officials to “create a program where we can subsidize some of the leases.”

Jalali wants a broader solution that tackles the real issue: As long as small businesses like these don’t own their own buildings, they’ll always be at the mercy of their landlords. Changes like these, she said, lead to people feeling unwelcome to do business in their own communities. She plans to work with developers and landlords to ensure “that there’s accountability in that relationship.”

For now, Birdoff’s best guess at what the future of the space will hold is that the “ground floor will be commercial. We need parking, parking is very important, and either residential or commercial above.”