Midtown Global Market edges toward independence

The future of the Minneapolis' Midtown Global Market appeared to be in jeopardy last winter when then-Mayor R.T. Rybak sought funding to help keep one of his signature projects afloat.

But roughly six months after the City Council approved a controversial $1.6 million package of debt forgiveness and a customer parking subsidy, the market's leaders are much more optimistic. Occupancy and visitor numbers are at an all-time high, revenues from rent are climbing and more than a dozen businesses fought for space there after a vacancy.

Board members broke into applause after seeing the latest numbers at a recent meeting.

"I've been involved for a long time with MGM, and I think it was the most upbeat and exciting board meeting," board co-chair Atum Azzahir said.

Unlike most retail centers, the eight-year-old marketplace in Lake Street's historic Midtown Exchange backs unproven entrepreneurs who are mostly immigrants eager to become successful business owners.

Despite the good news, the market is still not standing on its own. Private fundraising is still needed to cover an expected $160,000 budget hole this year and the market may have to ask the city for a continued parking subsidy. The city's forgiveness of about $1.5 million in outstanding debt is contingent on private lenders forgiving or converting about $2 million in debt, but a city development staffer said that should be complete later this year.

The market's chief manager, Mihailo Temali, said a combination of other factors helped the market turn around. It opened just before the recession began, making it hard to fill market stalls. It then took time for customers to become aware of and comfortable with the year-round, all-week public market model, he said, which was unique to the area. Entrepreneurs have also grown more interested, with 15 businesses recently applying to be in a space vacated by the Left Handed Cook.

The Left Handed Cook's switch from a stall to a full-fledged restaurant, The Rabbit Hole, gobbled up previously empty space. And Temali said the market has driven up visitor numbers by reaching out to more school groups and convention visitors.

The market is now home to about 38 businesses operating stalls, including the latest addition, brewpub Eastlake Craft Brewing, and another 16 that share space in a communal kitchen.

"We're driving very hard to get to a place where we don't need any public subsidy or any subsidy of any kind," said Temali, who is also CEO of the Neighborhood Development Center, a nonprofit company that jointly owns the market with the Cultural Wellness Center.

Temali said the market's goal for five years has been to reach "90/3/90" — 90 percent occupancy, an average of $3 per square foot in monthly rent and a 90 percent collection rate for rent. A recent lease pushed them above 90 percent occupancy, Temali said, collections are closer to about 99 percent and average rent is at $2.62. Business rent is slowly increased as different leases come due.

In addition to the debt forgiveness, the city also agreed to pay $115,000 for a portion of 90-minute free customer parking and will give the market another $25,000 through a competitive grant program.

Temali said early numbers indicate that the market will, for the first time, make a profit this year before it pays for the marketing and other business help it provides to the vendors. The market already has $100,000 in private pledges to help cover that gap of about $160,000 — in addition to the $25,000 city grant.

"That is a dramatic reversal from when even the operation of the market needed heavy subsidy," Temali said.

Temali added, however, that the market may return to the city to seek funding that is ancillary to the market's primary operations, such as continued help with parking validation or a break paying for city police presence — both of which cost about $60,000 annually. Free parking is considered necessary for the market's grocery to compete with full-fledged grocery stores.

Their model of incubating small and first-time business owners, Temali argues, is unique but comes at an extra cost.

"No other public market in the country, as far as we know, even worries about that," he said. "They're not located in a very low-income neighborhood. They're not deliberately trying to assist low-income entrepreneurs of color get started and grow their business. They're not a business incubator project."

One of those businesses is Sonora Grill, a Latin-fusion outpost that recently opened a full-fledged restaurant on East Lake Street after outgrowing its Global Market location — where it still has a stall. Temali's organization loaned Sonora's owners $25,000 to get off the ground in 2011, provided marketing and licensing advice and even arranged free legal counsel.

"The only thing that we knew ourselves was just how to cook," said co-owner Conrado Paredes. "We never had a business before. So there is a lot of stuff that you never think about."

Azzahir said focusing on small businesses has been harder, but worth it.

"Rather than give over to a large business that wasn't local, we stayed the course with the small businesses, with businesses that represented their cultural communities, with new people to the country," Azzahir said.

Eric Roper • 612-673-1732

Twitter: @StribRoper