As office tenants move out, Madison Equities fires back at St. Paul officials for downtown crime

Days after St. Paul officials blasted downtown’s largest property owner for the spiraling state of the Lowry Apartments, Madison Equities fired back, saying the city should take accountability for unsafe conditions in the urban core.

Kelly Hadac, longtime attorney for the real estate company, said several office tenants cited crime in their decision not to renew their leases this year. The federally run St. Paul Vet Center, previously housed in Madison Equities’ U.S. Bank Center, negotiated an early move-out date and temporarily relocated to Richfield.

“The mayor and the city need to take responsibility for the deteriorating conditions in St. Paul rather than cast blame on property owners who will lose millions upon millions of dollars due to the crime/drug use that is allowed to occur without any consequences,” Hadac wrote in an email. “Such losses will lead to the further decay of St. Paul as large buildings will most likely soon be boarded up and left without any security in place.”

Madison Equities’ put its entire downtown office portfolio on the market this spring following the death of the company’s founder, Jim Crockarell. Lawsuits, a bankruptcy, foreclosure and other signs of financial distress soon emerged.

A judge on Wednesday appointed an emergency receiver to take over management of the Lowry, where tenants have reported repeated problems ranging from break-ins to pest infestations to broken elevators. Mayor Melvin Carter publicly condemned Madison Equities for these issues several times this week, saying the company effectively abandoned the property.

A spokesperson for Carter said the mayor was unavailable for an interview Thursday and directed questions to Joe Spencer, president of the nonprofit St. Paul Downtown Alliance.

“The stories that we’re seeing out of the Lowry, or even other places, we’re not seeing in all the buildings downtown,” Spencer said.

Hadac acknowledged that may be the case. But, he said, the city has allowed crime to concentrate near St. Paul’s Central Station light-rail stop, where many of Madison Equities’ largest buildings are located.

The Alliance Bank Center across the street lost its namesake tenant in April when the company moved a few blocks away to Wells Fargo Place. Redpath, an accounting firm, followed suit a month later, moving about 120 downtown employees to the nearby Securian Center.

While Madison Equities “was not a great landlord by any stretch,” Alliance Bank President Eric Johansen said, the company moved out of concern for employees’ safety. After the Green Line stop opened in 2014 — and drug use, public urination and more serious crimes became increasingly frequent — Alliance Bank and Redpath hired off-duty police officers to escort staff to their cars.

“In the end, I put more blame on the city,” Johansen said. “Because I think the city’s responsible for the safety of workers and residents.”

Both companies are happier in their new downtown St. Paul offices. Redpath partner Mark Gibbs said the Alliance Bank Center’s facilities were older and less clean, and the firm had to spread over four floors as it grew. Better security also made employees more comfortable resuming in-person work.

“I would credit Securian for that, not the city of St. Paul,” Gibbs said.

In a statement, a spokesperson for the U.S. Department of Veteran Affairs said the St. Paul Vet Center negotiated an end to its lease “to provide the best possible space for veterans, service members and their families.” An advertisement seeking a new office for the agency contains a map excluding most of St. Paul from its search.

In the U.S. Bank Center, anchor tenant U.S. Bank did not renew its lease for nine floors of office space earlier this year, maintaining only a skyway-level bank branch. Across the street at the First National Bank Building, Wold Architects is preparing to move its headquarters and about 250 employees to downtown Minneapolis.

CEO Vaughn Dierks said the firm started exploring a move after Madison Equities announced it was selling its entire portfolio. Civic leaders have said they want to convert downtown office buildings into housing, “and that’s not a great fit for our company, to be in a tower with residential units,” he said.

Wold Architects has grown in size and many employees moved around within the Twin Cities during the pandemic, making Minneapolis a more viable commuting destination, Dierks said. The new office will also be closer to other architecture firms and recruiting opportunities.

Dierks said the building’s management has been good. City officials reached out to ask if there was anything they could do to convince the business to renew its lease.

“Our issues aren’t with St. Paul,” Dierks said. “They’re really with our building ownership and what we thought we needed best for the staff of our company in the future.”

City Council Member Rebecca Noecker, who represents downtown, called Central Station “an epicenter of negative activity.” That’s why the city and Metro Transit are seeking a developer who will bring life to the block, she said.

“I have been the first to say that there’s work to do downtown and that public safety is a critical issue, and it’s foundational for everything else,” Noecker said. “But I do see it as fundamentally distinct from a property owner’s responsibility to maintain their property and to make sure their tenants are able to live in dignity and in safe and clean living conditions.”

She and Spencer both said they’ve recently been hearing fewer safety concerns and more positive feedback about the direction downtown is heading — perhaps a sign that efforts like the Downtown Improvement District, special cleaning and safety services funded by property owners, are working and worth expanding. Madison Equities has vehemently opposed such proposals.

Noecker also noted that the city is considering relocating some of its 3,000 employees to buttress commercial space downtown.

“At the same time, we’re not going to bail out property owners,” she said. “We need to make smart use of our public dollars and let private property owners who have made bad decisions take the accountability there.”

Hadac said the Lowry’s problems began when Crockarell started providing much-needed housing for low-income tenants at the request of local government. Last weekend, the building sustained thousands of dollars in damage from burglars who destroyed laundry machines, spray-painted over a security camera and stole the master elevator key, he said.

“If Mayor Carter wants to go see needles and everything else, I can walk him down a whole bunch of his streets, and I can show him all kinds of needles and different things,” Hadac said. “That’s not a Lowry creation.”

“We as a whole, as a community, need to figure out how to solve some of those problems — and nobody has the answer right now,” he added. “But hiding from them, which is what it seems they’re doing, is not the answer.”