Pottery Barn and Salut are the latest to depart Grand Avenue, where the State Teachers Retirement System of Ohio owns considerable property.
By Danny Spewak, KARE11 January 4, 2024
Two more businesses are preparing to close this month on Grand Avenue in St. Paul, dealing another blow to the city's most recognizable commercial district as concerns mount over an Ohio-based landlord that owns multiple properties on the strip.
The Pottery Barn location in the Grand Place Mall and the popular restaurant Salut across the street have both announced publicly that they plan to leave Grand Avenue in January, although they have not finalized exact dates.
Without Pottery Barn, the Grand Place Mall will become largely shuttered without any storefronts, following the recent departures of a health clinic and Lululemon and J. Crew stores. Meanwhile, the building that houses Salut near Grand and Milton already lost its Anthropologie clothing shop last year.
"It doesn't look great, obviously," Grand Avenue Business Association President Chris Jensen said. "When we have vacancies like that, it is kind of an eyesore and it's not reflective of the avenue as a whole.
The frustration among business owners is compounded by the fact that the State Teachers Retirement System of Ohio (STRS Ohio), one of the largest public pension funds in the U.S., owns the two buildings where Pottery Barn and Salut are closing. According to Ramsey County property records, limited liability companies with the STRS address -- 275 East Broad in Columbus, Ohio -- control the two properties spanning a combined two acres at a value of more than $19 million.
Jensen said he has not been able to communicate directly with STRS Ohio, which he said has been involved with St. Paul's Grand Avenue since redevelopment in the early 2000s but never heard back.
"The local leasing agent responds, but when we get to the regional level, we don't get a response," Jensen said. "Their portfolio is so large that they don't have any idea the effect this is having on our community."
In all, property records show that STRS Ohio's companies own four buildings within a few hundred feet of each other on Grand Avenue. While two of those properties will sit mostly abandoned by the end of the month, two other nearby STRS buildings are filled with tenants, including local favorites like Cafe Latte and Bread & Chocolate. STRS Ohio also owns two additional buildings in the city's Highland Park neighborhood on Ford Parkway.
STRS Ohio did not respond to KARE 11's request for comment, so it's not clear if the group has a strategy to fill the vacant storefronts on Grand.
STRS Ohio holds more than $89 billion in total investment assets for the benefit of a half-million educators, including $8.4 billion in real estate.
Edward Siedle, a former attorney for the Securities and Exchange Commission, said it's common for public pension funds like STRS Ohio to diversify investments -- even in properties where they have no local connection.
"For diversification purposes, their investments may span the globe," Siedle said. "It may be macadamia nut plantations in Hawaii, or commercial real estate in your state or city."
However, STRS Ohio has come under scrutiny in recent years after teachers complained about the fund's operations, financial management and transparency (Siedle was hired to conduct an audit of STRS Ohio in 2021). More recently, STRS Ohio has been back in the headlines because of harassment allegations against the group's executive director, which resulted in a leave of absence.
Siedle was careful to separate those issues from any questions about STRS Ohio's investment in properties in Minnesota.
"It's fair to ask, does the fund know this property is sitting vacant, or who knows whether they really know what's going on, on the street level, " Siedle said. "There are a lot of red flags, a lot of turmoil, but this particular investing in real estate in your state would not be an initial concern without knowing more.
"In an effort to fill vacancies in STRS Ohio's buildings, Chris Jensen with the Grand Avenue Business Association said he has relaunched a working group with neighbors, the Summit Hill Association and City Council member Rebecca Noecker. Among the major concerns right now, he said, is the fact that tenants are having trouble with long-term lease requirements and may be seeking smaller spaces in the STRS-owned buildings.
At the same time, Jensen said he's optimistic about Grand Avenue in 2024, coming off a year in which the commercial corridor added 11 new businesses. Further east on Grand, the residential Kenton House also just sprouted up near the corner of Grand and St. Albans, a property that includes revamped versions of the restaurants EMMETT's Public House and Saji-Ya.
"Grand is a destination. It's St. Paul's Main Street," Jensen said. "So many different varieties make Grand Avenue the destination that it is."