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Story by Alexandra DeYoe / The Hubbard School

Bought, sold, renamed, closed. 

The Gray’s restaurant space at the corner of 14th Avenue and Fourth street has gone through all those changes numerous times. Now it sits empty with partially covered windows revealing dusty tables and faded curtains. 

The University of Minnesota has tried unsuccessfully to lease the iconic Dinkytown space for two years to potential tenants—all who balked at the high cost to revive the space. Now the university is seeking a buyer for the building who can transform its history into a draw for students and the community, said Leslie Krueger, the assistant vice president of Planning, Space and Real Estate for the university.

“It really is about finding somebody who has a new vision for what that space could be, and how to utilize that space that’s really tailored, that's really targeted to the students,” Krueger said.

Kristen Eide-Tollefson, owner of the Book House next to Gray’s for nearly 50 years, said it’s odd to think of Gray’s as vacant because she has witnessed its changing forms as Dinkytown evolves. To her, Gray’s was always busy with students as a drug store, then into a restaurant and music venue. 

“It's really our pivotal central building,” Eide-Tollefson said. 

An iconic history

Debuting in Dinkytown in 1944 as Gray’s Cut Rate Drug more than 40 years after its construction in 1902, the building has gone through many changes. 

Widely known by many, Minnesota native singer Bob Dylan lived above the drug store in the late 1950s before dropping out of college. By 1976, it was sold, renamed and became Gray’s Campus Drugs, targeting nearby university students with large window advertisements until 1998. 

Entering into the 21st century, the building became the Loring Pasta Bar until 2017 when the owner faced accusations of child sexual abuse. After the COVID-19 pandemic, the two-story restaurant and venue went back to its namesake and became Gray’s. 

Eide-Tollefson of Book House remembers the most recent version of Gray’s, when Lynn Nyman managed the restaurant until its closure in 2022. She said Nyman had turned the once pasta bar into a lively place with plants hanging throughout the restaurant and tables lining the sidewalks outside. 

“Really her major motive was to make it more student-friendly and more useful to students because that is what students have always wanted in Dinkytown,” Eide-Tollefson said. 

The university bought the Gray’s restaurant building in 2023, a year after it closed, for around $2.8 million and began searching for potential tenants for the space. Potential tenants included a dog-friendly eatery, a coffee bar, and an arcade, but ultimately no proposals were made to the university,  Krueger said. 

Krueger said the school became involved in Dinkytown due to former university President Joan Gabel’s initiative to support its history and improve safety. “She was concerned about Dinkytown losing its historic charm and character, and really wanted to support Dinkytown as a charming commercial node on the university's doorstep,” she said.  

Selling as a solution

Though the university could not control who could lease the building, Krueger said a lease agreement would have included restrictions on the use of its space to prohibit the operation of a bar, or other use that could negatively impact public safety within the neighborhood.

Rebecca Paulson, the director of leasing and property management for the university, said for nearly two years after the 2023 purchase they worked with a commercial real estate broker to market the building for lease, to no avail.

“The feedback we received from the market was that the building is somewhat large for operating a restaurant,” Paulson said. “At more than 17,000 square feet, potential tenants expressed concerns that the size of the building was not supported by adjacent parking, which could create challenges for people coming from outside campus or Dinkytown.” 

She added that they did explore options, such as valet parking, with prospective tenants to mitigate those concerns.

Paulson said that, per policy, the university is required to charge market rents. However, a collaborative approach was taken when working with potential tenants that included evaluating whether the building could be divided in two and leased separately by two tenants, evaluating ground lease opportunities and offering periods of free rent to offset investments a prospective tenant would make for the building. 

Ultimately, costs to update the space, address building code issues and assess the equipment required to operate the restaurant racked up the cost for many looking into the space. 

For these reasons, Krueger said negotiations for the former restaurant stalled and the university filed an intent to dispose, with the aim to sell, the space in June. 

“We tried to get very creative with alternatives so in terms of thinking through how do you come up with a rent structure that does meet both parties’ needs,” Krueger said. “The university cannot subsidize a private party but we can try to get creative in terms of coming up with ways to make something work for both parties.” 

Reflecting Dinkytown

Krueger has worked with the university for more than 20 years, however, before her professional career here, she remembers visiting Dinkytown as a high school student in the 1980s. She said she’s seen the increasing density of students in the neighborhood and views that as an opportunity for future businesses. 

“It's really an opportunity for a buyer to come in and think through what is it that students want and need and how do they make that marketable,” Krueger said. 

Reminiscing on the retro charm of Dinkytown in days of old is understandable, Krueger said, but she notices there is more energy and potential to bring new visions to the neighborhood as a whole, starting with Gray’s.  

Places to get out of the workplace or home to meet with friends were once central in Dinkytown, Eide-Tollefson said. She’d like to see Gray’s be re-imagined and become the social hub it once was: a beacon for students and alumni. “It has played such a central role in the third space, the public space, the community space, the music space, in Dinkytown, which is really what defines Dinkytown,” Eide-Tollefson said.