How’s the Medical Mart going?

From the downtown library’s windows, you can see it all: bulldozers clearing the land for the new Medical Mart and tearing the old convention center out of the ground. Only a block-long stretch of Lakeside Avenue still hangs in the air, like a bridge, stripped clear.

In 2½ years, the Medical Mart and convention center, Cleveland’s $800 million hope, will fill in that hole and that plot of land. Will it succeed?

I’ve been wondering about that again this week after reading a couple of articles about the project.

“Medical mart’s tenant list only tentative,” the Plain Dealer’s front page announced yesterday. There’s no news in that headline; MMPI, the Med Mart developers, made it clear in January that their tenant list was based on non-binding letters of intent.

What’s actually new is that the PD called the tentative tenants and got one to (apparently) violate a nondisclosure agreement and spill the terms of its deal. Here’s the story’s second graf:

"Basically they offered us a free showroom for three years and a $20,000 cash incentive to build the showroom," said Jerome Alicki [of Michigan furniture company Industrial Woodworking Corp.]. "I couldn't see any reason not to do that ... I thought if I say no to this, the CEO is going to fire me."

Well, we can’t say MMPI didn’t warn us. Here’s what its vice-president, Mark Falanga, told Cleveland City Council in February 2009, as quoted in my Inside Business story from that year, “Affairs of the Mart”:

We believe we will need to subsidize those showrooms heavily to get them to try something new. … It's going to take many years for this to ramp up, for Cleveland to prove itself to the medical community.

I figured “subsidize heavily” meant “really cheap rent.” But no, it means what it says, at least in Industrial Woodworking’s case: If you move in for free, we’ll help you build the showroom.

There are two ways to react to news like this. One is to say we shouldn’t start judging the Medical Mart until it opens in fall 2013. They told us it’d be a slow start-up, and they’ve got plenty of time to fill the place with good tenants and conventions.

The other is to say, uh-oh. Two days before the PD story, Med City News’ Brandon Glenn published a analysis that asked, “Is the healthcare industry really buying into the medical mart concept?” That’s always been the essential question, the project’s biggest risk.

Glenn looks at New York, where a competing medical mart project fizzled, and at Nashville, where Cleveland’s remaining competitor is struggling to attract tenants and financing and the local business weekly is growing skeptical. It may be good news that our competition is flailing — but it doesn’t mean our project will succeed. Glenn asks whether it’s a sign that the whole concept of medical marts isn’t taking off.

Here in Cleveland, Glenn links to my report that MMPI’s January tenants list included only 5 percent of the companies it targeted on its 2009 prospects list, and only 1 percent of the medical conventions it hoped for. (It’s signed a few more tenants since January, but won’t say who.) Only three tenants are listed on the NASDAQ or the New York Stock Exchange, Glenn notes, and two of those are local, Invacare and Steris.

The medical mart remains a promising idea, for plenty of reasons. The mart concept works well in other industries; MMPI’s long success in Chicago is evidence of that. And today, hospital administrators have to travel across the globe to shop for equipment and furnishings; wouldn’t they rather see it all in one place? Medical manufacturers already market their wares at health care conventions, shipping their sales staff and heavy equipment from town to town. Wouldn’t they rather lease a single showroom, next to a convention center, in a city known for its leading medical centers, where customers can also go see the equipment in action?

But so far the idea’s hardly catching fire. “The early results from Cleveland, Nashville and New York suggest an industry uncertain of the benefits that the untested medical mart concept could hold,” Glenn writes. “And Northeast Ohioans need to begin thinking about what happens next if you build it, but not very many people come.”

It’s too early to hit the panic button, even if there were a panic button to push. We’re committed to the project and the business risk -- the hole in the ground is proof of that -- and we’ll at least get a new convention center out of the deal. That’s the built-in Plan B. A state of the art meeting place with windows facing the lake will surely win back some of the convention business lost by the damp, leaky, column-cluttered, 79-year-old hall we just tore out.

For now, all we can do is watch the spending, plan for how to hold MMPI accountable under worst-case and moderately bad scenarios, market the town and the project, and hope that the venture works, the health care industry warms up to the Medical Mart and the risk pays off. The county council has pledged to give monthly updates on the project, while the PD promises weekly reports. Stay tuned.

My June 2009 story, "Affairs of the Mart," is proving to be a good guide to the promise and risk of the Medical Mart project and what needs to happen for it to succeed. You can read it here.