By DENNIS GRUBAUGH
Economic developers from throughout the region have some new ideas — and a more positive attitude about doing business in Illinois — after a daylong conference in Fairview Heights.
More than 80 people attended the Downstate Illinois P3 Luncheon held in August under the auspices of The International Council of Shopping Centers at the Four Points by Sheraton in Fairview Heights. The theme this year was “Retail Done Right: Expansion and Growth in a Churning Market.”
Perhaps there is no right way to do it, given the number of avenues to be taken to attract development, from financing to marketing to understanding how companies arrive at their decisions. But participants were particularly upbeat about the possibilities.
“Do I have concerns? Absolutely. Is it doom and gloom as some like to make us think? I would say absolutely not,” Fairview Heights Mayor Mark Kupsky said.
Retailers, brokers, city officials and others shared scores of ideas.
Speakers included Dennis Maher of Buxton, a national firm that analyzes market data; Wendi Nowell, senior specialty leasing manager of CBL Properties, which owns St. Clair Square; Paul Ellis, the emcee for the day and economic development director of Fairview Heights; Renee Eicholz, of Copper Fire Bar & Eatery in Belleville; Bob Elkan, of the Westmore Group; and Gregg Medeiros, of Sugarfire Smoke House, in O’Fallon. The event was co-sponsored among others by the Illinois Business Journal.
Maher said malls are “definitely not dying, but changing across the country.” He said the important thing is to focus on driving tax revenue and supporting existing businesses, keeping in mind that the unemployment rate, now about 4 percent nationally, makes it increasingly difficult to find workers.
One in five jobs in Illinois is supported by retail, and there are almost 150,000 retail establishments across the state.
“That number is going to continue to grow,” Maher said. “Even though there are big box closings, retail and brick and mortar is still growing. That is not going to stop. People need that experience out there.”
A 9.3 percent vacancy rate is expected nationally in 2019, he said. That growth rate is forcing some retailers to look to “secondary” or less-prime locations.
“It’s becoming very competitive from a pricing perspective, and that’s where we’re going to have to help these retailers understand those markets,” he said. “Retailers may be asking for incentives but they also know that they may have to make adjustments to the way that they operate. A smaller inventory is looking more attractive — less inventory, less overhead. Those are important factors they are looking at.”
He discussed some of the newer trends in retailing including what he calls “omnichannel,” or selling goods via multiple platforms (stores, online, catalogue, etc.). The combination is not going away and, in fact, should be encouraged, Maher said, because it helps retailers reach all of their audiences.
Under what he called “aggressive retail,” Maher cautioned communities about going after a merchant that is impractical or ill-suited for a particular market.
“Make sure you’re not wasting your time on a retailer who would never step foot in your community. Make sure they are healthy and make sure they are expanding aggressively.”
Eicholz, owner of Copper Fire, began in business with the launch of Precision Practice Management Inc., a one-physician consulting firm that developed into a million dollars a year in revenue. She eventually partnered with a technology company, her current partners, 16 years ago. She and her husband are part owners of two buildings in downtown Belleville. Precision and Copper Fire are based in one of them.
Eicholz said she and her husband had no restaurant experience when they started the new business but were drawn to downtown Belleville because of a lifelong love of the area.
“Most people would say we were crazy, it was a learning experience,” she said. Both she and her husband have full-time jobs, so a key was bringing in her stepson to run the restaurant. And he has done a great job, she said.
Elkan, of St. Louis, has more than 45 years of experience in commercial development in multiple formats large and small. His notable projects have involved companies like Walmart, Target, Home Depot, Hardees, Krispy Kreme, KinderCare and many others.
Elkan wants to dispel the notion that Illinois is a bad place in which to do business.
“I’m not from Illinois, I’m from Missouri, but I feel like I’ve spent 90 percent of my life in Illinois. The first project I ever did was KinderCare on Goshen Road (in Edwardsville) — and it’s still there.”
He, too, dispelled the notion that Illinois is a bad place to do business.
“The state of Illinois has shown me a lot. All you hear about, all you read, is how broke the state is. I’d never know that. The state has been great to us. The cities have rolled out the red carpet for whatever the project,” Elkan said.
Adding to that chorus, Medeiros, of Sugarfire, said: “We were warned about coming to Illinois to do business, and I’m glad we didn’t heed those warnings. We’ve been very successful in O’Fallon.”
The chain is now expanding to other states.
“Opening these other stores around the nation, we realize how easy it is to do business in Illinois,” Medeiros said.
Nowell, of St. Clair Square, said the mall is looking ahead to big developments, including the opening of a new anchor store, H&M. It will locate between Sears and Macy’s on the lower level. It will be a 25,000-square-foot store constructed and opened in 2019.
She also talked about the mall’s specialty leasing program, which serves as an incubator. Using it, the mall is able to fill temporary locations with flexible terms.
“We can do anything from two days to a year and a half on a temporary document. It’s quick and easy,” she said.
The program allows for numerous small setups, known as retail merchandising units (or RMUs), displays and banners. RMUs are easily moved and configured for available space.
“We do the contracts right in our office at the local management level. We’re able to flip things on a dime. We have a visual merchandising team from New York City come in and help locals set up correctly. We have 25 RMUs in our program there,” Nowell said. “We also do quick popups, which are $250 a weekend. We can literally write the agreement on a Tuesday, you can be open on a Friday and leave on a Sunday.”
Ellis, Fairview Heights’ director of economic development, held one of the many roundtable discussions that allowed guests to circulate around the room as they desired. He focused on real estate investment trusts, or REITs, which are companies that own and, most of the time, operate revenue-generating real estate. Such trusts can include offices, apartment buildings, warehouses, hospitals and more.
St. Clair Square, for instance, is operated by CBL Properties as a REIT. Fairview City Centre at Lincoln Trail and Belleville Road is as well.
REIT stock is similar to stocks in general in that it represents ownership in an operating business. However, a REIT is unique in that its primary business is managing groups of income-producing property and it must distribute most of its profits as dividends — allowing the company to avoid corporate income tax.
“That makes them a very attractive investment,” Ellis said.
Evidence of such trusts’ importance to the economy is that they account for $2 trillion in estimated gross asset value. There are more than 500,000 such properties.
“It’s not a small or insignificant part of real estate in the country,” Ellis said.
Economic developers are well-advised to learn about the industry because of the potential for encouraging outside interests to invest in the business community. He said he has spent much of his time in Fairview Heights getting to understand how the process works.
It’s also good to know with whom you’re dealing.
“There are two types of companies out there,” he said. “There are those who will come in and buy a center, milk it for what it’s worth and suck all the money out of it as it falls apart. Then, there are companies that will come in, invest money and do what they need to do to turn it around.”
Many REITs formed in the 1990s were restructured around holdings of developers who were overleveraged and basically built on weak portfolios. Fast forward to today, and REITS are well-structured, with strong management and much higher returns.