Volume 17, Number 12 December 2003 Feature Article Great Grocers, Great Challenges in Greater by Jon Dahlin, Itasca Funding Group, Inc.

ow will the congestion in the are currently 13-15 Wal-Mart Supercenters in aisles be affected as the competition heats operation with approximately nine in various planning Hup in this market? Here’s an overview of stages. To compete and survive in this competitive what’s happening with the grocery competitors in environment certainly dominates the marketing and Minnesota. currently dominates the growth strategy of every grocer. Most of the major market and Roundy’s recently purchased the 31 operators in outstate Minnesota appear to be with- Rainbow Food stores and is aggressively pursuing standing the competition so far, and nobody is a path to regain some of its market share. Lunds standing still. It can be argued that Rainbow Foods and Byerly’s are firmly entrenched in their upper- stores in outstate Minnesota may be the first casualty scale niche. Newer factors in the market such as the of the Wal-Mart Supercenter competition. Certainly, new discount stores, the expansion of the Fleming/Rainbow was beset by other problems, but grocery departments in Sam’s Club stores and with two supercenters in Rochester and one in Costco, as well as SuperTarget and Wal-Mart Mankato, it is very likely that Fleming did not fore- Supercenters. However, it may be instructive to see a very bright future for their stores in these take a look at what is going on in the grocery busi- markets, thus canceling their leases via bankruptcy. ness in outstate Minnesota to foresee what we can SuperTarget, the grocery and general merchandize expect in the metropolitan area in years to come. concept of Minneapolis-based Target corporation, The advent of the Wal-Mart Supercenter with its very will have 11 stores in its hometown market by the large grocery component has changed the market end of this year. dynamics for everyone in the grocery industry. There Great Grocers continued on page 2 WANT VISIBILITY? A Shopping Center Snapshot on the front page of the MSCA monthly newsletter is a great opportunity to gain exposure for new, existing or redeveloped properties. Use this space to detail center specifics, such as a photo or rendering, location, opening date, management and contact information, GLA, occupancy, anchor tenants, market area served and additional narrative about the site. Call the MSCA office at (952) 888-3491 to schedule your Shopping Center Snapshot for 2004. Advertising space is on a first-come, first-serve basis. The MSCA newsletter goes out to approximately 600 members as well as prospective members. See rates below for additional newsletter advertising opportunities.

MEMBER RATE NON-MEMBER RATE Announcement Advertisement - 2" x 3" $75 $100 Quarter Page Advertisement - 3 3/4" x 5" $100 $150 Half Page Advertisement - 7 1/2" x 5" $150 $225 Shopping Center Snapshot - 6" x 4.5" $275 $325 Advertising Insert (members only) - 8.5" x 11" $250 N/A GREAT GROCERS continued from page 1 The Coborn’s operation based in St. Cloud Miner’s, Inc. based in Hermantown known for its outstanding customer ser- appears to be the most aggressive of the currently operates 12 stores in Minnesota vice and competitive pricing. Hy-Vee chains in greater Minnesota. The and is the dominant grocer in Duluth and currently operates 16 stores in southern chain is supplied by SuperValu and cur- the Iron Range. Their primary format is Minnesota and its closest store to the Twin rently operates 25 stores including 18 the Super One super store, which in many Cities is Faribault. The most recent store Coborn’s full-service and ways has all the trappings of a Rainbow or opened in April of 2002 in Winona and no seven Cash Wise discount markets in the Cub Foods store. Miner’s, Inc. recently new stores have been announced for 2004. southern two-thirds of the state. The stores switched suppliers from Fleming to are concentrated in central Minnesota and SuperValu with SuperValu’s purchase of SuperValu is by far the dominant whole- clearly dominate the St. Cloud market. the warehouse and distribution rights of saler in Minnesota and supplies many Coborn’s has stores ranging from Moor- head to Austin and are moving closer to All of the grocery chains are spending more money on marketing and the Twin Cities with recent stores in store maintenance and cutting their profit margins. Delano, Albertville and Elk River. Stores targeting for opening in 2004 include Fleming’s operation based in LaCrosse, local operators and small chain grocers Long Prairie and Sartell. Wisconsin. There are no new stores planned flying the “SuperValu” or “County Mar- Nash Finch currently operates 19 retail for 2004 and, like other retail operators, ket” banners. Currently there are 54 com- grocery stores in Minnesota. Its 16 Econo are concentrating on strengthening their pany-owned and franchised Cub Foods Foods stores are concentrated in central existing operations. stores in Minnesota: 44 of them are in the and southeastern Minnesota in addition to Hy-Vee, Inc. stores rank among the top Twin Cities area. It appears SuperValu is three Sun Mart stores in the Fargo/ ten retail grocery operations in the United concentrating its efforts in the metropolitan Moorhead area. The majority of their States and currently operate approxi- area with two recent stores opening and growth plans are concentrating on their mately 218 stores in the central part of the another four currently under construction. hispanic Avanza markets which are ex- country. The company, based in Des The most recent Cub Foods store opened panding in the Denver and Chicago areas. Moines, Iowa is employee-owned and in conjunction with the redeveloped mall on the east side of Brainerd. Cub Foods is projected to have 50 metro-area stores by 2004 Schedule of Events early 2005. They appear to be proceeding much more cautiously in the rural region Our monthly program meeting date is the first Wednesday of every month (with with no new announced stores. the exception of March, July, September and December). All meetings will be held at 8:00 a.m. (registration at 7:30 a.m.) at the Radisson South Hotel unless There is little or no growth in most of the otherwise noted or publicized before the program. Program topics and location rural region of Minnesota. All of the gro- are subject to change. cery chains are spending more money on marketing and store maintenance and Wednesday, January 7 - Technology cutting their profit margins. Sooner or later Wednesday, February 4 – Stock Analyst Panel something has to give. One thing is Thursday, March 18 - Legislative/Business Day at the certain, Wal-Mart will continue to get a Capitol Four Points Sheraton St. Paul/Capital Hotel bigger and bigger share of the same size pie. Within five years, the landscape for Wednesday, April 7 (Afternoon) – Geographic Focus retail grocers in outstate Minnesota will be Wednesday, May 5 – Development significantly different. The one-store or small chain operations are likely to be the Wednesday, June 2 – Industry Trends & Demographics earliest victims to the Wal-Mart Monday, June 21 – Annual Golf Event Supercenter onslaught. Majestic Oaks It seems to be the consensus in the grocery Wednesday, July 7 – Professional Development industry, sooner or later Wal-Mart Supercenter will enter the Minneapolis/ Wednesday, August 4 – Retail Focus St. Paul metropolitan market. It could be Wednesday, September 8 – Mall Focus that they are not ready to take on the union issue or they are not ready to go head-to- Wednesday, October 6 – Economic Outlook head with local grocers. Nevertheless, they Wednesday, November 3 (Afternoon) – Retail Report will come and the turmoil currently being Tuesday, December 7 (Evening) – Year End Ceremonies/STARR Awards/ experienced in other parts of Minnesota Holiday Party will impact the more local market in very dramatic ways. msca news 2 www.msca-online.com November Meeting Recap MSCA 2003 Retail Tournament of Champions by Anita Johnson, Premier Commercial Properties he 15th annual MSCA Retail Real discussed the reports findings that Estate Report program on Novem- vacancy had been reduced from Tber 5th was a fun and informative 7.6% in 2002 to 7.3% in 2003 event attended by 165 local investors, despite multiple store closing by developers, brokers, property managers, Snyder Drug, Paper Warehouse, vendors and appraisers. The enthusiastic K-Mart and Rainbow Foods, and program emcee, Jerry Ciardelli of Erdahl that the universe for retail shopping Aerial Photos, hosted the Jeopardy-style centers greater than 30,000 square interactive game show, involving 25 feet in the Twin Cities had grown Above: 165 industry professionals attended the questions regarding market trends, to just under 50 million square feet. Retail Tournament of Champions. development and retail activity in the Twin He described the developing Below: Each table worked as a team to answer Cities and outstate markets. The participants relationship between MSCA and questions regarding retail real estate. at each table competed against other tables MnCAR and how the Research for the title of Retail Champions, which Committee has continued to assist sparked some healthy and good-natured MnCAR in improving the accuracy rivalry. Between rounds, presenters gave of their Xceligent database of overviews on the retail market, challenges Minnesota retail properties. Several and opportunities, new developments/ of the new retail concepts entering retailers to the local market and the our market were mentioned as well investment market. as the quick absorption of a handful of vacated K-Marts in 2003 by This year’s Research Committee was Home Depot, Wal-Mart, Burlington Coat developments “spurred on” by the “strong co-chaired by Janet Goossens and Paul Factory and JCPenney. Sevenich thanked residential growth” in the Twin Cities and Sevenich of Kraus-Anderson Realty the eleven members of the Research outlying areas. New developments opened Company. Sevenich began the presenta- Committee and the many industry experts in 2003 included Excelsior & Grand in St. tion with an overview of the market and who gave their time and talents in making Louis Park, Arbor Lakes in Maple Grove, the report a reality. and Southwest Station in Eden Prairie. The November Professional After another round of questions, Betty Cub Foods, Super Target, and Wal-Mart Showcase was Ewens of Kraus-Anderson Companies continue to be the strong anchors for shopping centers with some new retailers sponsored by Terracon presented the opinion section, which included the Top 5 Challenges and coming on the scene including CVS Opportunities in 2003. Once again real Pharmacy, Roundy’s, IKEA and Lowe’s. estate taxes were the number one challenge “Fast Casual” had been the new buzzword in 2003 followed by economic conditions, on the restaurant scene – some of these competition, retailer bankruptcy, and lack restaurants include Panera Bread, Noodles of available land/space. Ewens showed the and Company, Baja Fresh and many more. correlation these challenges made with the After the final round of questions, Eric Top 5 Opportunities, which were restora- Bjelland of United Properties energeti- tion/center redevelopment, financing, cally put forth his expertise regarding mixed-use development, infill opportuni- Retail Investments. Some of the highlights ties/municipal redevelopment, and retailers included more product coming available, a new to the market. It was interesting to strong demand from all buyers, particu- Terracon is a nationwide consulting note that new development ranked number larly for grocery anchored centers. engineering company that provides 6 under both Opportunities and Chal- Bjelland says that some of the aggressive quality environmental, geotechnical, lenges. Therefore, Ewens deduced that the buyers are pension fund advisors, REITS, construction materials, testing, Challenges are the Opportunities. life companies, and major private entities. facilities and pavement engineering Tricia Pitchford of United Properties What’s ahead in investments? Bjelland services to their clients. described the continued success of retail Retail Tournament continued on page 4 www.msca-online.com 3 msca news What’s Happening 2,000th Great Clips Opens Galleria Offers Gift Registry Great Clips, Inc., headquartered in Minneapolis, opened its MallGiftRegistry is a new concept in gift registries that lets con- 2,000th salon. The 2,000th and 2,001st salons opened on opposite sumers visit virtually every store within one retail center to build coasts on November 6 – at Main Street in Metuchen, NJ (part of a single personal wish list. MallGiftRegistry is similar to the the New York DMA) and at Campus Crossroads in San Bernar- registry services that brides and mothers-to-be use to create gift dino, CA (Los Angeles DMA). A total of 250 new Great Clips lists before their big events, but it is unique in that it includes salons are expected to open this calendar year, following a com- items from multiple stores and gift wish lists can be created for pany-high 224 in 2002. any life celebration. In addition, MallGiftRegistry uses the latest JCPenney Leaves Brookdale wireless technology for real-time access to wish lists at www.mallgiftregistry.com. MallGiftRegistry is currently available The JCPenney at Brooklyn Center’s Brookdale Center mall will at Galleria in Edina. close early next year. As a result, the Talisman Cos., the Florida- based company that owns Brookdale, has begun looking for Gaviidae Hosts Wishing Tree ways to fill the department store’s 140,000 sf with new specialty Gaviidae Common and Children’s Home society and Family shops and a mini-anchor tenant. Plano, Texas-based Penney’s services will help holiday wishes come true for local children in imminent departure was “a mutual decision” between the depart- need with the 2003 Wishing Tree. The Wishing Tree booth will ment store and the mall, according to Talisman. be located on the Skyway level in Gaviidae’s Saks Fifth Avenue Solner Presents at CenterBuild 2003 wing and will run from November 28 through December 16. In December 2003 MSCA member and Cuningham Group Prin- Gander Mountain Sold in Forest Lake cipal and Corporate/Retail Studio Director David Solner will Upland Real Estate Group and Upland Capital Advisors recently speak on “Engaging the Shopper: Keys to Success” at completed the sale and financing of the Gander Mountain CenterBuild 2003. The CenterBuild Conference is the premier Superstore located in Forest Lake, Minnesota. The 96,275 sf specialty conference for design and construction held by the property sold for $11.9 million to a 1031 Tax Deferred Exchange International Council of Shopping Centers. It provides opportu- investor from western Wisconsin. nities to meet and discuss issues with industry professionals and features nationally known speakers representing development, retailing, department stores, design and construction.

Snowmobiling, skiing, ice skating. A warm fire, good company and all for a good cause. Join us February 28-29, 2004 Lakewoods Resort in the Hayward, Wisconsin lakes area. www.lakewoodsresort.com Save the date NOW! Please call the MSCA office for more details. (952) 888-3491

RETAIL TOURNAMENT continued from page 3 states that Rainbow “eats” at Cub market share, as previously stated, more property is coming to market, and yields depend on interest rates. Overall, it was a fabulous program followed by a social hour with opportunities to network with others in the industry. A huge “thank you” is extended to the many people who volunteered their time and knowledge to share the report and program with others in the industry. A printed copy of the 2003 Retail Real Estate Report is available for purchase at the MSCA office by calling (952) 888-3491. msca news 4 www.msca-online.com 2003 Committees and Accomplishments he Minnesota Shopping Center Heuer, Aspen Waste Systems; Shelley industry, concerns about high property Association would like to thank all Klaessy, Rouse Ridgedale Management taxes and the State’s role in our increasing Tof the committee volunteers for and Stefanie Meyer, United Properties transportation problems. 2003 and recognize each committee’s The Golf Committee coordinates MSCA’s Co-Chairs: Howard Paster, Paster Enterprises accomplishments. The following volunteers highest attended event, the annual MSCA and Dick Ward, Capps Companies, Inc. make it possible for MSCA to function Golf Tournament. The committee is re- Committee: Trish Rein Cowle, C.G. Rein and have driven the association to become sponsible for soliciting hole sponsorships, the success that it is today. THANK YOU! Company; Kelly Doran, Robert Muir auction prizes and donations, encouraging Company; Sonnie Elliot, Faegre & Benson The Awards Committee is responsible for golfer sign-ups and coordinating events at LLP; Richard Forschler, Faegre & Benson the annual Shopping Center Tribute Awards the tournament. Monies raised from the LLP; Nancy Frykman, Robert Muir Com- for Retail Real Estate (STARR Awards) to auctions, raffle and putting contest benefit pany; Todd Johnson, Colliers Towle Turley recognize excellence in retail real estate. MSCA’s charity, The Caring Tree. Martin Tucker; Mike Korsh, Kraus-Ander- Preparation includes award criteria, judging The committee streamlined the raffle by son Companies; Chad Macy, Regis Corpo- process, and the planning, promotion and implementing a key raffle to replace the ration; Joe Nunez, Target Corporation; implementation of the STARR Awards time-intensive raffle tickets. 242 golfers Kathy Ostertag, Robert Muir Company; event in December. George Ramler, First American Title In 2003, the committee redefined the Insurance Company; Rob Stolpestad, nomination categories to clarify renova- Exeter Realty Company; Greg Suckow, tion and redevelopment and now includes Happy Park Midwest Commercial Real Estate; retail in multi-use developments. In addi- Scott Thompson, Construction 70, Inc. and tion, 24 nominations were received, which Holidays! Joseph Weis, Weis Builders, Inc. is the greatest number of nominees to date. The Marketing and Communications Co-chairs: Tricia Pitchford, United Prop- Committee is responsible for promoting attended the 12th annual Golf Tournament erties and Brett Christofferson, Weis MSCA through advertising, public rela- in 2003 and the event raised a record high Builders, Inc. tions, and the consistent development and of $10,000 for The Caring Tree. Committee: Peter Lund, CBL Properties/ use of MSCA collateral materials and Co-chairs: Bob Lucius, RSP Architects Burnsville Center; Kim Meyer, United member communications. This committee Ltd. and Matt Alexander, Contractor Properties; Sara Stafford, KKE Architects, develops ideas for expanding the reach of Property Developers Company Inc. and Ronn Thomas, United Properties MSCA, promotes monthly meetings, Committee: Kevin Conway, Pfeffer produces the annual Membership Directory, The Community Enhancement Commit- Company, Inc.; Chris Hussman, Aspen solicits MSCA advertising and assists other tee facilitates and enhances the community Waste Systems; Kent Larson, Weis Build- committees in their promotional efforts. outreach functions of MSCA, focusing on ers, Inc.; Tom Madsen; Greg Michael, The Caring Tree Foundation and its annual The 2003 committee produced the 13th Olson Contractors; Tom Moran, Stahl campaign to give low-income, K-12 annual comprehensive membership direc- Construction; Luann Sawochka, Rochon children new school supplies. The commit- tory and added history information, such Corporation and Carol Ulstad tee coordinates many efforts to help The as past presidents as well as additional Caring Tree reach its yearly goals, includ- The Legislative Committee informs information on 2003 corporate sponsors. ing raising donations for the annual MSCA MSCA members about pending legislation The committee also created a “Member of Golf Tournament, working closely with and other legislative efforts, including MSCA” logo for current members to participating malls, educating and involving generating and directing grass-roots include on company stationery and updated the MSCA membership in the program. efforts by MSCA members. The commit- the comprehensive membership survey to seek member feedback. They also created This year, the committee members raised tee works closely with MSCA’s paid lobbyist to influence the legislative agenda at “Celebrating 15 Years” logo to celebrate $8,382 in prize donations for Golf Auction MSCA’s 15th anniversary. and Raffle. The committee members were and legislation in the best interests of our instrumental in increasing mall participation industry. Past and current efforts include Co-chair: Kelly Slawson, RSM McGladrey work on issues such as property tax re- in The Caring Tree from 27 to 39, which Committee: Peter Austin, Welsh Compa- form, taxation of internet sales, “smart directly contributed to The Caring Tree nies, Amy Barth, Cambridge Commercial growth” initiatives and special taxing helping more than 14,000 students this year. Realty; Laura Bradford, United Properties; districts. In 2003 the committee released Diane Scherer, LandAmerica Common- Co-chairs: Wendy Aaserud, Madison the fourth annual Comparative Retail weallth and Amy Senn, Welsh Companies Marquette Realty Services and Liz Lee, Property Tax Study. Legislative Coffee The Wall Companies meetings for 6 Districts were implemented The Membership Committee’s primary Committee: Lee Bastyr Ching, Base Real to give members the opportunity to meet responsibility is to oversee all membership Estate; Lisa Chubb, Glimcher Properties; with their legislators and discuss issues aspects of the organization. This committee Gina Gossman, RSM McGladrey; Tom important to them and the shopping center Accomplishments continued on page 6 www.msca-online.com 5 msca news ACCOMPLISHMENTS MSCA Member Profile continued from page 5 discusses new strategies for increasing membership, as well as devising or im- Laura Ramme Giertsen proving ways to make new members feel welcome and maintaining MSCA’s current Title: Manager, Real Estate Development ciate at US Bank prior to joining Opus membership. Company: Opus Northwest, LLC Very First Job: The 2003 committee surpassed their inter- Career Focus: Retail Development nal membership goal of 550 members to Volleyball referee reach an all-time high of 590 members as Hometown: Edina, Minnesota for the community park program of the end of November. This number Education: B.S. Business Administration Dream Job: A perfect balance between represents the highest member retention of – University of Colorado, Boulder; M.S. being a career woman and a mom 90% and the highest number of new mem- Real Estate and Urban Land Economics – Secret Talent: Video clip editing on my bers to date (92) in MSCA’s history. University of Wisconsin, Madison. computer - a talent I have slowly taught Co-Chairs: Mick Thorsland, Venture Family: Husband Drew and son Brady (2) myself and come to really enjoy! Mortgage and Kevin Krolczyk, Dalbec Roofing Hobbies: Water skiing, walking, spending Favorite Food: Sushi time at the cabin and being outdoors. Committee: Bill McCrum, RSP Architects MSCA Involvement: Member for 5 years Ltd.; Jay Moore, Oppidan; Nick Reynolds, Job History: Commercial Banking Asso- and formerly on the Program Committee Welsh Companies; Crystal Rundle, Con- struction 70; Brian Treber, Target Corpora- tion and Royanne Carper, Paster Enterprises and meet as needed for their designated tive program Retail Tournament of Cham- program. pions and 165 actually attended the program. The Newsletter Committee is committed to providing MSCA members with an In 2003, the committee had the highest Co-chairs: Paul Sevenich, Kraus-Ander- interesting monthly newsletter with accurate average monthly program attendance of son Companies and Janet Goossens, and up-to-date information. The committee 160 attendees and sold-out each month’s Kraus-Anderson Companies members discuss new ideas and work Professional Showcase for the year. Committee: Eric Bjelland, United Proper- together to obtain and prepare articles, Co-Chairs: Doug Sailor, Park Midwest ties; Molly Bird, United Properties; Jerry including features about existing and future Commercial Real Estate and Tony Pasko, Ciardelli, Erdahl Aerial Photos; Betty retail development projects within the Bremer Bank Ewens, Kraus-Anderson Companies; Jim state, profiles, program recaps, and retail Committee: Peter Austin, Welsh Compa- Mayland, MnCAR; Tricia Pitchford, trends that affect our industry and members. nies; Peter Berrie, Faegre & Benson LLP; United Properties; Holly Rome, Jones The 2003 committee continues to provide Kristi Broderick, First American Title Lang LaSalle and Ken Vinje, Kraus- a timely and high-quality newsletter with Insurance Company; Miesche Francis, Anderson Companies useful information for our membership, Target Corporation; Ed Karsnia, Midwest The Sponsorship Committee raises funds including feature articles on all aspects of Maintenance & Mechanical, Inc.; Nancy for MSCA through solicitation of corpo- the industry, program recaps, industry Litwin, Glimcher Properties/Northtown rate sponsors by inquiring about sponsor- tidbits to name a few. Mall; Tom Madsen; Andy Meelberg, TCF ship renewal, identifying potential spon- Co-chairs: Tim Hilger, Diversified National Bank; Liz Picking, Cambridge sors and following-up with sponsors Acquisitions and Lonnie Pierce, Meridian Commercial Realty; Emily Smith, US regarding their MSCA benefits. Real Estate Bank and John Tramm, Griffin Companies The 2003 committee secured the highest Committee: Albi Albinson, Architectural The Research Committee prepares the number of corporate sponsors (60) since Alliance; Kathy Anderson, Architectural annual MSCA Retail Real Estate Report. MSCA’s inception, and increased exposure Consortium; Bob Barton, Kraus-Anderson The 52-page report summarizes key areas for corporate sponsors with the Mission, Companies; Nancy Murdakes Brown, Sun- of concern for the state’s shopping center Vision and Quotes that were included in tide Commercial; Jon Dahlin, Itasca Fund- industry, and includes a detailed summary the membership directory, newsletter and ing; Lisa Diehl, McDonald’s Corporation; of rents, common area charges and taxes on the monthly program PowerPoint Stephen Eggert, Target Corporation; Betty for each center that answers the survey put presentations. Ewens, Kraus-Anderson Companies; out by the committee. The committee’s Co-chairs: Cindy MacDonald, Urban Retail Cynthia Hable, Kraus-Anderson Companies; findings are presented at the MSCA No- and Ned Rukavina, United Properties Christopher Naumann, KKE Architects, vember meeting. Committee: Amy Coleman, Urban Retail; Inc. and Terry Smith, TRS Commercial This year’s committee produced another Bill McCrum, RSP Architects Ltd.; Shelly The Program Committee brainstorms for quality retail real estate report detailing Muelken, Tanurb; David Solner, program ideas, organizes and prepares for information on 383 Minnesota shopping Cuningham Group and Andrea Thompson, future monthly meetings. Sub-committees centers greater than 30,000 square feet. Brookfield Properties are formed to handle individual programs 182 people were registered for the interac- Accomplishments continued on page 7 msca news 6 www.msca-online.com If you have additional tidbits, please forward them to Industry Tidbits Tim Hilger, newsletter co-chair, at [email protected] by Tim Hilger, Diversified Acquisitions, Inc.

oliday Station Stores are taking months. The increase was due to a very joins Aldi’s and other local brands in the a verse or two from the old song broad merchandise mix, higher prices, the market for efficient merchandising, high H“North to Alaska.” They are continued growth of home building and quality, limited, selection grocery stores acquiring 26 Williams’ Company gas/ remodeling and property protection and seeking sites. convenience stores in our fiftieth and repairs from weather related incidents The competition in the “quick casual largest state. The Alaska acquisition is part around the country. restaurant” segment is ratcheting up of a $265 million deal involving two Advertisers continue to look for new another notch with the remaking of Kansas-based companies, Koch Alaska ways to “pummel” us with their messages. Bruegger’s Bagels restaurants. The Pipeline and Flint Hills Resources The latest involves in-store TV ads nation’s second largest primary bagel acquisition of Williams’ Alaska’s assets. distributed via Premier Retail Networks restaurant recently completed the remodel- Holiday will take over the ownership and (PRN) which operates the in-store systems ing and re-menuing of its North Oaks operation of the gas/C-store portion of the in numerous retailers. As home TV store. The North Oaks store is one of the transaction. Holiday presently operates viewers decline, ratings on prime shows first five in the U.S to get the store and over 350 stations and the growing chain of fall, the aggressive advertisers seek us out menu overhaul. The changes include Gander Mountain stores. The Alaskan while we are “attending our retail therapy redesigned interior decor and expanded stores will obtain its exclusive Holiday sessions”. Ads from Gillette, Sony, menu to reflect the food nitch it is in. New fuel, “Blue Planet”, low sulfur fuel from its Proctor and Gamble, Uniliver, even furniture, earth tone colors, light fixtures present supplier Flint Hills Resources of NBC itself, seek us out at our favorite and a broader menu are in their plans to Minnesota. The real estate guys at Holiday retail store. Retailers using PRN include, gain market share. The completion of the will be easy to spot now, dog sleds packed Wal-Mart, Circuit City, Ralph’s Super national “roll-out” should be completed with fishing and hunting gear, mucklucks, Markets and many others, with the ads over the next 22 months and they plan on fur parkas and a propensity to shout tailored to each chain. adding an additional 100 new restaurants “mush”! Looking for a 10,000 to 12,000 sf over the next 3 years. Home Depot reported a record profit grocery store with marketing punch? How A recent article in Fortune magazine quarterly profits ending November 2nd. about Trader Joe’s? The popular grocer is about Costco did an interesting compari- The 22% gain was the highest in 15 mapping out locations in the Minnesota. It son of Sam’s and Costco. Here are some of the comparisons. Sam’s has 71% more ACCOMPLISHMENTS continued from page 6 stores than Costco (532 Sam’s vs 312 Costcos), but Costco produces annual sales The Technology Committee is responsible for staying current on technologies that of $34.4 billion to Sam’s $32.9 billion, a might improve the way MSCA operates and serves its members as a professional asso- 5% lead to Coscto. The average Sam’s ciation. Their main focus is to ensure that the web site www.msca-online.com provides store does $63 million on sales annually timely information about the organization and responds to member needs. compared to the average Costco stores Thanks to the 2003 Technology committee, online registration is available for MSCA sales of $112 million annually. Costco events and in January 2004, they will roll out the new “Members Only” section that will sells 55,000 rotisserie cooked chickens include an online directory, past newsletters and job postings. annually; it is the U.S. number 1 seller of Co-Chair: Adam Davies, Urban Retail Properties Co. fine wines; it sold 45 million cooked hot dogs at $1.50 each to its customers while Committee: Peter Austin, Welsh Companies, LLC; Larry Calhoun, Kraus-Anderson Com- they shopped; and 60,000 carats of panies; Charlie Casserly, Casserly Media and Paul Sevenich, Kraus-Anderson Companies diamonds with some costing $100,000. The 2003 Leadership Committee, also known as the Officers and Board of Directors, Costco has had only one CEO since its are vital to the success of MSCA by making decisions that affect current and future founding and Sam’s has had seven which endeavors. As shown in the committee accomplishments above, this year has been our may imply consistency of direction and most successful to date. Thank you for your commitment and guidance! focus. The article cited a distinct advantage Officers: President - Steven Mosborg, Park Midwest Commercial Real Estate; 1st Vice that Costco has over Sam’s. Costco can President - Michael G. Sims, United Properties; 2nd Vice President - Peter C. Austin, compete with Wal-Mart anyway they Welsh Companies, LLC; Treasurer - Kenneth M. Vinje, CSM, Kraus-Anderson Compa- want, Sam’s has to be cautious on how it nies; Secretary – Thomas Madsen. competes with its parent retailer. Directors: Kathy Anderson, AIA, Architectural Consortium; Bruce Carlson, United KFC announced in November that they Properties; Lisa Diehl, McDonald’s Corporation; Bob Lucius, RSP Architects Ltd.; John are pulling their ads touting KFC fried Meyers, Opus Northwest, LLC; Paul Sevenich, CCIM, Kraus-Anderson Companies; chicken as healthy! Customer, and probably Sara Stafford, KKE Architects and Scott A. Thompson, Construction 70, Inc. Tidbits continued on page 8 www.msca-online.com 7 msca news TIDBITS continued from page 7 Food News competitors, notified the federal regula- Baja Fresh Mexican Grill is are blamed on several reasons including: tors. KFC said they are terminating the ad partnering with Twin Cities businessmen increased demand, lowered production as a regular course of business. A KFC Mike Givens and Denny Hecker to open in partly attributable to a drought in spokesperson stated that the ad tried to at least 21 Baja Fresh restaurants in the Western beef-producing regions and a inform customers that KFC’s original next five years. Givens is a major fran- continued ban on the importing of receipt chicken could be incorporated into chise operator of Wendy’s International Canadian beef, where one case of mad a balanced diet. with more than 20 Wendy’s restaurants cow disease occurred earlier this year. October retail sales softened compared opened or under construction. Hecker The USDA projects that the 2004 total owns several automobile dealerships. beef production will be 3.4 percent below to prior months. According to the Bank of The first Baja site noted is in Coon already low 2003 levels, where the Toyko-Mitsubishi October’s “same store Rapids. The restaurant will open next shortage is coming from the demand side. sales” increased an industry average of March. The restaurants are 3,000 to 3.2%. Target stores reported a sales As a wave of tropical-theme concepts 3,500 sf and serve tacos, burritos and increase of +4.5%, Marshall Field’s fresh salsas. appears to be growing, Dave Anderson, reported a decline of -10.5%, Mervyn’s founder and chairman of Famous Dave’s had a decline of -15.1%, Gander Moun- Louis XIII is on track to open this of America, the 88-unit barbecue chain tain an increase of +14.3%, Christopher month at Southdale next to Cheesecake operator and franchisor, has debuted his & Banks had an increase of +1%, Shopko Factory, Maggiano’s and P.F. Chang’s. entry into the segment, called Kokomo’s had a decrease of -3.5%, Kohl’s decreased Island Café at the Mall of America. The Word has it Mojito will open its -11.6%, Wilson’s Leather decreased second location in Maple Grove’s colorfully decorated, 300-seat restaurant 19.2%, Wal-Mart had an increase of Shoppes at Arbor Lakes in the spring. and tiki bar is meant to transport patrons +4.5%, and Costco increased +11%. to a tropical island paradise. Kokomo’s In St. Paul, Axel’s Bonfire replaces the Ciatti’s location on St. Paul’s Grand is positioned to appeal to families as well Developers Diversified Realty has Avenue. Also, bid farewell to The Lotus. as to adults who enjoy tropical cocktails. decided to alter their shopping center Look forward to another well-known The Pickled Parrot, a Caribbean- investment strategy. In the past few years casual dining restaurant to fill the void. themed, casual dinner-house and bar they have been primarily investing (over half) in existing centers and the balance of In downtown Minneapolis, the opened its third location in Uptown. their investment dollars have gone into Pillsbury Center is getting a new retailer. Soon to also open is Zeno, coffee/ new developments. Starting in 2004 they Look for Beyond Juice Café to open dessert/wine bar. are going to invest most of their money early next year. They will open at least Qdoba just opened their doors the week into their new developments and much four Twin Cities locations. Window’s of Thanksgiving at Excelsior Grand in less in acquisitions of existing properties. On Minnesota in the IDS Center recently St. Louis Park. McCoy’s Restaurant The reason cited was the low cap rates for opened its doors to the public again also recently opened. The development existing centers averaging approximately after a major renovation. The owners of is 97% leased. The condominium phase 7%. While new developments cap rates Atlas Grill in the Pillsbury Center will is 70% pre-sold and 4,000 sf of retail/ be opening a contemporary American office available. are closer to 11%. restaurant next spring in the former The classic supper club on Lake Street Best Buy got exclusive rights to the Aquavit location in the IDS Center. newest Rolling Stones “Four Flicks” Panchero’s Mexican Grill and the piano in Minneapolis, Nora’s closed last month due to a drop off in customers. DVD release. Other retailers “cut-out” of bar club, The Shout House, will open the release are refusing to stock the full around December 1st in Block E. And, The already covered market for take- complement of other recordings by the upscale Italian restaurant Bellanotte and-bake pizzas is about to have another English rock group. will open the end of December as well. competitor. Gifaro’s Italian Pizza, Inc. Tidbits continued on page 9 Coco Cha Cha will reinvent itself is coming to town. The company based this month as a breakfast and lunch out of Salem, Oregon plans to have spot. The short-lived Billfish Grill on about a half-dozen stores in the Twin Highway 394 is now the new home to Cities by the end of 2004 and a state- the metro’s fourth Major’s Sport Café. wide goal of 100 in the next 10 years. They are also opening Tonic in Uptown They will be primarily franchised. Other in the renovated Lakeland Dental competitors are Papa Murphy’s and Academy building. Leonardo’s Take and Bake. The top five retailers had the Look for the former Portofino’s High-end steakhouse operators are greatest stock gains in 2003: location in Wayzata to be leased again. coping with an extended period of Books-A-Million, They closed their doors in late Novem- extraordinarily high prices, particularly AMC Entertainment, 7-Eleven, ber unable to generate enough revenue for USDA Prime steaks, owing to Shopko and Party City. continuing supply shortages. The factors to cover expenses. msca news 8 www.msca-online.com TIDBITS continued from page 8 Web Sites FAO Inc., the parent company of FAO McDonald’s announced that they will The most web sites visited Schwartz, Right Start and Zany Brainy, introduce proprietary line of books, include eBay, Amazon.com, revealed that they are having continued clothing, toys and videos called McKids. Yahoo Shopping, Expedia, liquidity problems. Knowledgeable The merchandise will be sold through DealTime, Travelocity, AOL Shopping, sources are predicting that FAO may not traditional kids retailers and the items will Orbitz.com and Wal-Mart. make it through the Holidays. go on sale spring 2004.

Home Depot announced that they have Best Buy and Wal-Mart both an- Electronic readers mounted on loading purchased RMA Home Services who is a nounced that they will both offer on-line docks or at other locations receiving contract installer or replacement windows musical downloads. product will automatically check in and home siding. RMA is the #3 company orders, reducing labor demands, and A recent ACNielsen survey of Ameri- nationally in that business. This purchase increasing inventory accuracy. by Home Depot illustrates the retailer’s cans found out that 61% of U.S. house- commitment to expanding its “At-home holds have used self-service check-out Regis purchased 758 hair salons in 25 Services” division. lanes, with 32% stating that it was a “great transactions in fiscal 2003. One of the procedure”. most important for future growth was the JCPenney and May Companies both acquisition of Vidal Sassoon. They are Spiegel, Inc. has asked the bankruptcy announced 3rd quarter sales that beat Wall looking to open two studio-size Sassoon court to allow it to open 17 new Eddie Streets predictions and both see a positive stores in the United Kingdom in December Bauer stores. The retailer states that the Holiday retailing season. On the other end and another in Chicago early next year. of the spectrum, Federated Department request is part of its original plan to stores announced that their 3rd quarter emerge from bankruptcy. This plan also Sears announced that it has indicated income fell a -15% from the prior year’s calls for the closing of 60 plans to move 200-300 of the retailer’s quarter. underperforming Eddie Bauer stores. stores out of regional malls and into larger, free-standing stores built to new Starbucks announces record 4th quarter McDonald’s announced in November Sears Grand Prototype specifications. that they opened the first of seven revenue increase of +24.9% on sales of McCafe coffee shops in Raleigh, North $1.08 billion, and same store sales Classic women’s wear specialist Carolina. The interior of the cafes encour- increase of +9%. Talbot’s has taken the notion of tailoring one’s offerings to a whole new level with ages a broad mix of customers to meet, The Albertville Outlet Mall is now the the recent introduction of an entirely new discuss business, relax and enjoy the Albertville Premier Outlet Mall. gourmet coffee, sandwiches and desserts. retail store—this time targeted exclusively Cold and flu season is just around the The design includes couches, music, to men. They recently opened their sixth corner. U.S. Consumers spent $17 billion wireless and internet connections. Sound Talbot’s Man store in Manhattan this year. on vitamins and nutritional supplements in familiar? A McDonalds franchisee tested Initial sales results have been encouraging 2002, more than double the $8 billion the concept in Chicago from April 2001 and expansion plans are moving ahead for spent five years ago. The average person until May 2002, but closed the café when 2004 and beyond, including approxi- spends $12.28 on vitamins. There are the building it was located in underwent a mately six to eight new Men’s stores per 20,000 varieties of dietary supplements to major renovation. The latest concept was year. The stores stand approximately cure anything from memory loss to a host launched in Australia in 1993. Plans call 4,500 square feet. of other illnesses. for the roll out of 400 units worldwide by In 2001 and 2003, ICSC interviewed the end of 2004. The concept is a store Despite the hype about radio frequency 48,500 shoppers exiting General Growth, within a store. identification (RFID) technology, and the Rouse and Simon malls to compile data great promise it holds for inventory concerning the number of times they The high-end jeweler Tiffany & Co. management, the reality is many manufac- announced that they will launch a new visited the mall in a three-month period turers are just not ready. Wal-Mart could store concept focused around the sale of and the amount of time they spent at the speed things along with its demand for pearls. Primary locations will be in the mall per trip. The results are somewhat RFID tags on all incoming pallets and high-end regional malls. Details about the predictable: teenagers between 14 and 17 cases from its top 100 suppliers by 2005. stores were not released. years old made the most trips to and spent the most time at the mall. Young adults spent the lease amount of time per visit at Up and Online Holiday Spending 70.1 minutes, and adults ages 35-44 made the fewest trips to the mall. Online holiday sales will reach $18.35 billion this year, a 22% increase over last year’s holiday spending online, according to BizRate.com Inc. Consumers are After emerging from Chapter 11 in April speaking up and saying their spending decisions will be influenced by convenience of last year, Factory Card and Party Outlet and value and not just the lowest price. A recent survey showed that the web is the has reached another milestone: a listing on second most popular shopping destination among consumers after discount the Nasdaq National Market. The ticker department stores, with an average 21% of their holiday budget spent online. symbol is FCPO. They currently operate 175 company-owned stores in 20 states. www.msca-online.com 9 msca news

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