February 2008 Minnesota Shopping Center Association Vol 22. No 2 In this Issue No. Branch Mktplace - SNAPSHOT 1 Credit Crisis --- HOT SPOTS / COLD SNAPS 2 lucy -------------------- RISING STAR 3 Colianni / Moen ---- MEMBER PROFILES 5 MSCA Board ------ COMMITTEE PROFILE 5 Mpls Momentum -- PROGRAM RECAP 6 Connection Feature Guest Author: Dan McElroy, MN Dept of Employment & Economic Development Trends Look Promising for State Economy s commissioner of the On the other hand, the economy is continuing to grow. Minnesota Department of DEED’s employment data shows some important sectors are AEmployment and Economic performing well, including medical-device manufacturing, Development (DEED), I’ve visited insurance carrier operations, business services, tourism and with businesses throughout the some retail segments including general merchandise and state and reviewed some timely department stores. The national economy continues to data on Minnesota’s economy. grow. The Federal Reserve has lowered interest rates, Although there are short-term encouraging lending and boosting investor confidence. economic soft spots, businesses Minnesota manufacturers reported a relatively strong 2007, and the economic data suggest according to DEED’s recent Manufacturing Business that the Minnesota economy Conditions Survey. Significant employment and profit growth remains strong and vibrant. elude the industry, but increases in orders, productivity and 2007 Economic Review production levels appear to offset some of those effects. The big economic story of 2007 State manufacturers are also continuing to benefit from nationally and in Minnesota was increasing exports. Minnesota’s third quarter 2007 exports the loss of momentum in the housing market and the reached a record high with growth of nearly 12 percent resulting credit crunch. These changes contributed to from the third quarter of 2006. employment losses in the construction and finance industries and have trickled over to many sectors, including retail. Snapshot Location: NWQ I-35 & Highway 95, North Branch North Branch Month/Year Opened: Under construction – store openings in October 2008 Marketplace Owner: North Branch Marketplace LLC Managing Agent: Steve Johnson, Solomon Real Estate Group Architect & Construction Contractor: Amcon Construction Site Planner/Engineer: Westwood Professional Services GLA and Tenants: 186,000 sf including a Shopko, unnamed Grocer, 21,000 multi-tenant retail space, Holiday Gas, Arby’s and three outlot pads Market Area Served: North Branch & surrounding communities Construction Style: Concrete block, brick, glass and EIFS store fronts with awnings Additional Facts/Narrative: North Branch Marketplace is a 43- acre retail center with excellent visibility and easy access off I-35. The unique mix of a general merchandiser, grocer, convenience stores, and highway-related services offer retail opportunities to the City and Highway corridor traffic. The synergies of this retail center coupled with the existing Outlet Mall to the south provides a much-needed and unique shopping venue to the region. msca-online.com 1 MSCA Connection Feb 08 Trends Look Promising - continued While 2007 may not be remembered as a Minnesota manufacturers are optimistic high-flying year, there certainly were some that growth will be solid in 2008, according 2008 Sponsors positive conditions as the calendar turned to DEED’s recent Manufacturing Business American Engineering Testing, Inc. to 2008. Conditions Survey. Orders, production levels Aspen Waste Systems, Inc. and productivity are expected to expand Barna, Guzy & Steffen, Ltd. Outlook for 2008 and produce mild employment growth. Bremer Bank, N.A. Brookfield Properties The housing sector was a stimulus to the Prospects for the Retail Industry CB Richard Ellis economy during the recession earlier this CSM Corporation Cambridge Commercial Realty decade, but the housing sector is likely to While some retail industries are Capital Growth Madison Marquette continue to be a drag on the economy in experiencing short-term soft spots, the long- Chesapeake Companies 2008. While many economists expect slower term outlook for retail businesses in Chuck & Don's Pet Food Outlet economic growth to continue in 2008, they Minnesota remains promising. Recently, the Colliers Turley Martin Tucker The Collyard Group L.L.C. generally agree that housing will not drag combination of falling house prices, Commercial Partners Title, LLC the economy into recession. The housing tightening credit standards, higher energy Cuningham Group Architecture, P.A. downturn continues to be offset by a solid prices and a weaker job market have Cushman & Wakefield of Minnesota, Inc. Dick's Sanitation, Inc. economic foundation. taken a toll on U.S. consumer confidence. Doran Companies Slower consumer spending will affect the Several factors point to the ability of the Dougherty Funding LLC economy through softer retail sales, and Emmes Realty Services LLC economy to continue with positive growth. thus weaker demand for goods. Exeter Realty Company For example: Faegre & Benson LLP In the longer term, Minnesota’s population Fendler Patterson Construction, Inc. Strong corporate bottom lines should Fredrikson & Byron, P.A. and household growth will lead the nation’s support healthy levels of business General Growth Properties, Inc. heartland and rival many western/southern Gray Plant Mooty investment. New orders and shipments states. The state will add more than 500,000 Great Clips, Inc. for capital goods will be the key to Griffin Companies residents and 200,000 households through understanding the industry’s health H.J. Development, Inc. 2015 with large gains in Dakota, Scott, over the next few months. Hempel Wright and Sherburne counties. Inland Real Estate Corporation Slower economic growth in the U.S. Itasca Funding Group, Inc. should dampen inflation pressures, Population gains are good news for the JE Dunn Construction giving the Fed room to cut rates further. retail market, although the demographic Jones Lang LaSalle/Rosedale Center KKE Architects, Inc. Growth momentum will remain strong in shifts accompanying the growth will Kraus-Anderson Companies most developing countries in Asia, Latin influence retail trends. The largest increases LandAmerica America and Europe. will be in people ages 55 to 69, with Landform Larkin Hoffman Daly & Lindgren Ltd. The decrease in the value of the U.S. increases also for those younger than 14 Let There Be Lights! dollar relative to other currencies and those 25 to 34. Likewise, the number of M & I Bank makes U.S. exports more competitive. empty-nesters and one-person households McComb Group, Ltd. As a result, Minnesota businesses should will increase. The ability of retailers to adapt McCombs Frank Roos Associates Messerli & Kramer P.A. continue their long-term trend of strong to changing demographics and consumer Midwest Maintenance & Mechanical, Inc. export growth. preferences will be vital. Minneapolis/St. Paul Business Journal NAI Welsh NorthMarq Capital, Inc. Olsson Associates Oppidan, Inc. Hot Spots / Cold Snaps by Ross Dahlin, Itasca Funding Group, Inc. Opus Northwest LLC Park Midwest Commercial Real Estate Paster Enterprises RJ Marco Construction Inc. Have We Bottomed Out? RLK Incorporated RSM McGladrey, Inc. The Credit Crisis and Commercial Real Estate Lending RSP Architects Reliance Development Company, LLP mericans will not look back fondly on First a brief background of the recent CMBS Robert Muir Company the country’s economic (commercial mortgage backed securities) Ryan Companies US, Inc. performance in 2007. The word market, which accounted for 54% of Shea, Inc. A Shingobee 1 “subprime” has become so common, commercial loans in 2006. They were the Solomon Real Estate Group Inc. college students use it as an adjective to fastest growing segment of the commercial Stewart Title Guaranty Company describe their poor exam performance. (I debt market because of their high LTV Stonehenge USA TCF Bank hope the word does not apply to this (loan-to-value), low rates, and other Target Corporation article!) As the residential mortgage crisis borrower-friendly terms. Similar to home U.S. Bank unfolded early last year, commercial loans, CMBS loans are packaged by banks United Properties lenders were comfortable that the crisis was and sold to outside investors. When the The Velmeir Companies Venture Mortgage Corporation contained. The fundamentals of rating agencies saw what was happening Weis Builders, Inc. commercial real estate remain sound; on the residential side, they began to Wells Fargo Bank, N.A. occupancy is good and mortgage defaults question the underwriting standards of the Westwood Professional Services, Inc. are at historic lows. Why then would the commercial paper investors were buying. Winthrop & Weinstine, P.A. residential credit crisis affect commercial Potentially risky terms including high- real estate lending? continued on page 7 msca-online.com MSCA Connection Feb 08 2 rising star by Andy McDermott, Shea, Inc. Featured Sponsors lucy Activewear Barna, Guzy & Steffen, Ltd. To provide our clients with Portland, OR-based lucy Activewear, Inc. reaches 300 doors. They have seen 60% high quality legal services at opened its first Minnesota store at the growth, double digit comp stores sales and reasonable rates, while Galleria in Edina in March 2007. The store significant operating margin improvements. building strong relationships targets affluent women who lead active It was also recently announced that and confidence