After years of sporadic or largely nonexistent construction in the lakes area in the wake of the Great Recession, 2012 proved to be the year the economic recovery took solid steps.
Jobs. Construction. Development.
The ground was laid for the first waves of economic development at the end of 2011 with the confirmation of a number of projects. The largest arrived with retail giant Costco. In April, Costco closed on the former Dondelinger Motor City property, with plans to build a warehouse store in one of the smallest markets the company has entered. Costco bought the land for $4.2 million. Construction began on the southwest corner of the Highways 210 and 371 intersection.
The building plan called for a 142,705-square-foot wholesale building with 752 parking stalls, a fueling station, and five outlots on the land off Elder Drive. The store plans include a tire installation and repair center and off-sale liquor store. Four of the outlots with the Costco development will be able to be developed for commercial businesses. A starting wage was initially reported at $11.50 per hour, but actually started at $11 when Costco began hiring in Baxter this summer. The average hourly wage, the company reported, is $22.37 with 90 percent of employees expected to be eligible for benefits.
The Baxter Costco’s opening date is listed for Oct. 24. Costco reported it expects to hire 175 to 200 employees and applicants were expected to significantly outnumber job openings.
Costco currently operates 605 warehouses, including 438 in the United States and Puerto Rico, 82 in Canada, 32 in Mexico, 22 in the United Kingdom, 13 in Japan, eight in Taiwan, seven in Korea and three in Australia. The company has 16 warehouse openings listed from mid-August to the end of November, including Baxter.
It didn’t take long for Costco’s plans to have ripple effects.
Olive Garden, which has been circling the Baxter area looking for a location
for months, settled on land along Highway 371 and the intersection with Glory Road by J.C. Penney Co. Olive Garden reported its 7,600-square-foot restaurant will open in early October with 45 bar seats and 200 seats.
Phase one of construction put up the restaurant, landscaping, parking and driveway areas. Phase two involves the construction of the retail strip center of about 13,200 square feet, with not more than 4,200 square feet of restaurant uses including drive-through windows. Phase two construction is required to start by Dec. 31, 2014 with proposed food sites in the north retail area of phase two have 130 seats listed for the project along with 9,000 square feet in retail shops. A site plan shows two restaurants, with one on either side of the building with the retail shops in between. One of the restaurants is listed at 2,400 square feet with the other at 1,800 square feet and with drive-through lanes.
Just yards away on the western side of J.C. Penney, trees gave way to put up a Discount Tires building on Glory Road. Bill Wendell, Discount Tires regional vice president, initially thought the building may go up in 2013, but the store is ahead of schedule with a November opening date expected following this summer’s construction. Wendell said the company, which now has about 23 stores in the state and more than 800 nationwide, is trying to open two to three stores annually. The chain started in 1960 in Ann Arbor, Mich. and strictly sells tires and wheels and accessories. Fifteen hires were expected with the store, which may grow to 25 to 30 employees.
Wendell said the addition of Costco was a driver in the decision to locate in Baxter. Although with a lake home in the area, Wendell was familiar with potential locations here.
“I’ve always thought it would be a good spot,” Wendell said. And he said having Walmart, Costco, Home Depot and Menards along with the restaurants nearby are benefits.
“They all create traffic and everybody drives cars,” he said.
Just up the highway, AT&T moved into the freshly constructed addition to the North Pointe Center and opened a 2,819-square-foot retail store on Edgewood Drive.
In June, ATEK Companies announced a commitment to a significant presence in Brainerd by moving production to the city by the end of 2012. ATEK is a family of companies with five businesses — ATEK Medical, ATEK Manufacturing, ATEK Plastics, ATEK Products and Progress Casting. ATEK Products, based in Brainerd at 10th Avenue Northeast, works with industrial sensing, security and safety systems with familiar names like Larco.
The company, which has been in business for more than 60 years, has a long history in Brainerd and has employed people here for decades. ATEK announced it is moving all accounting and other back-office functions to Brainerd and plans to move all production at its Savage facility to Brainerd by the end of 2012.
In the neighborhood, on Isle Drive, Essentia Health St. Joseph’s-Baxter Clinic opened its new building in February.
The addition of the Baxter clinic meant a move for eight of the 16 family medicine doctors working in Brainerd. Urgent Care made the move along with physical therapy, obstetrics and gynecology and pediatrics. Changes included the ability for patients to check in on their own health care records electronically and an emphasis on same-day service for walk-in patients. Physician’s schedules were examined and restructured so patients would have more opportunities to see their primary care physician, even on a walk-in basis. Design elements incorporated natural light and created screened waiting areas for added privacy.
In February, Allina Hospitals and Clinics and Crosby-based Cuyuna Regional Medical Center announced a joint land purchase off Isle Drive in Baxter. The land is off Highway 371 on Isle Drive, south of the Mid-Minnesota Federal Credit Union building. There were no immediate plans to build, but the health care provider deemed it a good time to make the land purchase in preparation to adding a presence in the area to serve patients who now travel to the hospital and clinic in Crosby.
Minneapolis Heart Institute, part of Allina, has operated clinics in Brainerd/Baxter, Crosby and Aitkin for many years, and previously stated they are looking forward to expanding community partnerships and health and wellness programs throughout the region as we continue to offer a full range of cardiology services in the Baxter area, including same-day appointments with a cardiologist.
In Aitkin, Riverwood Healthcare Center completed the first phase of a major renovation and expansion project, which created private rooms for patients, a common courtyard and reworked the birthing suites adding a third delivery room and family waiting room. Semi-private rooms at the hospital were converted to 25 single patient rooms. More space was given to the intensive care unit and a separate space created for chemotherapy and infusion treatments. Renovations continue on the surgery department, lobby enlargement and other additions in the $21 million project.
Olive Garden is the first new major restaurant addition to the lakes area community in some time. But it wasn’t the only culinary change in the region.
A major makeover was in the works through the winter of 2012 for the re-opening of Bar Harbor. The restaurant, with roots on Gull Lake dating back to late 1930s, reopened after an extensive renovation.
The restaurant remade itself before. The original structure burned to the ground in 1968 but was rebuilt. In April 2004, a new restaurant — modeled after the 1930s version — was constructed on the site next to the old one, which was then demolished. In 2010, John Allen, longtime Gull Lake resident and president and CEO of Minneapolis-based Industrial Equities, purchased Bar Harbor from Steve and Deanna Anderson. With winter business slowed by a lack of snow, the restaurant remained closed for an extended time, allowing for a more complete renovation to time with the first day of spring.
Numerous pine tree plantings and landscaping reshaped the look of the gentle curve on County Highway 77 near the Gull Lake Narrows. Inside the storied restaurant was also transformed. Mahogany wood. White linens. Vintage photographs. The new restaurant features an intimate piano bar and a homage to the lakes area in the Elbow Room bar.
The restaurant has two sides, one with white table cloths and fireplace and the other with high tables and bar seating, including an intimate piano bar and nearby stage for a three- or four-piece band. Allen’s vision was to reach out to the restaurant’s rich tradition and rebuild that grandeur, while not making a restaurant stuffily set aside solely for special occasions. The new Bar Harbor was described as upscale casual where people, fresh from a boating excursion and docked in one of the restaurant’s 32 boat slips, would feel comfortable.
The restaurant seats 210 inside and 110 outside. Seating on the deck now has a focal point of a gas stone fire pit and view of Gull Lake. Chef P.J. Severson said the kitchen’s focus is on fresh ingredients and meals made in-house. He said the restaurant is focused on a higher-quality of tender meat that incorporates the tradition of the supper club and its steaks.
Farther down the road in Lake Shore, venerable Sherwood Forest would also find a fresh start in the spring.
Sherwood Forest, settled on a narrow strip of land between Gull Lake and Lake Margaret, has been part of the area since the 1920s when redwood logs came from California bound for Duluth harbor and were abandoned at a lakes area depot. Mike Mulrooney, owner of Blarney Pub and Grill in Minneapolis, had driven by the building, once part of a resort, for decades and felt the building’s striking looks could help draw people inside. Mulrooney described Sherwood Forest Tavern as a casual and relaxed dining experience with full bar and menu.
The interior was freshened up with a hand-crafted redwood slab added for the bar counter, which was moved across the room. A lounge area with couch, chair and love seats were added across from the bar, along with new fixtures and ceiling fans. A deck was constructed for outdoor dining. Signature menu items include stuffed pork chop with sauteed mushroom bacon risotto with vegetables, a pan sauteed walleye is covered in wild rice walnut mushroom creme sauce along with daily pasta specials and burgers. Mulrooney said he hoped a good location was combining with an economy that was starting to turn around for a successful summer.
Other eateries in the region, such as the former Cheek’s, between Merrifield and Crosslake, had a makeover with an ownership change. It is now McCabe’s Pub in Mission Township. Menu items an appetizer menu with two versions of lavash, or a thin flatbread that is popular in the Middle East. Applebee’s in Baxter updated its look inside and out with a sweeping renovation of the restaurant this summer.
Hammers weren’t confined to fresh construction projects as renovations and expansions provided work for contractors.
In Baxter, icons of Paul Bunyan and Babe the Blue Ox were loaded for transport a second time from the Kohl’s corner as the statues outside the Paul Bunyan Bowl left the site as their much larger and more animated counterparts did years earlier.
This summer, construction work changed the former Paul Bunyan Bowl building into the Mills Indoor Shooting Range and Archery Center, a complement to the next-door Mills Fleet Farm. Building plans called for a 15,000-square-foot addition, 50-yard firearms shooting and tactical training range, a 40-yard archery range, a large classroom, a small training room and a merchandising area.
In Aitkin, a main street mainstay was getting a new lease on life. Sylvia Allen, owner of Allen Consulting with a home in New Jersey and long family tradition of summers in Aitkin that goes back to her grandparents. They visited friends in the area in 1912 and later built a home there. That connection led Allen to the effort of renovating the landmark Butler’s store, originally the Aitkin Opera House, built in 1902. Allen reported she wanted to start with the first floor and begin a phased three-year plan to renovate the building starting with an Internet cafe and six retail stores. To that end, she created a nonprofit Butler Project. With help from the Blandin Foundation and other grantors, the plan was updated to complete all three floors in a timely fashion giving full theatre and event space on the second floor and providing two restaurants in the basement —The Grotto and a microbrewery called the Rathskeller.
At the end of 2011, new owners of the Westgate Mall announced plans to revitalize that portion of the community with new stores and more jobs.
Alan Retkinski and Alex Schleider formed Westgate Mall Realty Group for the $6.8 million purchase. By spring, Big Lots and Dunham’s Sports moved into the former Steve & Barry’s store and opened in the spring of 2012. Those stores were joined by specialty young adult retailer rue 21.
Retkinski’s New Jersey-based company, Lexington Realty International, owns and manages shopping centers and has taken other malls said to be in death spirals and turned them into vibrant destinations again.
When the Westgate Mall came on to the market, Retkinski said they thought it was a perfect fit with other properties they have in the region. With their existing relationships with retailers, Retkinski said they were able to ink deals with Big Lots and Dunham’s Sports. Big Lots took about 32,000 square feet and Dunham’s Sports moved into about 33,000 square feet.
In addition to updates at the mall with Wi-Fi and other service upgrades, the mall owners began to look for a restaurant to move into a 1.15-acre parcel in front of the mall.
The mall owners then sold the theater to longtime operators Mann Theatres, creating another building project as the theater was expanded from 10 screens to 12. Each auditorium was gutted and rebuilt with stadium seating, 3-D screens, computerized digital projection equipment. Two large auditoriums and a party room were added to the building. For 12 screens, the investment in the digital technology was about $850,000. The renovations, expected in the $4 million to $4.5 million range, extended to a new facade, new entrance and new name in Lakes 12 Theatre.
Steve Mann, president of Bloomington-based Mann Theatres, said it was a pleasure to work in the community where people cared about the project and were quick to help from local signmakers to the Brainerd High School passing the word about job openings. Mann said it was a different experience than building or renovating in a metro area.
Radco Truck Accessory Center, a division of Silver Star Industries, opened in March in the shuttered Floor to Ceiling Store along Highway 371. Radco has been in east Brainerd since 1976. The company headquarters remained in Brainerd while the retail and warehouse facility made the move to Baxter.
“We have had a terrific run here at the Highway 25 facility, and we want to sincerely thank all of our friends who we have helped for 30 plus years,” Brian Skogen, company president, stated at the time. “The opportunity that presents itself in relocation is invigorating. While we have an established track record here on the east side of town, it’s obvious that traffic patterns and commerce in general have gravitated to west Brainerd and the 371 corridor in Baxter. ...(In the) Floor to Ceiling store, we have a rare find with both a location and building size that mirrors our needs today and for years to come.”
THE FUTURE and the Costco and North Dakota effects
Chris Close, broker/owner with Close-Converse in Brainerd, specializes in investment properties and business brokerage. Close said property values have leveled off and remain relatively stable. The economy is creating attractive lease rates for people who may want to upgrade to a nicer space. Until supplies diminish, values may continue to hover near the bottom. Close said existing properties are still prices well below the cost to build, which is critical. Close said with those deals in mind, a lot of industrial buildings are being gobbled up.
“A lot of people are still under stress,” Close said. He said regulations and the time and energy it takes to enter local markets may be more of a struggle to small business owners and small entrepreneurs than it is for larger national players looking to move here.
And then there is the Costco effect.
Baxter reportedly represents the second smallest market Costco has decided for a warehouse store location. Simply looking at the demographics here it doesn’t appear to be enough to attract the development even with Brainerd and Baxter and Unorganized Territory combined, or by combining the 63,000 people in Crow Wing County with 29,000 in Cass County for a 92,000 draw area.
“We don’t come close,” Close said of the demographics companies typically need when weighing decisions for store locations, “but they keep coming.”
Summer estimates for the Brainerd lakes area indicate the population spikes to 200,000 or more. But it’s a hard number to track down. Instead, Close said companies are looking at other significant numbers.
“We’ve at least survived and come out pretty well in this down economy because we really have a draw to this area from the lakes and rivers,” Close said of the lakes area, which continues to create a regional hub. “We are drawing people with a lot of money to this area. We are in a unique position. If you look at the demographics, it doesn‘t make sense. I think the wealth effect is critical.”
The wealth effect comes from the seasonal homeowners filling the lake communities and neighborhoods.
“Our commercial development is an anomaly in the world of commercial development,” Close said. “It doesn’t make sense by the numbers.” But he added the regional hub of the Brainerd lakes area, the existing wealth here are all part of the equation as developers see a positive future here. Developers are also looking at retail sales numbers, which indicate a market that draws a lot more than just the area population.
“The retail dollars are critical to know how much money is flowing around the community,” Close said. And now developers have another solid reason to take a hard look at the region — Costco.
The No. 1 thing for any national chain looking at the market, and a certain way to get their attention is to say “Costco is building,” Close said. “They are all saying, ‘if (Costco) is doing it, surely we will do it. A lot of nationals are looking at our market right now. ... From the national side we are going to see a lot of activity.”
Beyond Costco, Close said there is the North Dakota influence as the oil boom there, trickles down here. Close said people, particularly contractors, are going to North Dakota for the opportunity to make a lot of money.
“But this is such a great place to live, they keep homes here and work for three weeks and then come back,” Close said. He calls it the Midwestern version of the California gold rush. “The good news is they are bringing money back to spend here.”
Entrepreneurs finding it expensive to employ people in North Dakota are seeing a good and more affordable work pool in the lakes area and more affordable properties. With the savings, the numbers are in their favor to develop product here and ship it to North Dakota.
So while the Great Recession forced businesses to streamline, cut costs, be more efficient and downsize to survive, Close said some are now seeing more revenue even as they have fewer sales because their costs have decreased.
“Businesses had to get really smart to maximize every dollar because it was so limited,” Close said, noting in the long run that will be good but the short-term pain comes with the higher unemployment.
“I feel far better today than I did a year ago in terms of activity,” Close said, noting he still has concerns but people are investing cautiously. “We are heading in the right direction. A lot will be told in the election.”
Close said the Gander Mountain building and site is back on the front burner for redevelopment with Michaels and Petco in the mix along with other recognizable names. A national chain has also looked at the former Pine Meadows Golf Course in Baxter, although property off the first tier will need a strong destination draw to make up for a lack of visibility. Close said those looking at the golf course will need to be more of a pioneer but they gain from a bigger land value.
Overall, looking at the economy, Close said things could be a lot worse.
“We are very fortunate and hopefully it will continue.”