Sprawled Out: The Search for Community in the American Suburb

Is Menards having its cake and eating it too with subdivision development?

No one else has asked, so I will: In cases where Menards is developing locations adjacent to or in proximity of land that they have acquired through subsidy deals with local governments, or near roads improved or built as part of that subsidy, is someone holding Menards accountable in some way as they exploit that subsidy in this new venture?

For example, are local municipalities seeing to it that taxpayer-funded subsidies to Menards are at least partially repaid by ensuring that these new subdivisions serve their constituents that are in need of affordable housing?

A sidenote to the story in the Milwaukee Journal Sentinel answers that question:

THESE AREN'T STARTER HOMES
Of the three residential subdivisions being developed by Menard Inc., just one - Prairie Meadows, in Yorkville, Ill. - has homes that have been built. Houses currently available there have listed sale prices ranging from $349,900 to $396,900. They include such features as three-car garages, walk-in pantries, stainless steel appliances and master bathrooms with whirlpool tubs.

Perhaps there is someone out there who can show me that the locations mentioned in the story were developed without subsidy support, and therefor Menards faces no obligation to local taxpayers. Good luck.

Wal-Mart plays a similar game. Local municipalities basically give Wal-Mart the huge chunk of land they demand for their superstores; then Wal-Mart collects rent from "out-buildings" on the huge unused frontage that are leased by Wendy's and other tenants (Wal-Mart counts itself as a tenant as well, paying rent to itself in the ever-popular REIT tax avoidance scheme).

What a deal.

Menards breaks new ground

Retailer hopes developing subdivisions will pay off

By TOM DAYKIN
[email protected]

Posted: May 5, 2008

People typically run to Menards to buy stuff for their weekend projects: a new drill, maybe a toilet seat.

But lately, the company is stocking something a bit more unusual: home sites.

Eau Claire-based Menard Inc. is becoming more active as a developer of residential subdivisions - an extension of the company's role as the nation's third-largest home improvement retailer.

Menard is proceeding with plans to develop two large subdivisions, in Warsaw, Ind., and Urbana, Ill., and is currently developing another subdivision in Yorkville, Ill. The company also owns land set aside for a small condominium development that might someday be built near its Oak Creek store.

Those projects are happening through opportune purchases of excess land as Menard buys parcels to build home improvement stores, said Jamie Radabaugh, director of sales and leasing for the company's property division.

"We are actively looking for new residential projects around our new and existing stores," Radabaugh said.

The company appears to be the nation's only home improvement retailer that's also a subdivision developer, said Scott Wright, spokesman for the North American Retail Hardware Association, an Indianapolis-based trade group with around 13,000 members - most of them independently owned stores.

"I certainly haven't heard of anyone doing anything like that," Wright said about Menard's side business. "Especially in this economic climate."

Menard did its first residential subdivisions, in Franklin and Eau Claire, many years ago. The company's land acquisitions have increased as Menard, which operates around 240 stores in 11 states, continues to grow.

Because it's privately held, Menard doesn't have to meet the quarterly earnings expectations that Wall Street demands from the chain's chief rivals, Lowe's Cos. and Home Depot Inc.; the latter announced last week the closing of 15 stores, including three in Wisconsin. The fact that Menard is not publicly traded gives it more leeway to invest in real estate developments, according to a company presentation made in January to the Urbana Plan Commission.

By developing residential subdivisions close to new stores, Menard creates a larger customer base among those new homeowners, and among local homebuilders.

Houses go up in Illinois

Menard's development in Yorkville, on the outer fringe of the Chicago metropolitan area, illustrates that strategy.

Yorkville is in Kendall County, which the Census Bureau recently named the nation's fastest-growing county.

In 2001, Yorkville annexed around 250 acres of farmland owned by Menard. Some of the land was set aside for a new store, which opened in 2003, said Lynn Dubajic, executive director of the Yorkville Economic Development Corp.

Additional parcels were set aside for 164 single-family homes and 68 townhouse-style condos, Dubajic said.

Menard put in utilities and other infrastructure for the single-family homes, and so far, it has sold 129 lots to AMG Homes, a local homebuilder. Since 2005, AMG has built 110 homes, said Chad Gunderson, AMG co-owner and chief executive officer.

The townhouse sites probably will be sold once the housing market improves, Dubajic said.

Materials from Menard

In purchasing the lots, AMG agreed to buy virtually all of its building materials for the project from Menard, Gunderson said.

The shopping list includes lumber, windows, doors, flooring materials and roof shingles, Gunderson said. AMG was allowed to buy a few products, such as concrete, from other vendors, because Menard doesn't sell them in large enough quantities.

The arrangement has worked out well for AMG, Gunderson said.

"We look at the contract as mutually beneficial," he said.

The company will have similar requirements with homebuilders buying lots from other Menard-developed subdivisions, Radabaugh said.

"It only makes sense to tie our company's main business with the residential development projects," he said.

Two more sites in works

In Warsaw, in north central Indiana, Menard is building a store that will open early next year, said Jeremy Skinner, city planner. He said Menard owns 70 acres, with 30 acres set aside for the store and other commercial use. The remaining land is for single-family homes.

Menard originally proposed 66 single-family lots for the Warsaw site but now is seeking to develop 89 lots, Skinner said. He said Menard is in discussions with a local homebuilder interested in buying the lots.

In Urbana, in east central Illinois, Menard bought just more than 350 acres at an auction in 2005. Menard is still working on its plans for a store, additional retail space, single-family homes and townhouses. The company expects to have a total of 425 residential units in Urbana.

As in Yorkville and Warsaw, Menard plans to sell the residential lots to homebuilders, said Lisa Karcher, a city planner. She said the entire project, including construction of all the planned houses and condos, will likely take five to 10 years to complete.

In the Milwaukee area, Menard owns just over 5 acres of vacant land northeast of its Oak Creek store, at 6800 S. 27th St. That store opened in 1998, just across S. 27th St. from a smaller Menards store in Franklin, which closed.

In 2001, Menard was granted permission to develop 22 townhouses on the Oak Creek parcel, but that approval has since lapsed, said Doug Seymour, Oak Creek director of community development.

Menard is looking for homebuilders interested in developing the Oak Creek parcel, Radabaugh said.

Menard's foray into development is "very interesting," said Wright, of the hardware retailers association.

The chain, which has grown despite increased competition from national players Home Depot and Lowe's, "has staying power unlike any other," Wright said.

McMansion blight

Clip from the film Subdivided