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Allan

Michigan aims to keep Kmart in state

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Why is the state not trying to get Kmart to relocate to downtown detroit? It seems like a perfect fit to me. Like I have said before....this is place is run by a bunch of idiots. Why would Royal Oak want the Kmart headquarters to begin with? There is plenty of space in downtown Detroit...and it is a tax free renaissance zone.

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Kmart employees go back to work after lunch at Kmart's headquarters in Troy, which can accommodate 4,500 employees -- well below the 2,100 workers who now remain.

Michigan aims to keep Kmart in state

Officials search for alternate sites if retailer decides to relocate Troy headquarters.

By Tenisha Mercer and R.J. King / The Detroit News

TROY - The state of Michigan and Oakland County are taking steps to make sure Kmart Holding Corp. stays in Michigan, preferably in the county if the giant retailer decides to relocate because of a dwindling workforce.

At least two communities - Royal Oak and Pontiac - have been asked by the Michigan Department of Labor & Economic Growth and the Oakland County Community and Economic Development Department to develop a list of potential new sites for Kmart, city officials said.

While the selection process is in the early stages, Pontiac Mayor Willie Payne said, "I would hope that we would be the chosen location."

Joel Feldman, president of First Realty Co., a real estate brokerage and consulting firm in West Bloomfield, said Kmart officials consulted with him earlier this year about various options for its headquarters. He said the company has been studying the potential sale or redevelopment of its headquarters for more than two years.

Kmart's headquarters - now nearly half empty - may be an attractive location for another large corporation if the giant retailer decides to move to a more economical building for its remaining 2,100 employees.

Among the locations: A 180,000-square-foot building that Schostak Bros. & Co. of Southfield is developing at Interstate 696 and Main Street in Royal Oak, or downtown Pontiac.

Paul Krepps, a spokesman with the Michigan Economic Development Corp., said the agency has spoken with Kmart officials, as it routinely does, but would not comment on the company's plans.

Dennis Toffolo, director of the Oakland County Community and Economic Development Department said, "We are always willing to help out to keep good companies" but said his office is not working on relocation plans for Kmart.

Real estate experts said Kmart may put its nearly 1 million-square-foot executive office up for sale after the retailer cut about 220 jobs at its headquarters last month.

Kmart would not comment.

The company's executive office at 3100 West Big Beaver and Coolidge, across from Somerset Collection North and South, can accommodate 4,500 employees -- well below the 2,100 workers who now remain. During Kmart's heyday in the 1970s, as many as 6,000 employees worked at Kmart's headquarters and adjacent buildings.

"It's a trophy property," said Barry M. Klein, chairman of Barry M. Klein Realty Enterprises in West Bloomfield. "It's probably one of the most valuable properties in the state. It's near I-75, Somerset and affluent communities. The value is tremendous."

Real estate experts estimate Kmart's headquarters could fetch a price between $15 million and $20 million, depending on the planned use for the property. The 44.5-acre property is adjacent to Big Beaver and Coolidge roads.

If the headquarters is demolished and replaced with a project of offices, stores and residences, the price would be lower to offset the demolition costs. If the office building is renovated to accommodate multiple users, it could command a higher price.

"Kmart's headquarters is really a labyrinth, and it's easy to get lost in there," said Feldman of First Realty. He added, "It would be exceptionally difficult for a developer to renovate the building for multiple users because of its inefficient layout and all the atrium space," he said. "My best guess is that if Kmart sold it, the headquarters would be torn down and replaced with a mixed-use development."

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You can reach Tenisha Mercer at (313) 222-2401 or [email protected]

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State scrambling to keep Kmart

Obstacles loom with move expected soon

September 22, 2004

BY JOHN GALLAGHER and GRETA GUEST

FREE PRESS BUSINESS WRITERS

Civic and business leaders in southeast Michigan expect Kmart Holding Corp. to soon announce a move out of its headquarters in Troy as part of its post-bankruptcy process of reinventing itself. With that in mind, those leaders are scrambling to find Kmart a new home and a new use for its old one.

Both goals present difficulties.

State and local officials desperately hope the nation's third-largest discount retailer will choose a new home in any one of several office parks in metro Detroit. But there's a distinct danger that the retail giant might decide to transfer its headquarters entirely out of state, officials acknowledge. That blow would cost Oakland County and southeast Michigan a couple thousand jobs and a Fortune 500 headquarters.

Ken Rogers, deputy Oakland County executive, said county officials have shown Kmart several sites in Pontiac and other cities that would be suitable for a downsized corporate staff in an urban setting.

And while he hopes Kmart stays in town, "life will go on" if the company moves, he said.

Equally difficult is figuring what to do with Kmart's soon-to-be-vacated headquarters on Big Beaver Road. Built in 1972, the 1-million-square-foot headquarters and adjacent 100,000-square-foot data center are considered too sprawling and inefficient to be reused and would probably be bulldozed.

"It's a great site as a dot on a map, but it is a very challenging facility," said Bennett Terebelo, executive vice president withLaKritz-Weber & Co., a Southfield-based real estate company that specializes in retail space.

Doug Smith, Troy's real estate and development director, said officials have been talking to Kmart for several months about finding a way for the company to stay in the area.

"We would love to have the opportunity to have them stay in Troy," Smith said. "They were the first corporate partner on Big Beaver in 1972, when we were just the Oakland Mall and a cemetery."

State officials expect Kmart to make a decision about a future headquarters very quickly -- perhaps in the next few days -- and announce it by mid-October.

These officials, who would not speak for attribution, said they are certain Kmart intends to leave its current headquarters complex on Big Beaver. They remain hopeful -- but short of confident -- that the company's main office will stay in Michigan.

Gov. Jennifer Granholm has met with Kmart Chairman Edward Lampert and other Kmart officials and pitched them on staying in Michigan, spokeswoman Liz Boyd said. Boyd didn't elaborate on specifics of what was discussed or whether Granholm felt confident of success.

Public and private professionals have been brainstorming ideas to reuse the site. Some suggest replacing Kmart there with a mixed-use project that could include pricey condominiums and a high-level hotel. "We could put a Ritz-Carlton there," Rogers suggested. The prevailing assumption, he said, is that all or most of the current headquarters complex will come down.

Kmart hasn't said much of anything about its plans. Spokesman Stephen Pagnani declined comment Tuesday.

But it currently employs just about 2,000 staffers at its Big Beaver headquarters in a facility built to house at least 5,000. Moreover, since Kmart emerged from bankruptcy in May 2003, the company has been trying to remake itself as a smaller, leaner, more aggressive company, and a move to a more efficient headquarters would be part of that.

With about 1,500 stores across the nation, Kmart's financial picture has improved considerably over the past year -- particularly after it agreed this summer to sell 63 stores to Sears and Home Depot for a combined $795 million. Now with a cash reserve of $2.6 billion, Kmart has seen its stock multiply four times in just over a year. The stock rose 40 cents on Tuesday to close at $86.30 on the Nasdaq.

Even if the current structures are razed, reusing the site could be tough for a while because the office, retail, and hotel markets in metro Detroit are all experiencing difficulties.

Office vacancy rates in southeast Michigan are running around 20 percent, and industry insiders say no new speculative office developments are needed for some time. The same can be said for big, new hotels. And with the upscale Somerset Collection right next door, putting new retail on the Kmart site could also prove tricky.

Moreover, with interest rates rising and the market soft, one professional in the Oakland County real estate business suggests Kmart may not try to market its site for a couple of years even after it moves out. This professional suggests developers might reason: "We know it's a home-run site, we'd love to own it, but come back and see us in two or three years when the market's better," the expert said.

Contact JOHN GALLAGHER at 313-222-5173 or [email protected] Free Press business columnist Tom Walsh contributed to this report.

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