Cities tailor incentives to lure Kmart

[Allan]

Kmart executives have also toured the former site of Hudson's on Woodward Avenue in downtown Detroit, where some say the retailer could relocate.

Cities tailor incentives to lure Kmart

Detroit, Pontiac, Troy aim to outshine each other, Atlanta

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

Kmart executives are keeping their lips sealed, but state officials are sounding more and more optimistic that they'll keep the Troy-based discount retailer from moving out of state and retain 1,500 to 2,000 jobs.

Just last week, Kmart executives toured specific downtown Detroit sites for a new headquarters, along with areas in Ann Arbor, Pontiac and Grand Rapids. Meanwhile, Troy Mayor Louise Schilling and others have suggested that Kmart could raze its oversized headquarters in Troy and replace it with a smaller mixed-use facility.

At the same time, the possibility that Kmart might move to the Atlanta area appears to be weakening after a Georgia state task force highlighted concerns that the state doesn't have enough incentives to lure the retailer.

An out-of-state move by Kmart also would mean the expense of hiring as many as 1,000 new employees, one analyst noted. In addition, it could take up to two years to design, construct and move into a new building, which could distract from new Kmart CEO Aylwin Lewis' efforts to revitalize the firm.

"If they just up and left now, it could throw a monkey wrench into all of that," said retail analyst Gary Ruffing, a former Kmart executive now with BBK Ltd. in Southfield.

If Kmart does decide to stay in Michigan, the state could offer more than $45 million to keep Kmart, while local communities have numerous incentives to offer prospective companies, such as no-interest loans, tax-free renaissance zones, training grants and free or reduced parking rates.

"We have put together an aggressive package to attract Kmart," said Mike Shore, vice president of communications for the Michigan Economic Development Corp. in Lansing. "We are optimistic about all of this administration's business development opportunities."

According to public documents, Kmart is looking to move between 1,500 and 1,800 workers to a 300,000-square-foot office building. The retailer prefers to relocate to an urban center.

Here's how the race to land Kmart appears to shape up:

DETROIT: Real estate officials say Kmart executives have toured both the former Hudson's site on Woodward Avenue and the upcoming River East project east of the Renaissance Center. Both sites are designated as state renaissance zones, meaning nearly all taxes are waived for a period of up to 12 years, including city income tax. But both sites would require construction of a new building

Kmart's beginnings trace back to a five-and-dime store on Woodward Avenue in downtown Detroit more than a century ago.

"This is where Kmart started," Ruffing said. "It's going back to their roots."

Detroit has some drawbacks, such as parking costs.

"Downtown parking in Detroit is around $150 per month per space, while suburban parking is often provided to employees at no charge," said Jeffrey Bell, senior vice president of Colliers International, a full-service commercial real estate firm in Southfield.

Downtown Detroit's River East area is one of several Metro urban areas that beleaguered retailer Kmart is considering moving to, according to real estate officials. The company is still also contemplating a move to Atlanta.

To build on the River East site, for example, Kmart would have to acquire employee parking for about 1,300 cars at an annual cost of more than $2.3 million, Bell said.

After a long corporate exodus, several major employers have relocated to Detroit in recent years: General Motors Corp., EDS Corp., OnStar and Compuware Corp. have brought 13,000 jobs downtown.

"We would love to have a major player like Kmart in our city, but I can't comment any further," Detroit Mayor Kwame Kilpatrick said.

PONTIAC: Pontiac, another urban location, is also making a strong play for Kmart.

"We plan to be very aggressive in bringing them to Pontiac," said Everett L. Seay, president of the Pontiac City Council. "We have space downtown in our Phoenix Plaza office center, which includes a parking deck, or we could put them at a new building at the Pontiac Silverdome (site)."

The Pontiac Stadium Building Authority, which operates the Silverdome, has been working with the city to sell the 127.5-acre stadium site at M-59 and Opdyke Road to one of two development teams that would add offices, stores and more.

In addition, Oakland County Executive L. Brooks Patterson said he is working to keep Kmart in the county, and could offer up to $250,000 in training grants to help sweeten the deal.

TROY: Kmart has the option of selling its 1 million-square-foot headquarters in Troy to a private developer. The developer could tear the offices down and build new space for Kmart on the 44-acre site while adding housing, stores and restaurants, said Schilling, the Troy mayor.

By remaining in Oakland County, Kmart could also get Patterson's offer of training grants. "We want to assist Kmart in any way we can," Schilling said. "The Kmart headquarters is in our downtown development authority, which would allow us to provide assistance with infrastructure needs, data lines and roads."

OTHER MICHIGAN CITIES: Kmart is also considering Ann Arbor and Grand Rapids, but the lack of office space and high parking costs could hamper any deal in Ann Arbor, real estate experts say.

Grand Rapids Mayor George Heartwell said the city has offered a renaissance zone to capture Kmart's new headquarters. "We have many quality-of-life issues to offer companies."

METRO ATLANTA: Atlanta economic development officials would not comment about Kmart other than to say they remain committed to recruiting new businesses to the area. Georgia has dangled a reported $30 million in tax credits to attract Kmart's headquarters.

But a recent report by the Commission for a New Georgia, a state tax force, found that the state can't always tailor its incentives for specific companies.

Among Georgia's available incentives: Companies which relocate their headquarters to the state can receive a $2,500 to $5,000 annual tax credit per employee for five years if they have 50 or more employees who meet certain wage requirements.

"What Georgia has to offer may not be exactly the same package that another state has to offer, but our combination of quality of life and work force and business environment rolled into a package, make George an unbeatable competitor," said Kevin Langston, a spokesman for Georgia's Department of Economic Development.

Kmart officials declined comment Thursday except to say that a final decision on relocation has not been made and is not expected until after the upcoming election.

You can reach R.J. King at (313) 222-2504 or [email protected]

[Mojo]

I would love to see K-mart set up show in Campus Martius. I hope this plan goes through.

[Allan]

I hope that the city doesn't offer them the entire Hudson Block. If they were offered the entire Hudson block, the building would only be about five stories tall, including ground floor retail. However, if they used half of the block, the building would probably be about nine floors. I'm thinking that about 12 floors would look about right. Tall, but not too tall. The only way I could see taller building working at the site is if it has setbacks in it.

[dnast]

They could always go mixed-use, but I doubt K-Mart would take the chance.

[Allan]

They could always go mixed-use, but I doubt K-Mart would take the chance.

<{POST_SNAPBACK}>

Yeah, that's what I was thinking. For C-Mart I think mixed use is best, but I really doubt that would happen, especially with Kmart.