Friday, August 29, 2008

Come Back Home

Nancy Herhahn writes a wonderful newsletter from rural NE, Nebraska Rural Living. In this month’s issue she’s has two articles that really caught my attention.

Mary Terry and her husband moved back home to Red Cloud, NE (population 1,131) from Denver, CO where Mary ran a 150 seat restaurant. After sitting around for a year, she and her husband bought the 1893 historic McFarland Hotel, which they are renovating. Already they’ve opened Cutter’s CafĂ© in the building.

This is what it is all about in my opinion, but in Mary’s own words, “Since an elderly patron lost her driver’s license, I often pick her up and bring her in for breakfast, and when she is ill, I’ll even deliver food to her. But that’s just what communities like ours are like.”

Another item in Nancy’s newsletter is an experimental marketing campaign she has started to counter negative rural stereotypes and promoting life in NE. The three postcards promote the differences in traffic jams (cars vs. cattle); housing prices ($395,000 vs. $100,000); and security (alarm systems vs. Fido). Check them out on her website.

Thursday, August 28, 2008

Katrina Can't Keep 'em Down!

Some of my most vivid inspirations from my travels have been seeing the resiliency of the American people. Visits to places like Greensburg, KS which was wiped out by an F5 tornado on May 7, 2007 and the MS Gulf Coast which was devastated by Katrina. Today is the third year anniversary of that hurricane making land at Bay St. Louis, MS.

The Gulf Coast Business Council Research Foundation released a report on the recovery from Katrina last week. You can read it here.

After being virtually wiped clean, with hundreds of thousands of people homeless, the MS Gulf Coast has done a wonderful job of rebuilding itself. I’ve been there a half dozen times through the process and been very impressed with both their “can do” attitude and willingness to not make excuses. Now they are almost back to normal after a lot of hard work.

Wednesday, August 27, 2008

Green Acres--ND vs SF

I was in North Dakota yesterday at the Governor's annual rural ED conference in Bismarck. It was my 14th talk in the state over the past four years. I’ve travelled thousands of miles through the state and have constantly found North Dakotans to be some of the friendliest people on the face of the earth. I was thrilled to be back.

As I was driving from Fargo to Bismarck the chorus to the Green Acres theme song kept rolling around in my head. Do you remember that show?

Green Acres is the place to be

Farm Livin’ is the life for me
Land spreadin’ out so far and wide
Keep Manhattan…just give me that countryside

So, which would you take, ND or Manhattan? Since we’re in the midst of the Democratic Convention, I decided to compare it to Speaker Nancy Pelosi’s San Francisco. SF has been cited by numerous pundits and writers (Richard Florida probably being the most vocal) as the ideal city of the future.

The populations of ND and SF are somewhat similar. SF has 764,976 residents. ND 639,715. SF has a much higher household income at $57,476 compared to ND’s $40,818, but beyond that one stat, virtually every other stat that I looked at showed ND similar to or superior to SF.

Both SF & ND lost population from 2000 to 2007. SF 1.5%. ND 0.4%.

Both have had a negative outward domestic migration in the past year. SF -1,112. ND -1,136.
The medium age in SF is 39.6 years compared to 37.2 years in ND. USA average is 36.4.

When it comes to families, only 44% of households in SF are married with children compared to 64.6% in ND. USA average is 68.1%. SF has one of the lowest school age populations in the country with only 9.4% in the 5 to 17 age group. ND is at 16.6%. USA is 17.8%.

In 2000, SF had 611,674 jobs. By 2007 the city lost 16% of its jobs, taking it down to 556,621. ND during the same period grew their jobs by 11% from 309,127 to 341,704.

Home ownership is really lopsided! Only 33.3% in SF own their own house vs. 59.1% in ND. USA average is 60.2%. In the past twelve months there were 799 single family housing permits issued in SF compared to 1,919 in the three MSAs in ND (Bismarck, Fargo and Grand Forks). With a medium housing cost of $799,000 in SF, the average job holder will spend 94% of their income on housing! In ND, it will cost you 24 to 28% for that $135,000 medium priced home.

And, how about the much higher household income in SF? They’ll need it! A $100,000 income in SF will buy you what $53,991 will in Fargo, ND. Groceries are 27% less expensive in Fargo, as is housing at 71%, utilities at 18%, transportation at 17% and healthcare at 18%. All are less expensive in Fargo!

Where would you rather raise a young family?

Just give me that countryside!

Tuesday, August 26, 2008

Amazing Arcola!

Arcola, IL (population 2,652) has always had a soft spot in my heart. It was where we did one of our first industrial projects outside of our hometown, building a manufacturing plant for a Japanese auto parts company. What was unique about the project was that we not only started building the project on a handshake (which we’ve done numerous times), but we never did get all of the paperwork finished and ended up completing the project without anything being signed. The closing was the simplest we’ve ever done. They gave us a check and we handed them the keys!

I was back in Arcola to help them celebrate their community foundation which was started in 1976 and has grown to $5.5 million in assets. Think about that! In a town of 2,652!

They give away tens of thousands of dollars in scholarships, helped to restart the local grocery store, gave $1 million to the new school building and $400,000 for their new library. In other words, they are making a difference in making Arcola a better place in which to live!

Have you started your Community Foundation yet?

Monday, August 25, 2008

Love These Updates--This One From MN

Having now done tours and talks in 300+ towns all over the USA, I love getting updates from new friends from all over the country. Here is one I received this weekend from Julie Rath in Redwood Falls, MN (population 5,459).

Just want to update you…..Daktronics started here in January 2007 with 110 employees, we are currently at 280 and plan to go up to 300 by the end of the year….and 500 by the end of 2009!!! They are doing a community open house this Saturday – production is over expectations here – life is good!

Lamberton – ethanol groundbreaking yesterday – 35 new jobs in Spring 2009

City of Redwood Falls approved a $3.8M family aquatic center. It is have a rock climbing wall, zero entry wading pool, lap pool, two slides, two diving boards, umbrellas and several other water amenities!

We are partnering with Minnesota West Community and Technical College for an extended education center here – partnership with Redwood County, City of Redwood Falls, and business partners – Lower Sioux Indian Community, and two additional funding sponsors to be named shortly.

Lots of things are happening in Redwood Falls! It was a very impressive town when I visited in April, 2007 (see blogs in archives) and continues their very positive momentum. In addition to the aquatic center, Redwood Falls also has a community ice skating rink, civic center, conference center that can seat 500, field house and fitness center. And, in a town of 5,459!


Sunday, August 24, 2008

At the Convention!

If you want a unique perspective from the Democratic Convention in Denver this week, tune into my brother Bob’s blog site. He and two friends are on their way out there this morning.

Calling himself the Republican Reporter, his tagline is, “Most reporters are politically biased, I'm one of the few willing to admit to it.”

He got credentials through a local newspaper and will be writing irreverently and with a decided bias. I just hope that I don’t have to send him bail money.

Friday, August 22, 2008

Mobile Dairy

A local coop in England has come up with an innovative idea to try to help their dairy farmers experiment with adding value to their product. I call it the business incubator on wheels!

In 2002 a group of milk producers there got together to try to figure out how to turn their money losing operations around. One of the ideas thrown around was to add more value to their product by producing such products as cheese, yogurt and ice cream. A lab was set up at Reaseheath College in Nantwich but the distance to the college was a major inhibitor to innovation.

So two of the participants, Sue Prince and Sarah Helliwell, came up with the idea of the Dairy Wagon. Prince Charles was the keynoter at the inauguration of the mobile dairy this year.

Already, John and Jane Marsden produce their own Hope Valley ice cream and Tina Bowler is making her own cheese.

Local production…niche products…they’re both ideas that are growing in importance in the USA. Perhaps this is an idea that we can copy from the Brits to accelerate both trends.

Thursday, August 21, 2008

Rails--Fuel Efficient Way to Move Freight

We first got involved with rail in 1999 when we helped to build the Effingham Rail Road (EFRR) with a great partner, Charlie Barenfanger. At the time we were ridiculed for building such a short railroad, less than 2 miles in length, and the only new railroad built in IL in the entire 20th Century. But we persevered, believing that we could develop a niche with a higher level of service. And, we’ve used the EFRR as a key factor in helping to bring in new industry to Effingham.

One of the major attributes of rail is the relatively low amount of fuel that it takes to move a ton of freight. I’ve always thought that this one factor would become more important, especially in a high fuel environment like today. And, we’ve seen potential clients come “out of the woodwork” as the price of diesel has continued to climb.

One of the rail companies has boasted that they can move a ton of freight 436 miles on one gallon of diesel. It sounded WAY too high to me, so I decided to check it out. The Association of American Railroads (AAR) actually keeps track of data like that! In 2007, the seven class one railroads (all of the big ones) used 4.1 billion gallons of fuel to move 1,770 billion ton-miles of freight, which works out to 435.9 ton-miles per gallon. That is over 100 times more per gallon than a truck!

My guess is that we’ll see a lot more freight moving by rail in the future.

Wednesday, August 20, 2008

Switchgrass for Ethanol

While corn and sugarcane have been the primary sources for ethanol production, there are emerging other potential crops on the horizon that could possibly supplant those two in the future. Two of the most promising are switchgrass and algae.

I planted a stand of switchgrass in 1988 on a CRP farm that I still own. We’ve got a wonderful picture of one of my sons, James, sitting on my shoulders in that field with the heads of the switchgrass up to my shoulders. That stand of switchgrass is still going strong, constantly reseeding itself without any involvement on my part.

A team of researchers from the Agricultural Research Station in Lincoln, NE published a five year study of the economics of producing ethanol from switchgrass. They contracted with ten farmers in NE, ND and SD, who averaged $60/ton. However, two of the farmers, who had previous experience with the crop, were able to drop their costs to $39/ton.

The conclusion of this study was that at $50/ton and a conversion efficiency of 80 to 90 gallons per ton, the farm cost of cellulosic ethanol from switchgrass would be about $0.55 to $0.62 per gallon.

The researchers also pointed out that they anticipated vast improvements in cultivars, agronomics, production technology and productivity as more farmers began producing the crop. They noted, “As an indicator of the improvement potential, switchgrass biomass yields in recent yield trials in NE, SD and ND were 50% greater than achieved in this study.”

I’m convinced that there are going to be new technologies and entrepreneurs that are going to emerge because of our current energy crisis. Some of the best companies sprout when the times are most difficult.

Tuesday, August 19, 2008

Handmade--One of My Favorite Stories

As I travel around the USA, sharing stories of success from rural America, one of my favorites is that of Handmade in America. This organization which encompasses 23 counties in western NC was formed in 1993 to help small artisans in that area to jointly improve their economic conditions. A book “The Craft Heritage Trails of Western North Carolina” resulted, having sold over 50,000 copies.

An early study by Handmade showed that over 4,000 artisans made their living in the region, globally contributing $122 million to the regional economy. With an average income of $32,000 per year, their earnings were slightly higher than that of a factory worker at $29,800. The study also showed that about 67% of all craft sales were made to tourists.

The Handmade organization wrote the book, promoted the region and today all of Western NC is better because of their efforts. Today that region generates more than $500 million from their efforts, new entrepreneurial enterprises have been started and numerous jobs have resulted.

The mission of Handmade continues, with an emphasis upon:

Place-based—assets tied to the region so that they can’t be moved;

Diversified—expanding many sectors rather than only one;

Regional—small towns are better working together rather than fighting each other;

Entrepreneurial—virtually all of the businesses impacted are owned by entrepreneurs;

Collaborative—over 45 partnerships with other organizations have resulted;

Inclusive—over 3,000 citizens have been involved in planning an execution.

My wife and I had a wonderful time touring the Handmade in America region with their book as a guide. We had a great time. I hope that you get a chance to visit the region yourself.

Monday, August 18, 2008

BoomtownUSA in Chinese! How Cool is That?

I just received a copy of BoomtownUSA translated into Chinese, only they changed the title to only Boomtown, leaving off USA. It is the first international translation of the book, which continues to still sell remarkably well. Thanks to each of you who continue to promote our work in small towns around the USA, and now the world. Or, at least one more country (a very big one!) in the world.

I just wish that I could understand even one word in it!

Friday, August 15, 2008

Engaging the Millennial Generation

I’ve become convinced in my travels and research that the major wave of the future for small towns is the engagement of your young people, the Millennial Generation. The Heartland Center for Leadership Development in Lincoln, NE is on the cutting edge of this movement and is doing a three day conference on “HomeTown YouthForce: Engaging the Entrepreneurial Generation” November 18-20 in Nebraska City, NE.

I spoke with Don Macke and Craig Schroeder about the program this past week. Don told me, “Our focus is on how to get the youth in a town engaged and attracted. We’re focusing upon leadership, mentoring and also entrepreneurism. We’ve seen some towns that are doing pieces of this but none that has pulled all of them together. We hope that communities will look upon their youth as a backbone strategy for their town’s future.”

Craig added, “If we do everything right in our towns, but lose our youth for the next 20 years, all of the good things that we might have done will have been for naught.”

He went on, “We’ve found in our research that 50 to 60 percent of the youth at the junior high and high school level would like to come back home after college, but often only 2 to 10 percent actually come home. There is a real gap between what they want to do and what they can do because of economic circumstances.”

If my travel and talk schedule allows, I’m intending to be there for what looks to me to be a great conference on our most important asset. Hope to see you there.

Thursday, August 14, 2008

Chocolatier at Fifteen!

The winner of the National Federation of Independent Businesses (NFIB) Youth Entrepreneur Award for 2008 is Peter Crabtree, 18, from Kingston, WA (population 1,611). Peter started CBC Chocolates when he was only 15 after taking a culinary arts class as a freshman in high school. His company specializes in truffles, which are available in five flavors: Kahlua, Amaretto, Irish Cream, Vanilla and Raspberry.

Crabtree, who grew up on his family’s ranch in Kingston, first started his business in borrowed kitchens in the area until he had accumulated $10,000 to buy his own utensils. Those funds came from showing registered black angus cows because, as he said, “I never got an allowance. Any money I wanted I had to work for.”

He recently introduced a Brew and Wine Series of chocolates (I’m not sure how he does this at this age?) and has several patents pending on new products he intends to introduce. One of those patents is for a chocolate melting machine that he designed with his brother, a West Point engineering graduate.

This fall Peter is headed to Seattle University, not intending to take on any student debt. Care to guess what he is studying? Don’t you just love these Millennial Entrepreneur stories that I’m collecting? What are you doing to encourage entrepreneurs in your hometown? Get on the bandwagon, now!

Wednesday, August 13, 2008

China's Land Area

Yesterday’s blog looked at the vast size of the USA and the surprisingly large amount of land that is owned by the U. S. Government. Today I want to compare our land area to that of China, which from a raw land area is almost identical to the USA at 3.5 million square miles. Only Canada and Russia are larger in land area.

However, while total acres are roughly equal the difference in those areas is great, especially when you take into account rainfall and population. John Mauldin who writes a fascinating world investment piece, recently wrote, “Contemporary China is an island. Although not surrounded by water (which borders only its eastern flank), China is bordered by terrain that is difficult to traverse in virtually any direction. The outer shell both contains and protects China.”

This mountainous topography does not lend itself well to habitation nor transportation. It is largely because of these physical impediments that virtually all of the population and economic activity is concentrated in the area shown in green on the maps shown. Over one billion Chinese live in this area, which is less than half the size of the USA.

West of this area of habitation (shown by the red line) is a marked difference in rainfall amounts. West of this line it rains less than 15 inches per year compared to east of the line where it rains more. Less than 20 inches of rain/year is considered desert conditions.

Perhaps most alarming, if I was a Chinese leader, is that China has about one-third of the arable land per person when compared to the rest of the world. Adding the fact that China is elevating a population the size of Germany (82 million—14th most populous country in the world) from poverty into its middle class each year. Those 82 million are definitely going to be eating better.

I’d say that it bodes well for our rural, agriculturally rich communities.

Tuesday, August 12, 2008

Who Owns the West?

One of the most astounding things that I’ve learned in my travels around the USA is the vast amounts of acreage that the U. S. Government owns in most of the western states. The map on the right clearly shows the incredible swaths of land under direct governmental control. In fact it totals 650 million acres, which is almost 30% of the entire land area of the USA! If all of this acreage were in one piece it would be just over 1 million square miles, or a land area that was 1,000 miles wide by 1,000 miles long.
At the same time, the western USA is the fastest growing part of the country. Much of the blame for the current housing crisis, which is most pronounced in 3 western states (CA, NV & AZ), can be laid at the feet of the double digit price increases in houses, largely driven by increases in the underlying value of the land under those houses. There is not a markedly different cost to build in different parts of the country…virtually all of the difference in value is due to the land cost of the property upon which a house is built.

And, like any commodity, when you have a shortage, the market will cause the value to increase. When you have an acute shortage, those prices will spike higher.

The situation is most intense in NV which has 84.5% of its land area under governmental ownership. Four other states have over 50% of their land government owned (AL, UT, OR and ID) and four have over 40% government owned (AZ, CA, WY and NM). The least owned, all under 1%, are CN, RI, IA and NY.

At the risk of opening up a flood of emails (I’m not proposing this!), the U. S. Government could pay off ALL of its $9.5 trillion debt if it sold off all of its current land holdings for an average of $15,000/acre. Now some of most remote areas of the west are not worth anywhere near that value but there are also some ocean front areas that are worth millions of dollars/acre.

We are a truly rich country. We’ve got some wonderful assets and attributes that are irreplaceable.

Monday, August 11, 2008

Cotton Distric Charm

Midway between downtown Starkville, MS (population 21,869—one of my agurbs®) and the Mississippi State Campus on the east end of town is the Cotton District. I immediately fell in love with it as Ben Bounds of the Greater Starkville Development Partnership took me for a tour of the town and University.

Until the late 1950s, the Cotton District was a collection of row houses and shanties housing workers for the nearby cotton mill. Developer and now mayor Dan Camp of Starkville began rebuilding some of the old houses in the district, turning it into the New Urbanism long before it gained nationwide popularity.

The area has a feel of Savannah, Charleston or New Orleans as you stroll through it. Camp is now building new structures in the district, but building them to look as though they are over 100 years old rather than being brand new. All of the pictures on this blog are of new construction in the Cotton District.

If you haven’t seen the New Urbanism style, take a trip to Starkville and see what charm it can bring to a neighborhood.

Friday, August 08, 2008

First Impressions

“To sell real estate you’ve got to have curb appeal! Our towns need to be doing the same thing. They’ve only got one chance to make a first impression,” Leland Speed told me several years ago at one of our too infrequent lunches. Leland, having come from the real estate industry, fully understood the importance of making a great first impression upon anyone looking at your community, whether it was a tourist, retiree, professional or Fortune 500 company looking to locate a new plant.

Two years ago Mississippi State University (MSU) set up a Community Action Team, headed by Virgil Culver, to utilize the expertise and resources of MSU’s faculty and students in concert with local citizens to address the needs of the many MS communities. One of their main programs is First Impressions, a program designed to provide communities with an unbiased summary of its strengths and weaknesses from the perspective of a first-time visitor.

Virgil told me, “It is a program that ties together our roots in extension with MSU. Andy Lewis from Wisconsin first developed the idea and it is now being done in states like OH, KS, WV and others.”

First Impressions descends upon a town unannounced with six or eight people. After doing a thorough study, Virgil told me, “We give them a full report and do a community wide presentation. We hope to get some issues on the table and start to work cooperatively on some of them.

The Community Action Team has completed over 50 studies in the past two years and has another ten in the pipeline to do.

Do you know what the first impression is of new people to your town?

Thursday, August 07, 2008

Building Lakes as ED Strategy

One of my most vivid memories from being out touring the country for the past four years occurred about three years ago at a breakfast with Leland Speed, at the time the head of the Mississippi Development Authority (MDA). Leland was the most youthful seventy-year-old I’ve met, constantly on the lookout for new ideas and ways to help create more jobs and economic opportunities in ALL of MS. He had started two public REITs, was an expert in real estate development and agreed to work for $1/year as head of the MDA.

“Why is it that people will pay three times what they will anyplace else to be located along the Gulf Shore in Biloxi?” Leland asked me. Not waiting for a reply he responded, “They won’t ever go down to the beach. They’ll only talk about going out fishing. What they really want to do is just sit up there on their condos balcony and look at the water. Water has a very calming affect on people.”

He went on, as he laid a map of MS in front of me, “What have we got a lot of here in Mississippi?”

When Leland got on a roll like he was on, you didn’t try to interrupt him with a guess, so I let him continue, “Water! We’ve got lots of water. We’re bordered on the south by the Gulf of Mexico and on the west by the Mississippi River. But, we don’t have any water in the rest of the state. We’re going to do something about that and use it as an economic development tool.”

Leland then laid out his plan to lay out as many as 200 lakes in the state, mostly in very rural areas. The plan would be to partner with the counties, build the lake and then sell off the land around the lake to developers, recovering the cost of the lake in those sales. I was enthralled by his vision as one of the major trends that I’ve observed in my travels around the country is the way that people are being drawn to water. Lake and seashore values continue to soar in value, but will increase even more with the coming retirement of the Baby Boomers.

Joy Foy, who heads up the asset development office at MDA, was at our spec building announcement in Columbus. She gave me a wonderful Power Point presentation of their progress to date on building lakes, which you can see here.

“We’ve already got four lakes under construction under this plan, with many others being studied,” Joy told me in our tour of the area around Columbus after our announcement.

I’m convinced that it is a brilliant strategy that will prove to be a major long term boost to the MS economy. Boomers are not only going to be looking for second homes in warmer climates but they’re also going to be looking at starting up new businesses when they retire from their careers. This water trend is synergistic with so many other ones that I’m seeing (i. e. entrepreneurism, Boomers in second careers, water, leveraging resources, etc.).

Wednesday, August 06, 2008

Back in Columbus!

The same day we were selling the spec building I told you about yesterday in Greenville, IL, we were in Columbus, MS (population 25,944) making an announcement for a new 100,000 sf (expandable to 200,000) spec building there.

In my remarks at the event I told them of having gotten a chance to tour over 300 towns in 44 states in the past four years, but have yet to find a town that is going through the job creating spurt that Columbus is enjoying. It is incredible!

As I’ve reported on this blog several times in the past few years, Columbus developed not one but two mega-sites that have resulted in both a new steel mill and also PACCAR’s new U. S. engine plant. PACCAR is better known for their two main truck brands: Peterbilt and Kenworth. In addition Columbus has recruited in several aerospace companies, including American Eurocopter, Aurora Flight Sciences and Stark Aerospace, which have all moved to the town with hundreds of new jobs in the past three years. Total investment over the past five years has been $3.5 billion, creating over 3,500 jobs, most of which will be in the $50,000 to $75,000 range. They’ve been on quite a roll!

And, they’ve got more projects in the works with both Heidtman Steel and New Process Steel building adjacent to the new SeverCorr Steel Mill which is itself in the initial stages of a new expansion. The headline in the local paper on the day we arrived in Columbus was SeverCorr Phase II, which would double their capacity to over 3 million tons/year after an additional investment of $623 million.

Joe Max Higgins, the dynamo head of ED, told me “We’ve got at least $500 to $700 million in new projects that will get started this year.”

I told him that there are whole states that I’ve visited that would like to have accomplished in last decade what he has done in the past five years!

And, Joe Max isn’t standing still. He continues to option more land for new projects, is working on expansions to the water and sewer systems and promotes the advantages of manufacturing in Columbus, MS.

Cliff Kjelgaard, one of the PACCAR executives who was at our spec building announcement told me about their experience, “We’re now making castings in Mexico and the U. S. that we used to bring in from China. Their costs and the freight from China to here, now make it much more cost competitive in the U. S. We’re in fact exporting our engines over to China right now, where we have the top engine for their bus fleets.”

Kjelgaard joined PACCAR in 1995 when they had $3 billion in sales. Last year they were over $17 billion with 65% of that in overseas markets. And, they’ve enjoyed 69 straight years of profitability!

Joe Max is by far the most colorful ED exec that you will run into. We’ve known him since his days in Paragould, AR when we were doing a site search.

My favorite story that he told on himself occurred on a recent Harley motorcycle ride. He told me, “I was filling it up with gas out by the new steel mill and some guy walked up to me and asked, ‘Hey, are you?....’ I thought that he was going to ask, ‘Are you the guy who was single handedly responsible for bringing in this plant over here?’ I sucked in my gut, puffed out my chest and said, YES? He repeated, ‘Are you local?’ When I told him yes, he handed me a stack of business cards for his new Tit For Tat Tattoo Parlor and asked if I could hand them out for him.”

And, that’s why we’re in Columbus, MS building a new spec building.

Tuesday, August 05, 2008

Spec Buildings

By coincidence, we were selling one of our older spec buildings on the same day that we were announcing the start of our newest one. It is especially coincidental when you consider that this newest one is only our seventh since we started the company. We’ve run Agracel since its humble beginnings as a highly risk controlling and mitigating enterprise and the word spec (short for speculative) sends shivers up my spine. Instead, we’ve concentrated on new build to suits when we’ve got a long term lease in place as fitting better into our conservative financial model.

But, there are compelling reasons why it sometimes makes sense to build a spec building, especially when the economy is expanding and there is a shortage of existing buildings. We’ve found that about 80% of companies looking to expand would prefer an existing building that they can move into quickly and several towns have used spec buildings as a lure to bring in a new manufacturing plant. That’s our goal with our newest spec building that I’ll tell you about tomorrow.

Today, I want to tell you about our first five spec buildings, all done in the 90s and all in the state of IL. Each was the same design (40,000 sf) and done in conjunction with the local community having buy-in on the building and its promotion. We wanted them with “skin in the game” if we were going to risk our capital or as I told them, “If I’ve got a prospect in town on a Saturday afternoon, I don’t want the mayor to say ‘Jack who?’”

Of the five, four have been virtually continuously occupied since they were completed. The exception was one that we completed at a small airport shortly before 9/11. Talk about bad timing!

The Greenville, IL spec building was occupied by a local manufacturer for a number of years until they added onto their existing plant, while we were continuously promoting it to new manufacturers. On Thursday we closed with El Milagro, which will expand the building into their main corn receiving and processing facility for their Chicago tortilla plant.

El Milagro was started by Raul Lopez in 1950 after he immigrated to the USA from his native Mexico in 1942. Orphaned at eleven, he lived with his uncle in Mexico City but dreamed of being a bullfighter, which forever earned him the nickname of “El Torero”. He began work as a laborer on the Illinois Central RR, starting El Milagro as a part time endeavor. Only when the business achieved a size that could support his growing family of 12 did he quit the railroad to run the business full-time. Today, seven of his children are involved in day to day operations of the rapidly expanding business.

And, we’re thrilled that they bought our spec building, creating dozens of jobs and offering an alternative, premium market for area corn farmers in the Greenville market. That’s why we built it in the first place.

You never know where these job creators are going to come from. Or what they are going to produce!

Monday, August 04, 2008

Economic Impact of Trails

My friend and neighbor Frank Brummer is a tireless advocate for the building of trails. He has literally travelled the world (at least six of the seven continents) and has seen first hand how trails can improve a community with a much higher quality of life component. He has taken this experience and is today leading the efforts to build a trail that will link several communities in our county to the many recreational assets that we are fortunate to have developed.

Frank recently sent me a study that American Trails Training Partnership did in MN on the impact that nice trails can have upon a community. The study looks at the impact of the Root River Trail in SE MN upon the town of Lanesboro (population 788) stating “Post-trail Lanesboro boasts 12 B&Bs (with year-long waiting lists), 8 restaurants, an art gallery, a museum and a thriving community theater.”

The study cited the example of the small “mom and pop” bike shop in Lanesboro which sold 60 tandem bicycles in a single year, more than Minneapolis’ largest multi-store chain sold in the same year. It’s an example of people out having a good time on the trail, making an impulse purchase in a small town.

MN boasts over 1.5 million cyclists, inline skaters and walkers that use its many trails. These people spend money and even fall in love with a region, sometimes moving because of quality of life attributes like trails and other amenities. In the case of Lanesboro that means more than $5,000,000 in added economic benefit. Not bad for a town of 788!

Friday, August 01, 2008

Urban Sprawl—DOA…and other musings

Two or three years ago the phrase “drive till you qualify” made a lot of sense. People couldn’t afford houses close into the city centers and the further they drove out, the less expensive the housing became. So it made sense to trade off a long commute with more house for the money. No more!

Today’s high gas prices have turned that equation on its ear and the worst collapses in housing prices are occurring in the further out suburbs of major cities, especially in CA, AZ, NV and FL. Those towns were dependent upon developing as a bedroom community, a long term recipe for disaster in all of our research. That’s why our research for BoomtownUSA was not centered on the suburbs but rather upon stand-alone communities that were creating new jobs and opportunities for their citizens. And, it is why we continue to see job creation and economic development activities as so critical for long term success in any town.

John Burns puts out a great weekly ezine on housing markets around the country. He tracks job growth, housing starts, housing affordability and other key statistics from around the country. This past week’s ezine showed that the concerns about job creation are largely confined to the states that had the greatest run-up in housing prices and ultimately also the biggest collapse. The states of CA, AZ, NV and FL have collectively lost almost 200,000 jobs in the past year. Other states like DE, MI, MO (St. Louis only), NJ, OH, RI, and WI have also seen a loss in jobs.

But surprise! If you total up those states, you’ll only get to eleven, which means that there are 39 other states that have grown their jobs in the past year.

All of the data shows that the housing crisis that has gripped the country for past year is beginning to bottom. It will be a couple of years before things return to normal, but the continuing massive declines in both sales and prices has slowed and is stabilizing. Granted, it will still take a couple of years to work off the huge inventory of unsold homes, but that is the normal consequence of an asset based bubble popping. From there is will probably take five to nine years for prices to return to levels seen in 2007, but they will also eventually come back as inventory is reduced and memories of the collapse fade.

Bottom line for me is long commutes are going to die, towns that create their own jobs are the long term winners, job growth isn’t as bad as the media would have us believe and the housing crisis will eventually turn around. Have a great weekend!