The New Grain Valley Marketplace - Slight of Hand

The new Grain Valley Marketplace – 50,000 square feet of retail space for lease

Slight of Hand - now you see it on paper, now you don't ever see it built

S.G. Property Management is looking for tenants for this new retail space at Interstate 70's interchange with Main St. (Buckner-Tarsney Rd.).

In the entire region of Eastern Jackson County in 2008, 554,498 square feet of new retail space was built (Eastern Jackson County by the Numbers 2010).

S.G. Property Management's figure is slightly less than one tenth the size of what was built in Eastern Jackson County during the real estate bubble year 2008.

What is going on?

Developers sketch out on paper configurations of retail strips and pads that someone could fit into area of land.  The Mayor is impressed.  The Aldermen are impressed.  But unless there are likely tenants and financing is available, what appears on paper will never be built.  Never.
The financing won't materialize until real tenants are lined up.  I should only live so long to see tenants for 50,000 square feet who are intending to do business in Grain Valley near the interchange.

Serious development starts out with a fifteen-year pro-forma calculation of income and expenses.  The initial income is not what you or I would call income.  It is what banks will realistically loan for the project, what investors will sink into the project, plus the proceeds from municipal bonds and tax credits for the development.  In the early years, the expenses are for purchasing land and construction and for beginning to pay interest to the banks for their loans and to pay dividends to the holders of the bonds.

In this pro-forma spread sheet, income must always equal or exceed expenses for these first fifteen years.  Otherwise, the project will never receive any bank loans.  Foolish investors may pony up money to invest in the project.  Silly public servants may issue municipal bonds.

Financed by these last two sources, bulldozers will appear and concrete might be poured.  And then construction slows and finally stops.  Taxpayers are left with the liability for paying back the bonds.  Some investors go bankrupt or, if they are luckier, write off the losses.

Along Roe Ave. in Leawood, KS, I watched a sign for retail leasing go up in 2008, and I saw bulldozers stirring up dust.  The city built a road extension that was in their master plan anyway.  Then the sign came down.  The land was leveled and planted with grass.  As I write, the land is kept mowed – economically dormant for who knows how long.  This development was planned for a stretch of Roe Ave. about one mile north of the huge Leawood Town Center Plaza and the Hawthorne Plaza Shopping Center.

Speculation, speculation, speculation.  Bust, bust, bust.

Consider that the land for Sni-A-Bar Community north of Sni-A-Bar Blvd. has yet to be improved, not to mention built.  This is 20 acres with a proposed residential plan which was supposed to be part of the Sni-A-Bar Community. 

Also, the Ryan Meadows development is less than half built-out.

For the next few years, though, the number of new residential households in Grain Valley is forecast to grow only about 1.4% per year.  See Grain Valley Vital Statistics - 2009.

Nine Acres for Sale in the TIF District

Seven Undeveloped Parcels within the TIF District Total About 9 Acres

At the northeast corner of Buckner-Tarsney Rd. (Main St.) and Interstate 70 in Grain Valley, interchange improvements have bumped Outer Rd. away from the highway.  Outer Rd. now encloses about nine acres of undeveloped land that is for sale.

What are the prospects for selling this land?

The primary consideration is whether commercial property is presently not available in the City of Grain Valley.  The answer is that commercial real estate is overdeveloped as part of the real estate fever that created a "bubble" of development without tenants lined up for leasing.  A commercial strip about one half a mile north of the Interstate sits almost empty.  Of the six units, only one is occupied.

In another area of town, Sni-A-Bar Plaza is not entirely leased.
Casey's built a new General Store, but the old one sits unoccupied.
Main St. has at least two vacancies – one is a restaurant that went out of business.

On top of these vacancies, S.G. Property Management is looking for tenants for the new Grain Valley Marketplace – 50,000 square feet of retail space for lease in a development which is supposed to be anchored by a theater.  This construction has begun north of the bumped out Outer Rd., across the street from the nine as yet undeveloped acres which are enclosed by the Outer Rd. and the Interstate. 

B&B Theatres, of Liberty, Missouri, will operate the theater.

Infrastructure (public works) for the development of vacant land north of the Interstate at the Grain Valley interchange is being financed by bonds that have been issued by the city.  The city's Industrial Development Authority (IDA) acts as a “conduit issuer” in order to carry out the annual appropriations pledge on the city’s bonds.  The bonds and interest are supposed to be repaid by Tax

Increment Financing (TIF) from the development district.
An Industrial Development Authority is a private corporation formed by a municipality.  Directors are appointed and approved by the mayor and the board of alderman.

If I understand correctly, the city's financing is spent only on public infrastructure which must be owned and maintained by the city once it has been completed.  These improvements include storm and sanitary sewers, road construction, curbing, sidewalks, grading, and other necessary site work such as a storm water retention basin.

See another post concerning which retailers will not establish themselves in Grain Valley and why not.

P.S.  Outer Rd. north of the Interstate is actually named McQuerry Rd. to the east of Buckner-Tarsney Rd. and Jefferson St. to the west.