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Thousands of people have seen the economic development successes in Kenosha County along I-94. The massive buildings developed by or for the likes of Amazon, Uline and soon Haribo are part of a bright spot in southeastern Wisconsin development that has gone on for several years.
Far fewer people are likely to have seen another development success emerging just west of the interstate in the Salem Business Park. Located along Highway C and west of Highway 83, the business park is a 15-minute drive from I-94 and about half that to the Illinois border.
The Kenosha Area Business Alliance led the development of the park. It landed its first tenant in 2016 when Vonco Products agreed to move from Lake Villa to Salem Lakes. After a roughly two-year lull in activity, the park has landed a number of new tenants this year, including Stabio North America and Advent Tool & Manufacturing. More recently R+D Automation broke ground on a 62,000-square-foot building.
“We actually had a lot of activity,” Todd Battle, president of KABA, said of the park’s lack of momentum. “We just couldn’t really get anything over the finish line. There was always some sort of impediment.”
Battle noted that for the typical company that would consider the park, moving the business would be a big deal, the cost of a new building is a significant hurdle and many have existing real estate they would need to sell or a lease to get out of before committing.
Serving those businesses, primarily small and medium-sized manufacturers, was part of the reason KABA launched into the development of the park, Battle said. The organization has seen success recruiting companies from the eastern portion of Lake County in Illinois and establishing a park west of the interstate allowed for similar opportunities in western Lake and McHenry counties. The new park also served to bring more development to the western portion of Kenosha County.[caption id="attachment_515589" align="alignnone" width="1280"] Vonco Products has grown to around 120 employees since moving to Wisconsin.[/caption]
Another reason to develop the business park was to put some of KABA’s available capital to work. Battle noted that, historically, financing growth and expansion has been a big part of KABA’s activity. The organization has around $33 million under management with the vast majority earmarked for revolving loans. The problem was the availability of those funds wasn’t enough on its own to bring projects to the county.
“We just noticed that for some of the projects we were chasing, a low interest loan wasn’t necessarily moving the needle,” Battle said. “It could be helpful, but it wasn’t necessarily always all that impactful.”
KABA wanted to put its resources to work, but the I-94 corridor itself is well-served by developers and investors putting up larger buildings. Battle noted a typical facility is likely closer to 500,000 square feet than it is 100,000.
“Us getting involved in that segment would probably screw up the market a little bit in terms of pricing and competition and subsidies,” he said. “But we just didn’t see anybody in Kenosha County killing themselves to build a 50,000-square-foot light industrial building for a small industrial company.”
The combination of available capital and a need to serve western Kenosha County led KABA to explore establishing a business park. Battle and his team worked with the county and municipalities, looked at multiple sites, and conducted a feasibility study and fiscal analysis.
Ultimately, KABA bought an 82-acre tract of land that would become the Salem Business Park. Around $4.5 million was invested in infrastructure to prepare the park, including mass grading and roads. By the fall of 2016, Vonco was able to break ground on its facility.
Keith Smith, president of Vonco Products, came to the company in 2013 as it was acquired by Milwaukee family investment firm Jacsten Holdings LLC.
Smith said the company quickly outgrew its Lake Villa, Illinois facility and needed to expand. The company explored expanding on its existing site, but the building was inefficient and required a lot of work to improve flow, cleanliness and overall looks. Expanding would have also been difficult because of wetlands on the site.[caption id="attachment_515590" align="alignnone" width="1280"] Zilber Property Group is currently finishing work on two buildings in the Salem Business Park.[/caption]
But Vonco also didn’t want to move too far. Its largest concentration of employees came from Round Lake, just a few miles to its south.
When Smith started discussing a move with KABA, the organization initially suggested the Pleasant Prairie area. It was just outside where he was comfortable moving the company.
Smith said KABA vice president Heather Wessling Grosz mentioned the possibility of the organization starting a new business park and asked if Vonco would be interested in anchoring it. Smith was. The park is just up Highway 83 from the company’s now previous location.
“KABA has been extremely creative in how they financed the deal as far as the building is concerned,” Smith said.
Vonco invested around $12.5 million and committed to bringing 86 jobs to the state in exchange for $500,000 in tax credits. As of October, Smith said the company is at around 120 employees and looking to hire another 35.
“The fact that we’re starting to see people move in, it’s great to see that the vision of economic development works and continues to work in Wisconsin,” Smith said.
Battle said KABA initially considered a speculative building to kick off the business park but decided the idea of spending $7 million or more with no tenant was too risky. With control of the land and a desire to get the park going, KABA decided to be aggressive in offering Vonco a deal on its rent to help attract the company. The deal is also structured to incentivize the company to eventually buy the building.
“Frankly, we don’t want to really own a lot of industrial real estate. We just want to build a park and have jobs and tax base,” Battle said.
KABA had an initial win in attracting Vonco, but then came the lull. Seeing a need to continue activity and the development of the park, the organization turned to Milwaukee-based Zilber Property Group. Battle said KABA acknowledged the developer might prefer bigger buildings within the immediate I-94 corridor but used its ability to offer more aggressive terms for land prices and financing to encourage Zilber to come to the Salem Business Park.
“If you’ve got a well-heeled developer with an extensive track record and portfolio in the region and they kind of come out and stick their flag in the ground and say, ‘yeah, we’ll build some industrial buildings out here,’ it kind of elevates the park,” Battle said.
Zilber ended up putting up two buildings that are nearly complete. One is around 110,000 square feet for Stabio North America and the other is a 50,000-square-foot facility with half occupied by Advent Tool & Manufacturing.
Chelsea Couette, industrial investments manager at Zilber, credited KABA with spearheading the user-driven deals.
Chad Navis, director of industrial investments at Zilber, said the company invested in the area because while there are a lot of developments and investors near the interstate, there is also opportunity off the interstate as well.
“There are a lot of manufacturers kind of in that western Kenosha County north-south corridor that need space and are under-supplied,” he said. “We think it’s a great opportunity to satisfy that need, which is close to a lot of skilled labor force for many manufacturers that need to be close to that labor force but then not as sensitive to immediate proximity to the I-94 interstate.”