Three weeks after Doyle Fowler was elected mayor of McCrory in 2003, American Greetings Corp. made a dreaded announcement.
The nation’s second-largest greeting card company would close its distribution warehouse in the little town about 35 miles east of Searcy, erasing more than 300 jobs.
What the company left behind, empty and for sale, was its big building - all 770,925 square feet.
Finding a buyer for a building that big isn’t often easy. Just think. The average U.S. single-family house contains about 2,480 square feet, according to the U.S. Census Bureau. The American Greetings building is as big as 310 of those houses. Or, it’s big enough to cover 13 football fields, including end zones.
Ten years since American Greetings pulled out of McCrory, Fowler is still mayor and continues trying to sell or lease the building to a job-generating company. “Everybody thinks that one of these days, the economy will pick up and it will happen,” Fowler said.
One of the most difficult tasks in economic development or commercial real estate sales in recent years,experts say, is finding active, job-creating buyers for big manufacturing plants and warehouses. Many large U.S. manufacturers have fled to Mexico or China for cheaper labor. The United States lost 5.7 million manufacturing jobs between 1998 and 2012, according to the nonprofit Economic Policy Institute in Washington. Many of those industries left behind giant properties.
Even when manufacturers do start up new operations in the United States, they often decide to build new facilities. Big River Steel’s planned $1.1 billion steel mill for Osceola, announced Jan. 29, is one example. Mitsubishi Power Systems Americas Inc.’s $100 million wind turbine facility, completed more than a year ago at Fort Smith’s Chaffee Crossing development, is another.
The Arkansas Economic Development Commission (AEDC) website has 11 big, used industrial buildings advertised for sale or lease across Arkansas. All the plants have at least 350,000 square feet. Though there’s no national standard, that’s a minimum size some commercial real estate experts use to identify very large properties.
AEDC officials don’t keep statistics on whether the state has more of those big buildings on the market now.
But Arkansas has many industrial buildings for sale that are at the very top of the square-footage scale - buildings some experts call mega-giants that flirt with, or exceed, 1 million square feet. The American Greetings facility comes close. A former Sanyo Manufacturing Corp. plant in Forrest City, with 1.4 million square feet, definitely qualifies. And then there’s the elephant, the whale, the Tyrannosaurus rex of Arkansas industrial real estate - the Whirlpool Corp. facility in Fort Smith, which went up for sale last year at 2.2 million square feet.
That makes Whirlpool’s two-building complex almost three times larger than McCrory’s American Greetings plant. The former appliance manufacturer has 50 acres under roof. It could span a dozen Wal-Mart Supercenters.
“It’s the biggest one I’ve ever had to walk through,” said Steve Jones, who specializes in marketing buildings and sites such as Whirlpool’s for the state’s economic development commission.
The Whirlpool building is one of the largest industrial properties for sale now in the nation, according to the commercial property LoopNet. Its availability increases Arkansas’ options for attracting industries, say economic developers. Its emptiness also illustrates the difficulties.
How to market and sell industry’s big left-behind buildings “is a complicated question,” said Tim Allen, president of the Fort Smith Regional Chamber of Commerce and a former AEDC staff member. Allen is the contact listed by the state for the Whirlpool building, even though the building’s commercial broker is Jones Lang LaSalle in Dallas.
“The days of a single manufacturer employing thousands at the same site are almost over in the U.S.,” Allen said. There are “still some large ones, but they’re few and far between.”
“It takes really the right project for the right community” to fill sprawling industrial property, he said. “Sometimes it takes a long time, sometimes it happens quickly.”
The Whirlpool property is attracting interest from would-be buyers, company spokesman Jeffrey Noel said, including “a couple of fairly serious suitors.” The company doesn’t expect a groundwater contamination issue disclosed in recent weeks to stop a serious buyer, he said. EASIER TO SELL
During the 2008 recession and subsequent recovery, “the smaller [industrial] facilities of any age have done pretty well,” said Jared Sullivan, an economist for CBRE of Los Angeles, one of the world’s largest real estate services companies.
The other segment that has attracted more buyers are warehouse properties, rather than manufacturing, he said.
That’s certainly been true in central Arkansas’ Maumelle. A former Target distribution center there, closed in April 2009, was attractive to department store chain Dillard’s Inc. - all 850,000square feet.
In 2012, Dillard’s opened its Internet fulfillment center in the building, with plans to hire more than 300 workers.
Maumelle has another large warehouse currently among Arkansas’ biggest 11 on the AEDC website that’s generating interest, said the city’s economic developer Judy Keller. A former Scholastic Inc. children’s book distribution center operated out of the 485,192-squarefoot facility until that company division sold to a foreign firm.
A group of investors currently has a contract on the 24-year-old building, and is performing “due diligence” in studying all angles, Keller said. If the sale goes through, the investment firm plans to subdivide the facility into several warehouses or light manufacturing operations.
Nationally, while buildings dedicated to distribution have “done well because of the explosion of trade” worldwide, CBRE’s Sullivan said, big, older factories have posed special problems.
“It’s a little more difficult to convert those into distribution facilities,” Sullivan said. A good, modern warehouse, for example, often has opposing shipping docks on each side so trucks can enter either way. But that’s a difficult conversion for a former factory. Warehouses also have different standards for reinforced concrete floors.
The more likely path for reinventing a large empty factory is to subdivide it for small manufacturers or other operators, Sullivan said.
“You can turn a factory into a bunch of research and development facilities or other operations,” Sullivan said. “That can work.”
That’s exactly what Kirk Billingsley of the Forrest City Area Chamber of Commerce hopes for the state’s second-biggest industrial building.
The Sanyo Manufacturing plant there, at more than 1 million square feet, turned out cathode ray tubes for old-style, boxy televisions. It also once employed more than 2,000. The company slashed its work force in the mid-2000s, though it kept a few dozen employees at a call center there.
Now the 50-year-old structure is for sale and seeing interest from investors “who will subdivide the building among three or four companies,” Billingsley said.
“Compared to 20 years ago, yes, I would say selling these big, old buildings is one of the hardest jobs” in economic development, Billingsley said. “With a lot of manufacturers moving to cheap labor in other countries, particularly in Mexico, they’re marketing this building as ‘buy it, sub it out and bring in four or five companies.’ I don’t think we’ve had any interest from a single, large manufacturing company.”
FORT SMITH CHALLENGE
On the state’s list of big industrial buildings, only Fort Smith claims more than one. The western Arkansas manufacturing town has three - the Whirlpool plant plus two manufacturing and distribution plants once operated by Riverside Furniture.
Together, they add up to more than 3 million square feet of factories and warehouses that need buyers who will create jobs.
That doesn’t daunt the Fort Smith Chamber’s Allen,whose work is to help sell and bring jobs to all three. Asked if he has a “live one” - an active buyer - for any of those buildings, Allen laughed, saying, “I always have a live one.”
One reason he’s not discouraged is that he has seen success marketing big structures.
Working with the AEDC, Allen was in on luring Caterpillar Inc. to North Little Rock in 2009. The heavy equipment company set up its North American headquarters in a 700,000-squarefoot facility that had been owned by Rank Video Services America.
Allen also helped bring Schulze & Burch Biscuit Co. of Chicago in 2009 to a 500,000-square-foot facility in Searcy, formerly occupied by Maytag.
In Fort Smith, Allen said, “We have some very nice properties we can market, and we push them out there.”
In McCrory, where American Greetings’ warehouse sits empty, Fowler knows as well as anyone that it can take time. The building has actually sold twice since 2003, but no company has gotten up and running there, to supply jobs to his town that needs them.
Now, he’s working to help the building’s latest owner, a California investor, attract a company that will buy or rent - and hire workers.
One company that toured the building last year says McCrory “is still on their short list,” Fowler said.
“Everybody keeps expecting” the big building to sell or lease, and hiring to commence, he said.
“I hope and pray it happens,” Fowler said. “I’d be a town hero if I could do that.”
Business, Pages 63 on 05/05/2013