Tony's coming to Berwyn

[Cermakplaza]

http://www.rblandmark.com/News/Articles/3-10-2018/Berwyn-looks-to-lure-Tony's-from-North-Riverside/

[markberwyn]

I'd love to hear somebody who's smart about retail explain to me how this is a good deal for Berwyn. The city punts on decades worth of sales taxes for the sake of a nominal number of high-turnover jobs, which many not necessarily be taken by Berwyn residents. (A commenter mentions property taxes, but those are being paid by the H-C Plaza's owners anyway, right?) Maybe the store is a big generator of foot traffic to the plaza; if so, presumably the city has those numbers near at hand. (But then, Meijer's obviously wasn't a success, so...)

Some BDC patter says that the Plaza is the number-one driver of tax revenue for the schools and parks. So the next time you hear a resident start up with the "lowuh muh taxes!" bellyaching, tell them that maybe the problem is with the city coming up with giveaways like the one Tony's is getting.

[Ted]

  Is it better to have the Meijer's location empty or to have someone occupying the space?  I think that is one question that has to be asked.

  The incentive package is that Tony's receives back 50% of the 1% of the sales tax that goes to the city of Berwyn, up to 5.3 million.  I am not sure how much sales tax Tony's generates per year or what total sales is per year in that location.

  It was stated on Facebook that Pete's did NOT want that location in Cermak Plaza because it was too small.

  As for property taxes, Cermak Plaza is now in a TIF district, so any increase in property taxes due to increased property value will not go to the schools or park district, or the city for that matter.

[Cermakplaza]

 "It was stated on Facebook that Pete's did NOT want that location in Cermak Plaza because it was too small."

That's a strange reason by Pete's, because they are opening stores in the 75.000 sf range and this store is over 90,000 sf...

Happy we are getting a grocery store, but really would have been nice to have Pete's...

[berwyn senator]

I feel more people should come back to Berwyn Talk! Plenty of residents are not on Facebook,and there is no newspaper in Berwyn.

[markberwyn]

  Is it better to have the Meijer's location empty or to have someone occupying the space?  I think that is one question that has to be asked.

  The incentive package is that Tony's receives back 50% of the 1% of the sales tax that goes to the city of Berwyn, up to 5.3 million.  I am not sure how much sales tax Tony's generates per year or what total sales is per year in that location.

  It was stated on Facebook that Pete's did NOT want that location in Cermak Plaza because it was too small.

Fair points, but they raise two other questions for me:

* At what point does having a tenant for its own sake negate the value of having an occupant? It would be good to know what the overall tax revenue is after the subsidy. One suspects that it's not a lot in any given year, given the length of the incentive package. Presumably the city is considering other benefits that may redound to store, like foot traffic or the secondary businesses that serve the supermarket (shipping, equipment, and so on). There's no guarantee, though, that those are a) substantial dollars or b) dollars that come from or stay in Berwyn.

* Why does this space need to exist? At this point, the Service Merchandise space has been vacant for about half my life, and retail no longer looks like the model that the Harlem-Cermak Plaza was built on: An outdoor strip mall with one or two biggish anchor stores. Those "biggish" retailers like Circuit City and Best Buy are going the way of the dodo, and more strip malls highlight either ginormous Home Depots or smaller boutiques. (Everything else you can get from Amazon.) So why not tear down that "biggish" space you have such a bitch of a time filling and make smaller retail spaces out of it, or make it into a courtyard, or a park, or an arts center, or something. Something people actually want. What I know about commercial real-estate development wouldn't fill a thimble, but presumably the BDC has access to plenty of progressive ideas about what some of those things might be. Better that than effectively giving businesses money to occupy a space.

[Ted]

It was also stated on Facebook from someone else involved in the BDC that no one else wanted that space - thus the incentives.

It was also stated on Facebook that Pete's would move to Cermak Plaza only if they could have all the retail space on the south end of the plaza. 

  Not surer if any of these statements are true given they are being given by people involved in the BDC who are defending the decision on Facebook.

FYI, yesterday the Berwyn City Council voted to approve the incentives package.

  Finally, I do not know how much in sales tax or property tax Cermak Plaza generates but a park would generate no revenue, which would have to be made up for in some way.

[Ted]

Here was a statement from Scott Lennon on Berwyn Cool Kids:

  "Pete's was approached and they declined. The building was owned by Meijers and the land is owned by the plaza. Marianos, Shop & Save, Caputos and many others were approached too. Meijers had an incentive when they opened and now Tony's has one too. Meijers couldn't make it at $25 million a year, Tonys will be $40 million plus a year. 60% of their customers come from Berwyn."

[Cermakplaza]

According to Mayor Hermanek: "Pete's Fresh Market reportedly had expressed some interest, as had Cermak Produce, which was a competitor Tony's did not want so close by."

[markberwyn]

Where are these numbers coming from, and what do they mean? Why is it one retailer can enjoy a 40 percent increase in revenue than another similar retailer in the same place?

If the only real revenue the city is getting out of the space is an increase in foot traffic at the plaza, a park may be no better or worse from an accounting perspective, and doesn't present the tenancy issues that an antiquated space does. If I'm wrong and there are great financial benefits to the city from this, I'd love to see the numbers making that case.

[Ted]

The numbers come from the Berwyn Development Corporation.  I believe there are details in this week's city council package (although I have not looked at the package).

  Meijer's was a combined grocery and other retailing.  Tony's is strictly groceries.  Not sure if that would be a difference between $25 million and $40 million.

  But, if Meijer's had the same incentive deal (rebate of .5% of sales tax), then the city will gain an extra $75,000 per year in sales tax if Tony's hits the $40 million dollar sales target, even with the incentives.  Based on those numbers, Meijer's was bringing in $125,000 in sales tax and Tony's will bring in $200,000 in sales tax, even with the incentive.

[markberwyn]

Hang on. Supermarkets traditionally have very thin margins---around 1 percent. That's why stores like Meijer expand into selling general merchandise; the margins are higher. But somehow Tony's, which sells only groceries, is going to generate more tax revenue than Meijer's did? How? To do that, it would have to either increase traffic to the store at levels much greater than Meijer's did---with fewer products. Scott Lennon says that will happen; I wonder what he's looking at that prompts him to say that. If he's wrong, Tony's only other option is to raise prices, but then its markup is going to be so high that people will take their business elsewhere. Berwyn is, after all, Berwyn.

I'm not trying to be a spoilsport here. If the collective minds of the Berwyn City Council, BDC, and local retailers feel like they've cracked the code for making that space work, that's super. But very little of what I've seen speaks well of Tony's being a presence in the long term, or much of a tax-revenue generator in the short term.

[Ted]

Margin is about profit, not revenue.  Sales tax is about revenue.

  It is not like this will be a new market for Tony's.  They are just moving across Harlem from North Riverside to Berwyn. I would assume the $40 million comes from what Tony's makes in North Riverside and that they would expect to make similar numbers in Berwyn.

  I looked in the city council packet and there was no BDC analysis - just the contract for the incentive where the city of Berwyn will rebate half of the Berwyn sales tax back to Tony's for a period of no more than 25 years up to $5.2 million.

[markberwyn]

Margin is about profit, not revenue.  Sales tax is about revenue.

And my point is that I don't see how Tony's makes more revenue than Meijer's unless it does things that, as a low-margin business, makes it unappealing to customers, like raise prices. I suspect it'll do no better or worse than Meijer's, with a good chance of doing worse. I'm not a betting man, but I'd bet a whole dollar that the space will be vacant (again) in less than five years. It would have been better if the plaza, city, and BDC spent more time rethinking that space than coming up with giveaways to the one store that was interested in occupying it.

[Ted]

And my point is that I don't see how Tony's makes more revenue than Meijer's unless it does things that, as a low-margin business, makes it unappealing to customers, like raise prices. I suspect it'll do no better or worse than Meijer's, with a good chance of doing worse. I'm not a betting man, but I'd bet a whole dollar that the space will be vacant (again) in less than five years. It would have been better if the plaza, city, and BDC spent more time rethinking that space than coming up with giveaways to the one store that was interested in occupying it.

  Why do you assume that Tony's revenue will be less in Cermak Plaza than it was in North Riverside?  If the revenue in North Riverside was $40 million per year and if Tony's was profitable in North Riverside, then why would they be unsuccessful in Cermak Plaza and have a failing business in Cermak Plaza?

  I do not understand your logic.  If Tony's was new to the area, then maybe your concerns are valid.  But, this is a profitable business that is just moving across the street.

[berwyn senator]

Tony's will do better, bigger store, and more parking.There is a store on the south side same size doing just fine! .

[markberwyn]

And my point is that I don't see how Tony's makes more revenue than Meijer's unless it does things that, as a low-margin business, makes it unappealing to customers, like raise prices. I suspect it'll do no better or worse than Meijer's, with a good chance of doing worse. I'm not a betting man, but I'd bet a whole dollar that the space will be vacant (again) in less than five years. It would have been better if the plaza, city, and BDC spent more time rethinking that space than coming up with giveaways to the one store that was interested in occupying it.

  Why do you assume that Tony's revenue will be less in Cermak Plaza than it was in North Riverside?  If the revenue in North Riverside was $40 million per year and if Tony's was profitable in North Riverside, then why would they be unsuccessful in Cermak Plaza and have a failing business in Cermak Plaza?

Scott Lennon didn't say Tony's revenue was $40 million/year in North Riverside. He said it *would* be $40 million/year in Berwyn. On what evidence? Is that what the store was generating in North Riverside? If so, he should say so. I don't buy the idea that a low-margin groceries-only business is going to generate more revenue *or* be more profitable than a hybrid store with higher margins. But, again, happy to be proved wrong.

[berwynres]

Has anyone been to Tony's lately?  Seems to me, that whenever I have been in their North Riverside locations, it is VERY BUSY.  I am not all that excited about their prices generally, but that doesn't seem to discourage many others from shopping there.  Meijer's in Berwyn never seemed to be very busy.  I went there a few times, but was not that impressed.  Guess most others weren't either.  That's why they did not succeed.  No traffic.  I don't think that will be an issue if Tony's moves to Berwyn.  I would estimate they will do even better than the do in their current location, since I believe it will be a larger store with more available parking.

I think I would have rather seen a Pete's move to Berwyn, just because it would be another grocery option and because they seem to do well at other locations and are expanding.

It would be nice to see some redevelopment of the shopping center in N. Riverside, too.  I think they should bulldoze the entire site and start fresh.  Maybe use the parcels for some new dining options, too.

[markberwyn]

Bump. So, how's Tony's working out for Berwyn? Lots of foot traffic? Super-busy and lots of revenue for the city?

[Ted]

Bump. So, how's Tony's working out for Berwyn? Lots of foot traffic? Super-busy and lots of revenue for the city?

Lot's of complaints on Facebook recently about the quality of the food, poor service and lack of food being stocked.

Not sure if it is any different than it was when Tony's was in North Riverside. But, the subject (though not about revenue, etc.) has been discussed in several posts on Facebook recently.