High materials prices rattle plans for second Dollar General
The rising costs for building the second Dollar General location no longer make the enterprise feasible, according to developer Peter Krahenbuhl with SimonCRE.
The company is in the process of acquiring the property at Northeast Poplar Street and Highway 97 to develop a 10,000-square-foot Dollar General store, the second Dollar General in Madras.
With increasing market prices for materials and additional improvements the City of Madras requires, Krahenbuhl said this project no longer pencils out.
The SimonCRE proposal states "The costs of steel buildings and construction materials have rapidly increased to two to three times their original quoting amounts of mid-2020 when the project was started."
Krahenbuhl says construction quotes are the highest bids ever for a Dollar General of this size and nearly double the cost of building the Madras branch currently at Brush Lane.
SimonCRE asked the Madras Redevelopment Commission to pitch in $500,000 to move the project forward.
"We need to be at least breaking even in order to obtain the necessary financing from our commercial lender to purchase the land," says Krahenbuhl, "while financing the construction of the store and off-site improvements."
Madras Community Development Director Nick Snead said the city's Urban Renewal Action Plan calls for a 17-year return on investment. He says this project will not pay back that quickly.
Snead pointed out the company is bidding at a time of high materials cost, which doesn't necessarily translate into increased property value.
Instead, Snead recommended offering $80,000.
Mayor Richard Ladeby said he's heard complaints about a second Dollar General. "Who makes the money off the stores? And does it support local business?"
Krahenbuhl shared tracking data from his company's studies showing the current Dollar General has brought 39,000 visitors to Madras largely from neighboring communities.
Commissioner Jennifer Holcomb asked if the company would move forward with the project if the city doesn't pay the half-million dollars.
"Five-hundred thousand is our break-even point," said Krahenbuhl, "Eighty thousand will break this project because it is not feasible. Eighty thousand is a non-starter."
The Redevelopment Commission approved the $80,000 grant.
Where does that leave the status of the project? Krahenbuhl says the company has no formal comment.
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