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A Tale of Two Costcos

A Tale of Two Costcos

Dan Proft recently spoke to a group of commercial real estate brokers, and one of the brokers shared with Dan a story about the difference between doing business in Illinois as compared to Wisconsin, from the perspective of the Costco corporation. Dan shared that story on the air:

DAN: Illinois and Wisconsin — So I was speaking to a group of commercial real estate brokers at lunch yesterday. And this guy was telling me, you know, about the climate in Illinois from their perspective as a businessperson that operates in the real estate sector, commercial real estate development. Talk to investors. Talks to big companies, in terms of location decisions, right? So he tells me, we’re talking back and forth about and what’s going on politically and where we find ourselves, and all of the intractable, seemingly intractable, problems that afflict us. But he said, “Let me give you an example of what’s happening and where Illinois is vis-à-vis, like, Wisconsin. Two Costco’s — he’s talking to a honcho at Costco. So they put two Costco outlets, one just south of Mitchell Field, just south of Milwaukee. I think it’s in New Berlin. I’m not sure, but just south of the airport in Milwaukee. And another in Melrose Park, here, in the near west suburbs, Cook County.

AMY:  I’m familiar with Melrose Park.

DAN: Well, I’m just saying. You know we have people downstate that listen to us, and other states that listen to us. I’m just giving a little geography. Importantly, in Cook County, it costs the same to build the facilities — $33 million dollars for both.

AMY: Square footage is the same?

DAN: Yeah. And the same cost to build. The sales are the same, substantially the same, within a few shekels, at the two outlets. The net for Costco at their Milwaukee-area store: $8 million a year. That’s what they net in volume business. The net at their Melrose Park location …

AMY: Oh, can I guess?

DAN: What do you think it is?

AMY: $5 million?

DAN:  $600,000!

AMY:  That’s it? Because of all the taxes?

DAN: It’s the taxes, and shakedown fees. You know … He talked about, like, there’s a

$50,000 a year roof inspection fee, and all of these other layers and layers of taxes, and because we have so many units of government, and fees, and basically, shakedown scams. That’s basically a difference of 13x in terms of return. $8 million dollars just north of the cheese curtain in Milwaukee, a year, that’s their net. $600,000 in Melrose Park in Cook County.

AMY: And sales are the same, pretty much the same.

DAN: Rauner tried to get a meeting with the CEO of Costco. He said, look, basically, he didn’t take the meeting. We have nothing to talk about. I mean, he’s not blaming Rauner. We just have nothing to talk about. We have nothing to talk about, in terms of locating more outlets here, doing business in Illinois, until something changes in Illinois, because it makes absolutely no sense. And all you have to do is share that vignette about the tale of two communities — Milwaukee and Cook County.

AMY: Wow. That is huge difference!

DAN:  Massive, isn’t it?

AMY: That’s unbelievable. We’re lucky we even have Costco here, with numbers like that.

DAN: No kidding!