BAXTER — For years, Baxter Village stood out as a case study of this Great Recession.
The retail center along Highway 371 first opened in the fall of 2005. The economic engine of the lakes area appeared to be a well-oiled machine. Just down the street, The Lodge at Brainerd Lakes hotel, water park and restaurant, was also having a grand opening at the time.
But those heady days — when growth seemed a given — suffered a severe reversal of fortune.
Recently, Andy Anderson, founder and chief executive officer of Anderson Financial Group, the owner/developer of Baxter Village, filed for a voluntary foreclosure of Phase One.
Anderson also received a form from Crow Wing County effectively shortening the redemption period to three months.
“I am working with the bank to restructure Phase One and the voluntary foreclosure is part of the process,” Anderson said, adding he is still overseeing the building.
Phase Two went back to the bank and is being overseen by Close-Converse of Brainerd.
Anderson, with a Nisswa heritage and as CEO at Anderson Financial Group with offices based in Wayzata, first opened the retail development in 2005 and announced Phase Two a year later.
He said he is renegotiating with Famous Dave’s and the other tenants to lower their lease payments to ensure their long-term viability.
It’s been a vicious financial circle.
When Anderson first put up Phase One, he estimated it was valued at $4.3 million. Now he estimates the worth at $1.6 million to $1.8 million. Rent was decided in terms of servicing the development debt.
“You are trying to service debt you bought to develop,” Anderson said, but added that rental rate is no longer viable.
As consumers tightened belts, tenants were no longer getting the sales they needed to pay the lease.
“The whole model turns upside down,” Anderson said.
Anderson estimated phase two was worth $3.5 million and is now about $1.3 million to $1.5 million.
He said rental rates were $16 per square foot when he started and are now in the $9 per-square-foot range for phase one.
Dropping rental rates meant there wouldn’t be revenue to service the debt, but having viable tenants in the building made dropping the rent a necessity.
It’s a problem felt across the country, Anderson said, adding it starts with the landlord to get a feasible rate for a tenant that the economy will support. “All over the country we are all adjusting to the new norm.”
Plans for Phase Two were announced in the early summer of 2006. The building was completed in the fall of 2007 just as the recession officially started.
At Baxter Village’s opening on that day in October of 2005, Anderson had plans for three phases. Famous Dave’s, Among the Pines, Tumbleroos and The Gumdrop Tree all opened with Phase One. Morey’s with its trademark fish moved in later as did Big Stone Therapies and The Woodland Meadow. The Gumdrop Tree became Krumbles bakery and then The Kitchen Place. The Woodland Meadow and The Kitchen Place have since closed their Baxter Village stores.
The initial development was a major change for a landscape that little more than a year before was remembered as being part of the country. A tractor salvage business and a welding business were once there along with a racetrack.
In 2009, Big Stone Therapies expanded to Phase Two as its first and only tenant. Recently Nor-Son Inc. began work to create the interior space to suit the needs of the Center for Pain Management.
Dr. Sam Elghor and Cheryl Schaubhut, registered nurse, from the Center for Pain Management of Sartell, which is expanding to Baxter, said they understood the financial issues surrounding the building when the decision came to locate there. They weren’t concerned.
“Economies go through cycles,” Elghor said. “This area has everything you need. The economy will bounce back.”
