Mn valley 1 15 by Free Press Media

Kyle Smith, owner of Tailwind Group, at the busy construction site in downtown Mankato. Photo by Pat Christman

Remaking Mankato

Tailwind Group transforming downtown Also in this issue • New Ulm Furniture Co. • The MoonDogs in winter • Kind Veterinary Center

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F E A T U R E S January 2015 • Volume 7, Issue 4

Tailwind Group was a little known development firm until it announced plans for three office/mixed use towers in a one-block area of downtown Mankato.

All four of the veterinarians at Kind Veterinary Clinic in St. Peter and Le Center grew up on family farms where livestock and family pets were part of everyday life.

The snow may be blanketing Franklin Rodgers Park, home to the Mankato MoonDogs, but Kyle Mrozek and his staff have a busy winter as they prepare for the 2015 season.

Richard and Sara Pieser started New Ulm Furniture Co. in 1945 and son Ben Pieser continues to run the family owned store in downtown New Ulm.

MN Valley Business • January 2015 • 5

■ January 2015 • VOLUME 7, ISSUE 4 PUBLISHER James P. Santori EXECUTIVE EDITOR Joe Spear ASSOCIATE EDITOR Tim Krohn CONTRIBUTING Tim Krohn WRITERS Kent Thiesse Heidi Sampson Pete Steiner

PHOTOGRAPHERS Pat Christman John Cross COVER PHOTO John Cross PAGE DESIGNER Christina Sankey ADVERTISING Ginny Bergerson MANAGER ADVERTISING sales Jen Wanderscheid Theresa Haefner ADVERTISING Barb Wass ASSISTANT ADVERTISING Sue Hammar DESIGNERS Christina Sankey CIRCULATION Denise Zernechel DIRECTOR For editorial inquiries, call Tim Krohn at 507-344-6383. For advertising, call 344-6336, or e-mail mankatomag@mankatofreepress.com. MN Valley Business is published by The Free Press Media monthly at 418 South 2nd Street., Mankato MN 56001.

■ Local Business memos/ Company news................................7 ■ Business and Industry trends.........9 ■ Minnesota Business updates....... 10 ■ Business Commentary................. 12 ■ Construction, real estate trends.. 33 ■ Agriculture Outlook...................... 34 ■ Agribusiness trends..................... 35 ■ Job trends..................................... 36 ■ Retail trends................................. 37 ■ Greater Mankato Growth.............. 38 ■ Greater Mankato Growth Member Activities ....................... 40

From the editor

By Joe Spear

Right time, right place, right ideas

Tailwind Group navigates trends

eading this month’s in-depth cover story on the Tailwind Group and its forays into all manner of Mankato development, I’m reminded of the old business saying that says being in the right place at the right time can bring success. But reading further, you see Tailwind President Kyle Smith and his team have not only taken advantage of the right place – the booming Mankato region – and the right time – a time of steady economic growth and low interest rates -- the group also has some of the “right ideas.” It appears that student housing was one of the first business ventures for the Tailwind Group. Smith and his team surveyed other successful projects around the country -- ones the offered new amenities not available in the existing student housing. Students wanted their own room and own bathrooms and so he constructed College Town near the Minnesota State University campus. Of course, it didn’t hurt that MSU enrollment has been expanding and is quite possibly the biggest state university in the state system. But his Rent MSU business also owns some 60 older homes in town that can also be rented to college students. He’s quick to point out that he did not enter the traditional housing market because there were plenty of developers already in that market, including Drummer development which has also been showing strong growth. With the collapse of Wall Street banking houses in the not too distant past and a 2008 recession that still offers lingering effects, one could be skeptical about the success of building not one but three new office/ commercial properties, including two office towers in a town the size of Mankato. The last new office building of significant size was built decades ago. Could there be a commercial real estate/office bubble and is it ready to burst? Smith seems to at least acknowledge that business cycles can

6 • January 2015 • MN Valley Business

go up and down. When asked if his projects will work, he told someone: “Ask me in 10 years.” But he and his group also have another “right idea” in making sure the biggest office tower tenants are also investors in the properties. They have some skin in the game. That also diversifies the ownership and creates a wider pool of available funds should they be needed. And Tailwind seems to have been built early on with many partners who are family and friends. While that can have its own challenges, the one big unknown you can remove mostly dealing with friends and relatives is trust. And while family businesses are certainly not immune from turmoil and discord, as least most of the time, you are dealing with the “devil you do know,” versus the “devil you don’t know.” The diversity of partners in Tailwind also diversifies the business. Smith’s sister helped manage a string of Anytime Fitness franchises they bought and sold. The group also has strip malls with commercial businesses and retail on lower levels and housing on the upper levels. To be sure, the flurry of new office and commercial development the Tailwind Group is bringing online in Mankato will stand as a new source of competition for the office space market. Older properties are likely to see some vacancies. That’s to be expected. It also appears there is some risk in all this new building, a potential that Smith seems acutely aware of. But the new projects were put in at a time of low interest rates, favorable government development tax incentives like accelerated depreciation schedules, and have been established in a market that has shown steady if not strong consistent growth. Right time, right place, right ideas. MV Joe Spear is executive editor of Minnesota Valley Business. Contact him at 344-6382 or jspear@mankatofreepress.com

Local Business People/Company News

■

Thoen honored by Thrivent

Greg Thoen, a Mankato-based private wealth advisor with Ameriprise Financial, was named to the 2014 Chairman’s Advisory Council. Thoen qualified based on “distinguished performance and client service,” according to the firm. He joins other top-ranked advisors to discuss current issues and business opportunities with Ameriprise Chairman and CEO James Cracchiolo. The council was established in 1984 and advisors qualify each year based on business results. ■■■

Abdo, Eick & Meyers announce merger

Abdo, Eick & Meyers accounting announced a merger with Baune Dosen & Co. A Top 20 accounting firm in the state, Abdo, Eick & Meyers now has 21 partners and 150 total staff in offices located in Edina, Plymouth and Mankato. Managing Partner Steve McDonald said the merger “will add unique talent and specialty services in the areas of financial institutions, litigation support and business valuations, broaden our presence in the Twin Cities metro area and allow us to better serve our rapidly growing business”. Baune Dosen was founded in 1974. Abdo, Eick & Meyers was founded in Mankato in 1963. ■■■

Knutson earns financial planner certification

Tim Knutson, an associate financial advisor with Ameriprise Financial in St. James, earned the Certified Financial Planner certification. Knutson successfully completed the requirements that include course work and a series of examinations covering financial planning, risk management, investments, tax planning and management, retirement and employee benefits, and estate planning. Those with the certification agree to meet ongoing continuing education requirements and uphold the code of ethics and professional responsibility developed by the Certified Financial Planning Board of Standards. ■■■

Meister joins Wenger

Wenger Physical Therapy added Natasha Meister to its staff. She graduated from Minnesota State University in 2010 with a Bachelor of Science degree in Exercise Science. She then earned her Doctorate of Physical Therapy degree in 2013 from the University of Minnesota and began working at Centrex Rehab. She has a special interest in treating patients with neurological and post-operative conditions.

M.R. Paving honored in New Ulm

The New Ulm Area Chamber of Commerce announced that M.R. Paving and Excavating has been named its 2014 Business of the Year. M. R. Paving was established in 1994 in New Ulm. They provide many services for both commercial and residential customers. ■■■

Pierson joins CTS

Computer Technology Solutions added Matt Pierson as inside sales specializing in IP cameras and phone systems. He has earned his Axis camera selling essentials designation. CTS is now a HP qualified supplies partner and has also qualified to sell the Google Chrome management console. ■■■

Whitney joins RE/MAX Dynamic

Jodi Whitney has joined RE/MAX Dynamic Agents. Whitney is involved in a number of volunteer efforts, including BackPack Food Program, YMCA RunStrong Series and Strong kids Campaign and Garfield PTO. ■■■

Parsons joins Weichert

Sarah Parsons has joined Weichert Community Group as a real estate agent. Parsons will assist property buyers and sellers in the Mankato, Eagle Lake, and Madison Lake areas. Parsons, who grew up in Madison Lake, joins a team of over 19 agents at Weichert. ■■■

TBEI hires CFO

Truck Bodies and Equipment International hired Kurt Meyer as chief financial officer for TBEI and its family of brands. Meyer has more than 20 years’ experience in finance, information technology and sales, most recently with Minnesota Elevator in Mankato. He holds a Bachelor of Science and MBA from Minnesota State University. ■■■

Trong Ho joins Weichert

Trong Ho has joined Weichert Realtors Community Group as a real estate agent. A Mankato resident for over 20 years, Ho will assist property buyers and sellers in the Mankato area.

■■■

MN Valley Business • January 2015 • 7

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Business and Industry Trends

Local Economy

Many rural jobs still low-skill

Job openings in Greater Minnesota are up 24 percent compared with one year ago, according to the latest Job Vacancy Survey from the Minnesota Department of Employment and Economic Development. The survey shows Greater Minnesota with 37,600 openings — by far the largest number of openings since 2001. Despite persistent claims from many Greater Minnesota employers of a growing skills shortage among workers, there’s no evidence of a shift to high-skill occupations. Two-thirds of all openings require no education or training beyond high school. Other major findings for Greater Minnesota include: • The median wage for all openings is $11.60 per hour. • More than 20 percent of all openings are temporary or seasonal. • More than 40 percent of all openings are part-time. • The median wage for part-time openings is $9.31 per hour. • Job seekers outnumber full-time openings by nearly 3-to-1. One-third of all Greater Minnesota openings are in three large occupations — food preparation and serving, sales, and healthcare support. These occupations offer a combined median wage of $8.53 per hour.

Outstate jobs more likely minimum wage

Women, most minority racial groups, people with disabilities and residents in Greater Minnesota stand to benefit the most from a new law that will raise the state’s minimum wage to $9.50 an hour by August 2016. The Department of Employment and Economic Development evaluated who would most benefit from the minimum wage hike. DEED studies estimate that 16 percent of all jobs in Minnesota pay less than $9.50 per hour. The agency found that jobs below $9.50 are more likely in Greater Minnesota and that education levels are the biggest factor in wages, with nearly half of those who don’t have a high school diploma or GED earning less than $9.50. But the study also found that at every step along the education spectrum, women are more likely to earn less than $9.50 than men.

■■■

Energy

Natural gas ‘choice programs’ increase

Eligibility and participation in customer choice programs, which allow residential and commercial customers to purchase natural gas from nonregulated

energy suppliers, have increased over the past 12 years. The number of eligible customers has more than doubled since 2001. Participation in customer choice programs has also more than doubled, increasing from 3.3 million in 2001 to 7 million in 2013. However, it has grown at a slower rate in more recent years, according to the federal Energy Information Administration. In Minnesota, some 740,000 residential customers are eligible but none were participating in the program as of last year. Proponents of the programs say consumers, particularly commercial users, can save 10-30 percent on their energy costs. Under the program, customers can buy their natural from other suppliers but still have it delivered by their normal carrier’s lines. Customer choice programs were developed in 1990s to increase competition in retail electricity and natural gas markets. These programs are implemented at the state level and vary by size, scope, and participation. For natural gas, large commercial and industrial consumers have had the option of purchasing the natural gas commodity separately from delivery services for many years. Participation in residential programs, which increased in the early 2000s, has largely leveled off in recent years.

Crude keeps tumbling

North Sea Brent crude oil spot prices fell from $95 per barrel October 1 to $84 at the end of the month. By early December it had fallen to around $70 a barrel. The causes included weakening outlooks for global economic and oil demand growth, the return to the market of previously disrupted Libyan crude oil production, and continued growth in U.S. oil production. There is significant uncertainty over the crude oil price forecast because of the range of potential supply responses from the Organization of the Petroleum Exporting Countries (OPEC), particularly Saudi Arabia, and U.S. oil producers to the new lower oil price environment.

U.S. oil production high

Total U.S. crude oil production averaged an estimated 8.9 million barrels per day in October, and monthly average production is forecast to surpass 9 million barrels in December. Projected total crude oil production averages 9.4 million barrels per day in 2015. If realized, the 2015 forecast would be the highest annual average crude oil production since 1972.

Natural gas production up

Natural gas plant liquids production is expected to increase from an average of 2.6 million barrels per day in 2013 to 3.2 million in 2015 Natural gas working inventories on Nov. 1 totaled 3.57 trillion cubic feet, 6 percent below the level at the same time a year ago and 7 percent below the previous five-year average. Despite the lower stocks at the start of this winter’s heating season, EIA expects the Henry Hub natural gas spot price to average $3.97/million British thermal units this winter compared with $4.53 last winter.

MN Valley Business • January 2015 • 9

Minnesota Business Updates

■

■ ADM suing GMO corn developer Archer Daniels Midland is suing the developer of a genetically modified corn, accusing the company of intentionally stymieing United States exports to China. In a lawsuit filed in Louisiana, ADM says Syngenta Corporation sold GMO corn seed to farmers across the country without undertaking reasonable “stewardship” practices designed to ensure genetically-modified seeds do not taint or become intermixed with the regular corn seed supply. As a result, China has rejected the “vast majority of U.S. corn shipments” because of the presence of Syngenta’s GMO MIR162, which has become intermixed with regular corn seed. China, a major importer of corn from the U.S., has not approved genetically-modified corn containing Syngenta’s MIR162 genetic trait, and won’t accept shipments containing so much as a trace of GMO corn.

■ General Mills settles ‘all natural’ suit Consumer group Center for Science in the Public Interest has settled a 2012 lawsuit against General Mills over the labeling of some General Mills’ products as “natural.” CSPI said the settlement prevents the Golden Valleybased food company from claiming its Nature Valley granola bars as “100 percent natural” if they contain artificially produced ingredients such as high-fructose corn syrup and maltodextrin. Bridget Christenson, General Mills’ external communications manager, said that the company “removed this from its label in 2012. And this change to the label preceded the lawsuit.” The settlement will end the lawsuit, CSPI said. The ingredients at issue are derived from corn. “No acceptable official definition of ‘natural’ should allow the claim on highly processed ingredients like highfructose corn syrup or maltodextrin, substances that literally do not occur in nature,” CSPI litigation director Steve Gardner said in a statement. Earlier CSPI complaints prompted companies to drop “natural” claims in connection with 7Up, Capri Sun and Edy’s and Dreyer’s ice creams.

■ Johnson Outdoors buys Jetboil Johnson Outdoors has closed on the purchase of Jetboil, the No. 1 brand of outdoor cooking systems. Jetboil emerged on the camping scene in 2004 with the launch of its award-winning personal cooking system powered by proprietary technology. The system integrated a one-liter pot, wind-protected burner and heat exchanger into a single, push-button start unit that cuts fuel use and cooking times in half compared to other canister stoves. Since then, Jetboil has broadened its technology and product offering to become the category leader in outdoor

10 • January 2015 • MN Valley Business

cooking systems, Johnson Outdoors stated.

■ U.S. Bank moves to paperless The benefits of handling loans electronically rather than passing around

sheaves of paper are a given. U.S. Bancorp, for one, has found all these advantages in its six years of offering paperless consumer loans and recently rolled out a similarly automated account opening, according to Bank Technology News. Yet a large segment of the industry still hesitates to use the technology, for legal, technical and cultural reasons, some more perceived than real. “Banks continue to stumble when it comes to automating the consumer lending processes,” wrote consultants at Cornerstone Advisors in a recent study of 61 U.S. banks with assets of $1 billion to $40 billion nationwide. “The percentage of direct loans approved through automated underwriting and direct loan applications originated online remains at zero. Banks are simply not spending the time or money on direct consumer lending to make it an efficient process.” In a survey of 80 community banks and credit unions around the country, AccuSystems, a document imaging and management software company, similarly found that just 12 percent are making paperless loans. U.S. Bancorp, based in Minneapolis, has been offering e-signature-assisted paperless consumer loans in all 3,000 of its branches since September 2011. Bank customers electronically sign documents 70,000 times per week in the branches, which translates to more than 150,000 signed documents a week. Most small consumer loans are handled this way. Mortgages are not paperless yet.

■ Jennie-O workers get bonuses

Jennie-O Turkey Store announces that over $10.7 million has been distributed to employees as a discretionary bonus based on the company’s strong performance this past year. This amount equals an average bonus of over $1,750 per eligible employee, with newly hired employees receiving $600. Those eligible for the bonus include approximately 6,000 hourly and farm employees across all of the company’s operations in Minnesota and Wisconsin who were employed when the company’s most recent fiscal year ended on Oct. 26. Increased sales of Jennie-O turkeys has been a major part of the growth at Hormel Foods. “Our team turned in another strong performance within our industry and within Hormel Foods Corporation … despite some challenges such as high propane costs last winter,” Jennie-O president Glenn R. Leitch told the West Central Tribune.

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MN Valley Business • January 2015 • 11

■

Business Commentary

By Patrick Baker

Transportation is key legislative issue for region

s the Minnesota Legislature convenes, the big news from November’s election is that Minnesotan’s returned Gov. Dayton to office while 11 seats in the Minnesota House of Representatives (including 10 in Greater Minnesota) switched from DFL to Republican control, putting Republicans in charge of that chamber and ending two years of complete DFL control of state government. The major task of the Legislature this year is to write a new biennial state budget. State officials kicked off that process recently with the announcement that Minnesota is running a $1 billion surplus. While the surplus is expected to make passing the budget an easier task than in years past when legislators faced multi-billion dollar deficits and government shutdowns, legislators are already being bombarded with suggestions for how that surplus money ought to be spent, saved or returned to the taxpayers. Our elected leaders will be making decisions on critical issues impacting the vitality of your business and our regional marketplace. It’s essential that businesses be engaged and visible in this legislative process. Be your own best advocate Over this legislative session, Greater Mankato Growth will continue to ensure that you’re able to have input and impact on key policy issues by providing you with the education, resources and opportunities for engagement you’ll need to be an effective advocate on behalf of your business and our community. Greater Mankato Growth’s policy issues webpage – greatermankato.com/get-engaged – is the primary place you should look for timely, factual and neutral information on policy issues that have broadbased impacts on business or are of special concern to the Greater Mankato area. Transportation the top priority In December, GMG’s board of directors approved the organization’s policy priorities for 2015. These priorities are formed from an extensive member engagement process and identify the issues that GMG will track, and in some cases actively advocate for on behalf of our members. You can view these policies at our webpage greatermankato.com/publicaffairs. One of the issues topof-mind for the governor and Legislature is transportation. It is also at the top of GMG’s policy priorities for 2015. A combination of inflation, changing driving habits and increased fuel economy makes the gas tax an increasingly unsustainable transportation revenue source long-term. Meanwhile, transportation needs continue to expand with population and economic growth. According to MnDOT the cost to complete needed improvements and make strategic investments in the state’s transportation network exceeds projected revenue by an estimated $50 billion over the next 20 years, including a $12 billion gap

12 • January 2015 • MN Valley Business

for state highways and bridges alone. Allowing this transportation status quo to continue is a direct threat to Greater Mankato’s long term economic vitality. Perhaps at no time in our history has the need for our community to efficiently and safely move goods and individuals out of and into this market and across our entire region been more important. The MankatoNorth Mankato Metropolitan Statistical Area leads all MSAs in the state in the growth of its gross domestic product, leads all state MSAs in employment growth, and has one of the fastest growing populations in the state. This growth is expected to continue with the Wal-Mart and FedEx distribution facilities opening this year. These facilities serve as two major examples of the increasing importance of a quality transportation network to our region. When our members were asked about transportation issues in a survey last year, more than 72 percent of respondents said that the state needs additional revenue to keep our transportation system safe, effective and properly maintained. For that reason, GMG will support a comprehensive funding solution that meets the future needs of Minnesota’s transportation system by securing increased and stable revenue streams, promoting efficiencies, and favoring transportation expansion projects that have an economic development nexus and return on investment. In the coming month, various transportation funding proposals will be issued by the governor, legislative bodies and interest groups. While GMG has not yet taken a position on any transportation revenue plan, we will ensure our members can play an active role in the issue through member surveys, forums and individual meetings with key stakeholders. Additionally, GMG will continue to advocate for the completion of Highway 14 as a consistent four-lane corridor. Completing this long overdue project will ease critical bottlenecks and support economic growth by providing the infrastructure necessary to connect the thriving regional trade centers of Rochester, Owatonna, Greater Mankato and New Ulm. GMG will strongly support the U.S. Highway 14 Partnership’s request for continued state investment in the Corridors of Commerce Program, which over the past two years has injected more than $82 million into Highway 14 projects. As GMG works to raise the visibility of our marketplace and its importance to the state among state leaders and centers of influence, our efforts will be most effective when you are personally engaged on issues that are of importance to your business and the community. It’s your business, your community, your state and your home - have a say in how they will be affected. MV Patrick Baker is director of government & institutional affairs at Greater Mankato Growth. pbaker@ greatermankato.com

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MN Valley Business • January 2015 • 13

The Tailwind Group includes Kyle Smith (front left) Landon Smith (front right), Michael Sather (back left) and Reggie Reed.

Flying high Tailwind Group makes its mark in Mankato By Tim Krohn | Photos by Pat Christman

hen Kyle Smith was working full-time as a pilot for corporate clients more than a decade ago, he would spend his down time renting a car and driving around communities across the country. He’d notice commercial and housing trends, like what tenants in strip malls were popular and the types of amenities college housing complexes were

14 • January 2015 • MN Valley Business

offering. That curiosity would help him and some business partners as they later created Tailwind Group and dove into commercial and residential development in Mankato and across the Upper Midwest. “We looked at student housing in the southwest and southeast and duplicated it here in Mankato,” said Smith,

Cover Story

A seventh floor conference room has views across the valley, including a view of the Historic Courthouse on the left side of the photo. who, at 35, is one of the most active developers in the area and has one of the highest profile projects in local history going on along South Front Street. That duplication of student housing led to College Town, a gated, 114-bed housing community located near Minnesota State University. The community includes 80 individual buildings with amenities students expect today. “It’s different than it used to be. They want their own bedroom and bathroom and all the amenities,” Smith said. That eye for trends helped Smith and his partners including long-time friend and fellow pilot Reggie Reed, brother Landon Smith, and Michael Sather - to begin investing in and developing other student housing and commercial projects including strip malls. But it’s the $40 million project, including a parking ramp and three towers, that is transforming downtown Mankato and pushing Tailwind’s profile from an under-the-radar business to major developer. Looking for second income Smith grew up on a farm in Hartley, in northern Iowa, and was well acquainted with Mankato. His uncle, Mark Smith, is long-time co-owner of NorthStar Aviation at the Mankato Airport. And his family regularly visited and shopped here. “If you wanted to go to a bigger city, everyone went to either Sioux falls or Mankato.” Beginning in 1998, Smith enrolled in Minnesota State University’s respected flight training program and helped train other student pilots and flew corporate clients through his uncle’s business during and after college. But gaining a pilot license just as the nation was reeling from the 9/11 terror attacks made Smith realize his industry could be unstable. “You could see the volatility of it. It just shook up after

9/11 and the industry got really banged up during the recession. I think it’s a strong industry now, 14 years later,” Smith said. “I just realized I needed to go out and get a backup. I was watching classmates and roommates losing jobs and I didn’t want to ride that roller coaster.” In 2001 he bought his first rental property with $2,500 down – an older Front Street duplex. He fixed it up, using his credit card, and began renting it out. Meanwhile, Reed, his college roommate and fellow pilot, teamed up with Smith on similar investments. Reed still flies full-time as well as serving in his role in Tailwind. Smith still flies some clients a few days a month but focuses most of his attention on Tailwind. His brother Landon handles leasing for the group and Sather, a son of the Sather Candy family, handles the books and financial side of Tailwind. “The partners and their families deserve the credit for our success. It’s us, not I. People ask me my secret to success and I say the same thing, and I mean it - put yourself around good people and it creates success.” And he said, Abbie, his wife of 10 years, has been a key to his and the group’s success. “ ‘Understanding’ is a key component of hers. I’m a guy who’s not home as much as some others are.” The couple has 5-year-old twins and a 3-year-old. Hitting the fitness clubs While Smith and Reed were just beginning to develop the idea of a rental house business that would eventually be called Rent MSU and now includes 60 homes, Smith went into a business deal with his sister, Karmen, that would give him more exposure and experience in commercial development. She’d graduated from MSU in 2003 and had gone to

MN Valley Business • January 2015 • 15

Kyle Smith watches as crews put the final touches on a new city parking ramp. work at a major Twin Cities investment bank. “She realized that wasn’t for her.” Smith sold the few rental homes he’d attained and he and his sister began opening Anytime Fitness centers. “We bought franchise numbers 120 to 140. Anytime Fitness really took off, there are some 2,000 (franchises) now.” In 2008, they sold about half their 20 fitness locations and his sister continues to be involved with the others. Tailwind begins As Smith and Reed joined their home rental businesses and were joined by Landon Smith and Sather, the Rent MSU business continued to grow. “We have 60 homes, mostly older homes in the downtown area. We try to put some capital into them and upgrade them and keep them at an affordable price point,” Smith said. “Whether it’s food or retail or rentals you have different price points. It’s maybe not the sexiest business but it’s a strong product for us.” As the group moved into other ventures, including larger student complexes and retail and office ventures, a new corporate name was needed that would include the Rent MSU business as well as other ventures. The “Tailwind” aeronautics reference was one of several potential names, but not necessarily the first choice for pilots Smith and Reed. “The one partner in the deal that doesn’t fly is the one that really liked Tailwind,” Smith said. The group’s early investments in projects involved cobbling together a group of investors, including family members, relatives and acquaintances. “We’d build a project and sell it and move on to the next thing.” But larger projects, including the 2009 College Town development and a Starbucks, required more funding from banks and larger investors. Often, a group of investors in one project would join together with additional investors to pursue another

16 • January 2015 • MN Valley Business

project, Smith said. And Tailwind Group and Smith and the other partners invest their own money in the projects. “That’s been one of my hard line stances. I say how do you ask someone for money if you don’t have your own money in it?” Changing downtown Mankato While Tailwind Group grew its footprint locally and in other states, it was the downtown Mankato developments that propelled the company to a new level of influence and public recognition. Smith’s group had purchased the former Miller Motors building on South Front Street, but had no concrete plans on what would replace it. “I thought maybe a nice bank that would complement the new MinnStar bank (on Riverfront Drive), which is a really nice project.” Profinium, a Fairmont-based banking and financial services company, had contacted Turning Point Management in Mankato looking for a Mankato location and eventually began talking with Tailwind. But what began as a smaller building on the former Miller Motors site morphed quickly. “Profinium really challenged us to do something much bigger,” Smith said. In the end, the plan turned into a seven-story office tower – Profinium Place - on the corner of Riverfront Drive and Warren Street that would house Profinium and other tenants. The Miller Motors site of Front Street grew to a five-story building that included the old Miller site and the site of the former Red Sky Lounge and will include retail on the first floor and upper-end apartments above. The project also includes a city-built parking ramp along Riverfront Drive. One remaining lot along Riverfront, where it intersects with Cherry Street, was pegged for future development. But just as construction was beginning on the other buildings and ramp, Tailwind announced it

An artist’s drawing of the Cherry Street tower, which will be home to Ridley and is set to open in December. had tenants interested and would also build the third building – Cherry Street Tower - a five story office building on Riverfront and Cherry. The three buildings represents about $30 million in private investment on top of about $10 million in public spending for parking and other infrastructure. In Profinium Place, Profinium will occupy the first floor with Turning Point Management and construction company Met-Con taking some space on the second. Blethen, Gage & Krause law firm will occupy the fourth floor. The Abdo, Eick & Meyers accounting firm will be on the fifth and sixth floors and Lidstrom Commercial Realtors will have an office on the seventh floor. Thirdfloor tenants have not yet been signed. The major tenant in the Cherry Towers building will be Ridley, the Mankato-based animal feed giant that owns the Hubbard brand along with many others sold across North America. They will move their approximately 100 Mankato employees to the tower. Smith said another tenant for the building is near to signing on. Marques Doppler, CEO of Profinium, said the process has been exciting. “Working with Kyle and Michael and his team has been extremely gratifying. They’re consummate professionals and they’re all-in committed to Mankato.” Profinium traces its roots to 1875 and the Martin County Bank. With offices in Truman, Fairmont, Owatonna and now Mankato, the company has assets of about $320 million with another $100 million in trusts and investments. “We have this footprint and there was this glaring beacon in the middle of our footprint calling our name,” Doppler said of the chance to expand to Mankato. “The

Mankato market is one of the most dynamic and exciting I’ve seen and I’ve been in the metro and in communities around the Upper Midwest.” Profinium has already had an office in Mankato, in the Landkamer Building, for the past year, working mostly with commercial customers. They will initially bring about 15 employees to the Profinium Place first floor, but Doppler said those numbers are very likely to keep increasing over time. “We’re a full financial health solutions center. We have all the traditional banking services and financial planning, trusts and insurance.” Smith said the downtown projects didn’t come together right away. “The risk level is big on this. It’s something different for Mankato” said Smith of the downtown project. “It wasn’t an easy sell originally on that block. A lot of people asked me if I was crazy. I said, ‘I might be - I’ll tell you in 10 years.’ “ But he said that as it’s come together the viability of high-end office space is being proven and the risk is spread out. Besides Tailwind, the tenants of the buildings are investors in the projects, as well as a couple of outside investors. “Getting the people who’ll be leasing to be the investors in it helps. Profinium and the others will have a vested interest in it.” (Information on the project can be found at the website Block518.com) Smith said the big development could never have happened had it not been for years of work by other private developers and business owners downtown and by MN Valley Business • January 2015 • 17

the city. “All of this happened because of what all these people did before. Everything (Tony) Frentz has done, the Graif Building renovation, (Mike and Cathy) Brennans’ projects, Tandem Bagels, the (new) U.S. Bank building - all those things that came down here first,” Smith said. And, he said, the city’s work to create wider walkways and a downtown pedestrian experience along Front Street, along with other downtown improvements, have poised the area for ongoing success. He noted that already many older buildings in the area have either been purchased with plans for renovation or are being improved, including a renovation of Pagliai’s Pizza and a building across the street that was purchased and is being renovated by Eskins Peterson law firm. “Business owners are stepping up to the table. I wouldn’t be surprised to see more opportunities in the blocks around here and across downtown. There are a lot of things going on quietly, remodels and sales. We’re going to have $100 million in renovations downtown,” Smith said. A growing portfolio The number of projects Tailwind has been involved in is large and growing. Besides the downtown Mankato projects, Rent MSU, and College Town, there are 60 units of student housing in Rochester, stores in Owatonna, a couple of General Nutrition Centers, The Lofts@1633 (student housing above the strip mall that houses Yu’s), strip malls in Mankato and North Mankato, including the mall housing Dickey’s, group TOP: The final glass panels, weighing 500 pounds each, go up on the Profinium Place building. homes in Waseca, and retail and student Bottom: College Town, near MSU, features student housing with individual bedrooms and housing in other states including Iowa and bathrooms for each tenant along with other amenities. Wisconsin. Smith said their and other market surveys show there is The next big Mankato development is The good demand for the type of downtown upscale apartments Quarters (TheQuartersMankato.com), a 180-unit, 450-bed being built on Front Street. It’s part of a national trend of student housing complex near MSU. young professionals wishing to live in entertainment “It’s a little different than College Town, there will be districts. But, he said, he’s not sure if that demand will flats and townhomes, so both horizontal and vertical,” grow or level off. “I’m not sure what the right number (of Smith said. apartments) will be.” Despite the number of higher-end student housing units Smith said he sees no end to growth and opportunities that have or will be added to the market, Smith said they in Mankato. are being careful not to overbuild. “We’re cautious on the “It will continue. With the growth here the demand will student housing because you don’t know what enrollment keep coming.” could do in the future. St. Cloud and others are losing He said the area’s designation as a Metropolitan numbers.” Statistical Area means national retailers now take a look at Smith admits being a landlord for young adults away Mankato and he said job growth will pull in more residents from home for the first time is a challenge. “Sometimes we and more demand for housing and services. call it adult day care.” But, he said, any business brings it Despite being bullish on the local economy, Smith said headaches. “Imagine running 20 McDonalds or something, Tailwind is aware it shouldn’t concentrate too much in one every business has its challenges and downsides.” area as the company moves forward. Smith said that outside of the upper-scale apartments “I’m not sure I have an answer as to our future plans, but aimed at young professionals to be included in the Front it’s controlled growth and opportunity,” Smith said. “Our Street building, Tailwind hasn’t looked toward getting into biggest push needs to become more diversified - diversity apartment building for the non-student market. “Mike into some other communities and other opportunities.” Drummer and other developers have been doing a great MV job of that. We’ve concentrated on the student housing.”

18 • January 2015 • MN Valley Business

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Dr. Richard Beran, of the Kind Veterinary Clinic.

Kind to pets

Kind Veterinary Clinic focuses on companion animals

By Heidi Sampson | Photos by Pat Christman

or Dr. Richard Beran, of the Kind Veterinary Clinic, veterinarian care went hand in hand with growing up on a farm. In fact, all four of the current vets who practice at the clinic grew up on a family farm. “We all had families that had a lot of livestock,” Beran said. “Ever since we were young children, we were exposed to animals and taking care of animals. For myself, I think that experience was the driving force behind my own personal choice to pursue this line of work.” Kind Veterinary Clinic was founded in 1953 by Dr. Jim Hanson. At that time, the clinic was known as Dr. J.O. Hanson, Veterinarian. For many years, Hanson’s wife, Carol, and her parents, Bill and Inez Mayer, worked as office technicians and staff, creating a family atmosphere of quality veterinary care for their furry four legged clientele. In 1955, Dr. Gene Kind began to work with Hanson, and by 1957 the clinic switched its name to

Hanson and Kind, Veterinarians. In 1959 Hanson left the private practice for a position with the University of Minnesota. Ten years later, Dr. Ken Douglas came to work with Dr. Kind as the practice changed its name to Kind and Douglas, Veterinarians. In 1975, the clinic moved to 1123 S. Minnesota, the present site of Mary’s Flowers with their last and final name change, Kind Veterinary Clinic. Dr. Denny Rossiter joined the practice in 1981, and is currently the senior partner of the clinic. In 1992, Dr. Richard Beran joined the practice during the same year that Kind Veterinary Clinic would purchase a veterinarian business in Le Center, from Dr. Harlan Meyer, allowing them to open a satellite office location two days of the week. In 1996, Dr. Kind and Dr. Douglas both retired, while Dr. Shelley Reicks joined the practice quickly followed by Dr. Mari Feder in 1997.

Profile

20 • January 2015 • MN Valley Business

Dr. Denny Rossiter and Terri Heimerman examine a cat in one of the Kind Veterinary exam rooms. “Our clinic has gone through transition,” Beran said. “As every new partner who comes into our practice, buys into the practice.” By 1998, the Kind Veterinary Clinic built a new clinic at their present location of 109 West Grace Street. Over the years, the practice has evolved from primarily a farm animal clinic to the majority of work consisting of companion animals. However, they still continue to serve the dairy and beef farmers of the St. Peter area. Companion Care A big part of the Kind Veterinary Clinic’s practice is dental. They also spend a good majority of their time spaying and neutering companion animals, as well as in performing other odds and ends, from tumor removal to GI surgeries creating a wide spectrum of services available to their customers. Computer technology has also influenced a lot of the changes at Kind Veterinary Clinic, as well as within veterinary medicine in general. Virtually all veterinary practices are using computer practice management software, which helps to keep medical records complete, tracks reminders, and other necessary healthcare needs of their patients. Kind Veterinary Clinic also hosts a web site, as they have a presence on Facebook to assist in promoting and featuring their clinic with regular updates. The computers that have advanced medicine and surgery for Kind Veterinary have many uses. For several years, they have been using ultrasound for diagnostic work in both their pet practice, as well as with dairy cows. Most of the mechanics within an ultrasound are computer based. They also have computer radiography for their general X-rays and digital radiography for dental X-rays. These products were virtually unheard of in general practice even a decade ago. In fact, their referral centers (Blue Pearl and University of MN) even have CT scanners and MRIs.

New rat poison a big danger Beran said the winter months bring more dangers for companion animals. “Pet owners need to be sure that their companions aren’t getting into antifreeze,” Beran said. “Also, this fall in particular, we’ve seen a large number of rat bait poisonings. Owners need to be careful when putting rat poisoning out so that their dogs won’t have access to it.” A major problem with the newer rat bait is that the bait won’t show any signs of the animal having ingested it until the pet is in critical condition. At that point, there really isn’t a good treatment for the poison, which usually kills the animal. With the older version of rat bait, the severity of the poisoning and the threat of death, depended upon how much they ate. “The newer rat bait is toxic to the brain and central nervous system of the animal,” Beran said. “Pet owners will typically see no signs of poisoning until several days after it’s been ingested, by then it’s simply too late. This year, the cases we’ve seen so far, the owner’s knew the dog had eaten the poison. We were able to get the dog to vomit before it was too late.” The Kind Veterinarian Clinic’s radius of business is about 20 miles from offices. “We appreciate the support of our communities,” Beran said. “Working at this clinic has been a very rewarding place to practice small animal care. We are extremely fortunate because we are able to see a wide diversity of people and pets, especially with the college here in town,” he said. “The absolute best part is when an animal comes in that is severely sick and we are able to bring it back to optimal health. We are given the opportunity to reunite families by bringing their companion animals back into the family and making the family whole again.” MV

MN Valley Business • January 2015 • 21

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Franklin Rogers Park may be blanketed in snow but the MoonDogs’ Kyle Mrozek and his staff don’t hibernate through the winter.

MoonDogs in Winter No off season at team headquarters By Pete Steiner Photos by Pat Christman

yle Mrozek loves January. Even though our most recent boys of summer have long since dispersed, and snow covers the playing field, the vice president of the Mankato MoonDogs needs to kick it into high gear. Just past New Year’s, while anticipating the 16-hour days he’ll be putting in a few short months from now, he has a long list of tasks to complete to get ready for the 2015 Northwoods League baseball season. “It’s a

year-round job now,” Mrozek reflects. It was not when he arrived for the start of the 2003 season. In November, he found time to sit for an interview in team offices just a couple blocks straight south of home plate at Franklin Rogers Stadium. It was not the first time he’d been asked, “What do you do in the fall?” While autumn is their least hectic time of year, Mrozek and General Manager Greg

Spotlight

24 • January 2015 • MN Valley Business

The MoonDogs take to the field for their home opener in 2013. Weis still staff the office 9 – 5 Monday through Friday. They’re setting up ticket and advertising sales and marketing for a season that’s only seven months away. Local companies have already been lining up hospitality gatherings on the All-You-Can-Eat Deck, or in the boisterous Dog Pound. And as soon as last season ended, they began lining up the 2015 player roster of promising college prospects: “The (new) team is already assembled. (In September and October) is when we have the time and the college coaches have the time.” Newly named Field Manager Ryan Day, last season’s pitching coach, gets to choose his assistant coaches then, as well. November’s tasks, as listed by Mrozek, included wrapping up accounts payable and receivable, and completing a review of last summer’s promotions. “We can’t get complacent,” he smiles, saying they constantly strive to be more entertaining. That means deciding what worked and what didn’t, and what new wrinkle might appeal to each home game’s 1,200 or so fans. The upcoming season’s giveaways, including bobbleheads, need at least 90–120 days to design, order and ship. “The expectations,” Mrozek says, “have grown by leaps and bounds,” to the point where the team is seriously considering hiring a third full-time employee. In the meantime, interns are key to the highly seasonal business. Intern interviews began in November, and five full-time interns will start coming on board from January through April. They will remain with the team through the season, into August. Mrozek himself owes his job to an internship he took while a business major at St. John’s University. He worked with the Alexandria Beatles, another Northwoods League team. “I loved it,” he says, “I worked my tail off, slept on hotel room floors. But, I WAS IN BASEBALL!” And before long, he was hired part-time by the MoonDogs for the 2003 season. The MoonDogs’ full-time interns may come from MSU

or Bethany or Gustavus. Some have come from St. Johns University in Collegeville. One even came from South Dakota State. Their pictures, in specific promotions they supervised, end up on Kyle’s office wall following the season. But their first task is to help with the key push in spring: marketing the team and selling ticket packages. In May, they will help prep the ballpark and concessions. Thirty to 50 more part-time interns join the club for the summer months. They’ll staff the box office and press box, sell concessions, and supervise on-field, between-inning promotions like the “dizzy bat contest” or water-balloon catapults. They get school credit and either a commission or an hourly wage for their efforts. Last year there were 36 home games to prep for. During one eight-game home stand that earned the name “Hell Week,” one intern put in 118 hours. The Business Model “It’s a pretty interesting business model to learn,” Mrozek said. Managing cash flow is a challenge. “We hope to make enough during summer to carry us through. It was more of an issue (a decade ago). We’re mostly selfsustaining now.” Some of the 200 season ticket holders do renew in the fall. But it’s helpful that most of the revenues come in during the season, when expenses are also highest. Besides management salaries, the MoonDogs pay for bus travel and lodging for 36 away games, and they buy all team equipment including 240 wooden bats and 145 dozen baseballs through a deal with Rawlings sports equipment. Insurance is another significant expense, as is frequent cleaning of all those player uniforms. While the privately-held ballclub does not reveal annual budgets or revenue, Mrozek does break down where revenue comes from: ticket sales bring in just 20 percent of revenue. Food and beverage concessions provide about 45 percent: “The

MN Valley Business • January 2015 • 25

Mrozek and his staff are busy lining up sponsors, developing special events for each home game, ordering bobbleheads and selling season tickets. hospitality decks (for company outings) are our number one growth area.” Advertising in the programs and on outfield billboards and via sponsored promotions, accounts for another 25 percent. Merchandise sales of t-shirts, caps, etc., nets about 10-15 percent. (Actually the MoonDogs do better on merchandise sales than most of the 18 Northwoods League teams.) When Mrozek speaks to college business classes, he tells them the same things he says to interns: “We provide fun, family entertainment at an affordable price. We don’t even say, ‘we’re a baseball team.’ We are selling fun. You have fun even if you don’t like baseball.” Strong support “This is a good baseball community,” Mrozek said. That’s partly why he loves January. “The biggest part is training new interns. Then we get on the phone and start selling packages. It’s fun, it’s busy. People want to start talking baseball. Minnesotans are itching to get back outside.” Host families are lined up for the nearly three-dozen incoming players, although as many as 90 percent of last year’s hosts are back on board. Previous families, who have hosted future big league all-stars like center-fielder Curtis Granderson, and the world-champion San Francisco Giants’ shortstop Brandon Crawford, often enlist new families via their positive endorsements. By April, the team will be lining up seasonal concession managers to begin ordering and staffing. Kelly and Colleen Terrell have filled those positions in recent years. By May, the ballpark itself, which has sat empty for two-thirds of

26 • January 2015 • MN Valley Business

the year, needs to be prepped – press box and PA system checked, seats cleaned, signage up – making sure it all looks “crisp” for the fans. Time flies by In December, an enormous whiteboard mounted in the hallway across from the Vice-President’s office was pretty much empty. It lists every home game for 2015. Over the next few months, next to every date, that whiteboard will have every space filled with each game’s sponsor, promotions, non-profit partners, who has the hospitality deck booked, who sings the national anthem, who throws out the first pitch and more. “If we get into February and there’s still blank spots up there, we know we have to get busy,” Mrozek said. He may have been “a slow-footed leftfielder” in high school, but in January, he’s running as fast as he can. “Time flies by,” he said, shaking his head, confessing it’s hard to believe that, at 36, he’s starting his 13th season with the team. “I never take it for granted.” As Mrozek reminds his interns, “most people don’t get paid to be at a ballpark in the summer!” MV

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Ben Pieser, owner of New Ulm Furniture, with his daughter Betsy.

One piece or a whole room

New Ulm Furniture offers personalized service By Heidi Sampson Photos by John Cross

fter the war, Richard and Sara Pieser became aware of the fact that there wasn’t a furniture store in New Ulm, as it had just gone out of business. Richard and his brother, Jay, who was owner of Fairmont Furniture at that time, believed New Ulm would be a good place for a furniture store. In 1945 Jay helped his brother establish New Ulm Furniture Co. in a small store on Minnesota Street. With the startup of their

new business, Richard and Sara would move to New Ulm from Mankato. In 1959, New Ulm Furniture would move to its current location, 16 North German Street, after tearing down the Cudahy Packing Plant and building a brand new store. “One of the things dad thought was important,” said Ben Pieser, son of Richard Pieser and owner of New Ulm Furniture Co., “was that in front of the old store, there were

All In The Family

28 • January 2015 • MN Valley Business

parking meters and dad didn’t believe that it was appropriate for his customers to have to pay to come into his store.” There were also two other distinct attributes that helped Richard and Sara to develop and build their business. When Richard started his business the majority of the people in New Ulm spoke German. Having come from Mankato, Richard didn’t speak German so the first thing he did was to hire a truck driver who spoke the language and who could also serve as an interpreter for him. The second distinct business characteristic was that Richard extended credit to his customers during a time when money was tight directly after the war. “Those who took advantage of the credit plan with my dad would come in and pay $5 a month, or whatever the agreed upon amount was, until the item was paid,” Ben said. “But in the meantime the customer was able to take the product home and use it.” Since Ben grew up in his father’s furniture store, when he graduated from college in 1968 he skipped his graduation ceremony as he was eager to get back to work on a fulltime basis. When his father passed away roughly 30 years ago, Ben took over the business. Ben’s mother, Sara, would continue to work in the store until she was 92. Since the startup in 1945, New Ulm Furniture Co. has added warehouses giving them more than 45,000 square feet in which to house their wide selection of merchandise. Today, Ben’s wife Vicki is also involved, completing the bookwork for the company. Their daughter Betsy came back to the furniture business around four years ago and

now assists with the store. “Betsy does everything,” said Ben. “We have to wear all hats here. My dad was always very involved also. He didn’t believe that one could sit at a desk and run a business efficiently. That just wasn’t how it was done. He believed that it was our responsibility to be out amongst the customers tending their needs. My dad did that, I do that and Betsy does that.” MVB: What does New Ulm Furniture Co. carry? Ben: We carry furniture, flooring, window treatments, and wall coverings for both residential and commercial businesses. MVB: Is there a lot of competition in New Ulm? Ben: There’s another furniture store in town, but in the furniture business, our biggest competition is other products. If you have a specific number of expendable dollars, are you going to buy furniture or go on that trip you’ve always wanted to go on? The main thing for us is that we offer personal service. Do you need help in picking out a lamp? We will help you. We don’t just walk up and down the aisles like a big box store might. We can help our customers pick out a lamp, put a whole room together or even an entire office. Interior design is a huge part of our business. MVB: How many employees does New Ulm Furniture Co. have? Ben: We have 13, some are full-time and some are part-

MN Valley Business • January 2015 • 29

The store moved to its current downtown location in 1959. time. We’d certainly be remiss if we didn’t say something about our employees. We’ve been fortunate to have had some great employees over the past 69 years. Three of our employees have now been with us at least thirty years. I’d say we are like family. MVB: What do you like about this line of work? Betsy: I like helping people become happy. When they are here getting a new sofa or putting up blinds, it’s something that will improve the way they live, which is a very satisfying and happy experience for them. It is also a very satisfying experience for us knowing that they are getting something that is making them happy. We can even make house calls to assist customers in making decisions, especially if they can’t decide what it is they would like to do. We can help them decide if a particular item is going to be a good fit for their house or not. MVB: What would be a unique aspect of the business? Ben: If people see something they like online, say a blue sofa or even a particular sofa with a different type of arm, we can find a match for what it is they like. Betsy: For instance, we can find them a similar sofa from one of our vendors and within their price range. Ben: It’s amazing how much we use computers today from Facebook to having a web presence. When dad was alive, I had wanted to get a computer to put our accounts on, as

30 • January 2015 • MN Valley Business

well as orders. Dad had said, “I don’t know about the computer. I’m not sure how this is going to work. What if that computer loses stuff?” Betsy: He was right, computers do lose stuff but it’s a neat way to communicate with customers. MV

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32 • January 2015 • MN Valley Business

www.cbfg.net

Construction/Real Estate Residential building permits Mankato

(in thousands)

- 2013 - 2014

11000

Residential building permits North Mankato

- 2013 - 2014 (in thousands)

3000

$2,603 $4,420

8250

$1,428

2000

$1,236

5500

1000

2750 0

Source: City of Mankato Information based on Multiple Listing Service and may not reflect all sales

- 2013 - 2014 275

Includes single family homes attached and detached, and town homes and condos

Housing starts: Mankato/North Mankato - 2013 - 2014

16 14

165

110

55 J

Source: Realtors Association of Southern Minnesota

Source: Cities of Mankato/North Mankato

Commercial building permits Mankato

(in thousands)

- 2013 - 2014

Commercial building permits North Mankato

- 2013 - 2014 (in thousands)

2000 1500 1000

$2,440 $1,300

$140 $165

500 D

Source: City of Mankato

Source: City of North Mankato

Interest Rates: 30-year fixed-rate mortgage

Foreclosures: 2013 Year End

— 2013 — 2014

5.5 5.0

4.3%

4.5 4.0

4.0%

3.5 3.0

170 220

220

80000 70000 60000 50000 40000 30000 20000 10000 0

Source: City of North Mankato

Existing home sales: Mankato region

Source: Freddie Mac

County

2012

2013

Percent change

Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan

126 37 46 98 42 49 58 57 17

101 19 27 70 25 43 39 36 24

-20% -49% -41% -29% -40% -12% -33% -37% +41%

Source: Minnesota Foreclosure Partners Council C. Sankey

MN Valley Business • January 2015 • 33

■

Agricultural Outlook

By Kent Thiesse

Farmers need a keen eye on risk management

s we look ahead to 2015 it appears that we will have much tighter profit margins in crop production. The combination of lower projected market prices for corn and soybeans in 2015, together with nearly steady input costs for seed, fertilizer, and chemicals, will limit estimated potential returns. Another major variable in breakeven levels in crop production are loan payments on capital investments such as farm machinery, facilities, and land purchases. The current projected on-farm average market prices for 2015 are about $3.50 per bushel for corn and $9.50 per bushel for soybeans. Approximately two-thirds of the corn and soybean acres in Southern Minnesota are under some type of cash rental agreement. Based on farm business management records for southern third of Minnesota, the average land rental rate in 2013 was just over $250 per acre; however, there was a wide range in land rental rates across the region. Most likely, average cash rental rates for 2014 in many areas of the region were as high, or even higher, than the 2013 average rental rates. Based on early reports from farm operators, it appears that land rental rates for 2015 in many locations across the region have been very slow to adjust downward. The University of Minnesota Center for Farm Financial Management has website (www.finbin.umn.edu) that allows farm operators, ag lenders, farm management advisors, and others to look at average income levels, direct and overhead expenses, and net return levels on farms. The data in FINBIN is based on actual farm management data submitted by producers through the various farm business management programs. The data can be sorted on the basis of whole farms, crop or livestock farms, location, farm size or income levels, owned versus cash rent land, as well as other data sorts. Based on a FINBIN analysis for the years 2011-2013 of over 1,100 crop farms on cash rented corn acres in southwest, south central, and southeast Minnesota, the average net return over average direct and overhead expenses, including land rent, was nearly $210 per acre per year. However, further analysis showed that there was a very wide variation between the top 20 percent net returns on cash rented corn acres for the three-year period, compared to the bottom 20 percent net returns. The top 20 percent profit farms had an average net return on cash rent corn acres for 2011-2013 of $521.61 per acre per year, compared to an average of negative ($108.40) net return for the low 20 percent profit farms, which is a difference of $630 per acre per year. More detailed analysis of the FINBIN data for 20112013 looked at the various factors that comprise the large difference in the average net returns per cash rental corn acre, between the 20 percent high profit farms and the 20 percent low profit farms. The average corn yield for 20112013 was 173 bushels per acre on all farms in the analysis,

34 • January 2015 • MN Valley Business

but was over 186 bushels per acre on high profit farms, and was near 165 bushels per acre on the low profit farms. The average corn market price received for 2011-2013 was $5.63 per bushel on all farms. There was also a significant variation in average costs per acre between the top 20 percent profit cash rental corn farms and the low 20 percent profit farms from 2011-2013. The average direct and overhead cost per bushel of corn produced for 2011-2013 was $4.68 per bushel, which compares to $3.83 per bushel on the high profit farms, and $5.63 per bushel on the low profit farms. Following are some things to consider regarding risk management strategies for the 2015 crop year and beyond: n Calculate crop production breakeven levels for 2015, using realistic yield expectations, crop expenses, and market prices. n Develop a crop marketing plan, based on the cost of production, with realistic market price expectations, and with action plans to execute the marketing decisions. n Utilize a sound crop insurance strategy for 2015 that optimizes the desired financial risk management protection for the crop operation.

n Closely analyze the choices for the new government farm program for the 2014-2018 crop years, and select the options that offer the most potential for added farm income. n Fine-tune the crop enterprise, searching for ways to reduce the overall production and overhead expenses, even if it involves several smaller adjustments. n Work with landlords to adjust cash rental rates to near breakeven levels on rented crop acres, and consider utilizing a flexible cash lease agreement, with some adjustments in the final land rental rate to the landlord, if crop prices improve. n Keep the cash available segment of the farm business as strong as possible. n Don’t forget about family-living and non-farm expenditures, as cash outlays for these items can be a major factor in the final net farm income for a given year. MV Kent Thiesse is farm management analyst and vice president, MinnStar Bank, Lake Crystal. 507- 381-7960; kent.thiesse@minnstarbank.com

Agriculture/Agribusiness Corn prices — southern Minnesota

(dollars per bushel)

— 2013 — 2014 8

$4.00

$13.00

16 12

Iowa-Minnesota hog prices

Source: USDA

Milk prices

185 pound carcass, negotiated price, weighted average

— 2013 — 2014 140

$9.90

$3.61

Source: USDA

$85.73

$25.86

112

Minimum prices, class 1 milk Dollars per hundredweight

— 2013 — 2014 30

126

$22.00

84 70

(dollars per bushel)

— 2013 — 2014 20

Soybean prices — southern Minnesota

$75.50 J

Source: USDA

Source: USDA. Based on federal milk orders.

Corn and soybean prices are for rail delivery points in Southern Minnesota. Milk prices are for Upper Midwest points.

C. Sankey

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• Commercial Leasing New Ulm, MN 507.359.2004

Olivia, MN 800.545.6227

New Hope, MN 877.535.4914

there for

you

Faribault, MN 866.332.8211

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Steve Olson

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Downtown Mankato 507-625-6816 Lake Crystal 507-726-2137

BUSINESS BANKING www.minnstarbank.com Member FDIC

MN Valley Business • January 2015 • 35

Employment/Unemployment Initial unemployment claims

Minnesota initial unemployment claims

Nine-county Mankato region Major November Industry ‘13 ‘14 Construction Manufacturing Retail Services Total*

535 160 64 238 997

Percent change ‘13-’14

796 189 51 229 1,265

Major Industry

+48.8% -18.1% -20.3% -3.8% +26.8%

November ‘13 ‘14

Construction Manufacturing Retail Services Total*

9,139 2,938 1,465 6,827 20,369

Percent change ‘13-’14

12,107 3,118 1,345 6,546 23,116

+32.5% +6.1% -8.2% -4.1% +13.5%

Services consist of administration, educational, health care and social assistance, food and other miscellaneous services. *Categories don’t equal total because some categories not listed.

Local non-farm jobs

Minnesota Local non-farm jobs

- 2013 - 2014

Nine-county Mankato region

130,468 127,867

133000

(in thousands)

2000

111000

1000

100000

Local number of unemployed

- 2013 - 2014

Nine-county Mankato region

8000 6000

- 2013 - 2014

95,612 121,877

150000

4,971 4,042

Minnesota number of unemployed 200000

10000

100000

4000

50000

2000 0

2,902 2,845

3000

122000

- 2013 - 2014

Mankato/North Mankato Metropolitan statistical area

Unemployment rate Number of non-farm jobs Number of unemployed

2013

2014

3.4% 57,064 2,010

2.5% 59,206 1,500

Source: Minnesota Department of Employment and Economic Development

36 • January 2015 • MN Valley Business

Unemployment rates Counties, state, nation

(includes all of Blue Earth and Nicollet Counties) October

County/area Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan Minneapolis/St. Paul Minnesota U.S.

October 2013 3.5% 3.5% 4.3% 4.5% 4.4% 3.2% 3.4% 4.5% 5.2% 4.3% 4.3% 7.0%

October 2014 2.6% 2.8% 3.6% 3.4% 4.4% 2.2% 2.6% 3.6% 4.5% 3.2% 3.2% 5.5% C. Sankey

Retail/Consumer Spending Vehicle Sales Mankato — Number of vehicles sold - 2013 - 2014 1200

884

1000

798

800

Source: Sales tax figures, City of Mankato

Lodging tax collections Mankato/North Mankato $56,900 $45,279

60000

- 2013 - 2014 $55,837 $59,000

51000 34000 17000

10000 J

— 2013 — 2014 $2.99

4 3 2

$2.57

1 M

Gas prices-Minnesota — 2013 — 2014 $2.92

4 3 2

$2.52

1 F

Source: City of Mankato

Gas prices-Mankato

Source: City of Mankato

68000

20000

Source: Sales tax figures, City of Mankato

85000

30000

Mankato food and beverage tax

40000

$387

- 2013 - 2014

50000

$406

400

100

200

- 2013 - 2014

500

200

400

(In thousands)

300

600

Includes restaurants, bars, telecommunications and general merchandise store sales. Excludes most clothing, grocery store sales.

Sales tax collections Mankato

Stocks of local interest

Nov. 12

Dec. 5

Percent change

Archer Daniels

$50.89

$58.29

+14.5%

Ameriprise

$129.93

$136.26

+4.9%

Best Buy

$35.12

$35.90

+2.2%

Crown Cork & Seal

$48.71

$51.23

+5.2%

Eventis

$27.10

$27.38

+1.0%

Fastenal

$44.58

$47.08

+5.6%

General Growth

$25.49

$27.51

+7.9%

General Mills

$50.94

$53.12

+4.3%

Hutchinson Technology

$3.68

$3.70

+0.5%

Itron

$41.34

$41.35

+0.02%

Johnson Outdoors

$31.22

$29.10

-6.8%

$157.40

$162.31

+3.1%

Target

$66.46

$73.63

+10.08%

U.S. Bancorp

$43.86

$46.20

+5.3%

Wells Financial

$25.75

$28.08

+9.0%

Winland

$0.81

$0.72

-11.1%

Xcel

$33.43

$34.82

+4.2%

Source: GasBuddy.com C. Sankey

MN Valley Business • January 2015 • 37

Presented By:

On November 18, nearly 450 members of the Greater Mankato community gathered to honor some of our region’s most outstanding businesses, organizations and professionals at the Greater Mankato Business Awards & Hall of Fame. Thank you to our members and sponsors for a memorable and wonderful event. Please join us in congratulating all of this year’s award recipients!

Greater Mankato Growth

To view pictures and video from the event, as well as nominate a business, organization or individual for an award visit greatermankato.com/business-awards-hall-fame. Presenting Sponsor

Dinner Sponsor

Event Sponsors

Photos By Quality 1 Hr Foto

38 January 2013 2015 •• MN MN Valley Valley Business Business 1 •• JANUARY

Video Sponsor

Greater Mankato Growth MN Valley Business • January 2015 • 39

Hall of Fame Inductee Minnesota Elevator, Inc.

Distinguished Business Award Greater Mankato Growth

PresenceMaker, Inc

40 January 2013 2015 •• MN MN Valley Valley Business Business 1 •• JANUARY

Entrepreneurial Business Award Friesen’s Family Bakery & Bistro

Brian Fazio Business Education Partnership Award College of Business - Minnesota State University, Mankato, Taylor Corporation - Innovation Center

Greater Mankato Growth MN Valley Business • January 2015 • 41

Greater Mankato Growth

Hap Halligan Leadership Award

Young Professional of the Year

Barb Embacher

Kevin Velasquez

Hospitality Award

Bring it Home Award

Justin & Jenna Rinehart, Nicollet Bike Shop

Bent River Outfitter

42 January 2013 2015 •• MN MN Valley Valley Business Business 1 •• JANUARY

Renovation over $3,000,000 - VINE Faith in Action, Adult Community Center VINE Faith in Action Renovation $1,000,000 - $3,000,000 - South Front Street Reconstruction Front Street Property Owners and City of Mankato Renovation under $1,000,000 - Visit Mankato New Construction Under $2,000,000 - Veterans Memorial Place Local Veterans Committee, City of Mankato and City of North Mankato Downtown Detail - Pub 500 Patio - Pub 500 Facade Improvements - Public Safety Center - City of Mankato Innovative Interior Remodel: Interior Renovation - Y Barbers/Onatah On Belgrade

CityArt “People’s Choice” Award Greater Mankato Growth

“Green Sea Turtles” Eric Thorsen MN Valley Business • January 2015 • 43

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