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The Journal Gazette

  • Kelley

Wednesday, March 07, 2018 1:10 pm

Kelley investing millions into expansion; moving dealerships

SHERRY SLATER | The Journal Gazette

Every five to seven years, automakers roll out a new showroom look for dealers to replicate.

Tom Kelley, who owns multiple dealerships, was tired of investing millions in those upgrades when he leases the land his car lots sit on. His father, Jim Kelley, sold the property to a real estate investment trust about 20 years ago.

So the local businessman is investing $45 million to $50 million to relocate five local Kelley Automotive operations onto property he bought last October from billionaire retailer John Menard.

Kelley Automotive, which now employs about 600, expects to create 25 to 50 jobs over the next several years. The move will send the corporate headquarters less than 1 mile west from its current location on Avenue of Autos.

Kelley and Menard made the announcement Wednesday afternoon at a news conference at the Menards at 6310 Illinois Road. The 50 acres Kelley bought borders the Menards property and is visible from I-69.

The two entrepreneurs will invest $12 million to $13 million upfront to pay for improved roads to access the home improvement store and the car lots.

Now, Menard said, drivers traveling west are sometimes confused about whether they're in the right turn lane for Menards or they'll be forced to merge onto the interstate. Drivers traveling east sometimes find the left turn lane into Menards is full, forcing them to skip the turn or risk getting rear ended, he said.

Mayor Tom Henry, who participated in the announcement, said city traffic engineers will study adding an access road that will allow shoppers to avoid Illinois Road completely.

City officials expect to create a tax increment financing district – or TIF – which would funnel taxes paid by the companies back to the owners to repay their infrastructure investment, city spokesman John Perlich said.

Menard used the occasion to announce investments in two of his three local stores. Menards on Illinois Road and the northeast location at 5511 Meijer Drive will be renovated to create more space for showroom displays.

"We've been wanting to expand this store for some time," Menard said. "We'll make it a little safer with less things stacked up that can fall on your head."

Dan Dufour, the store's general manager, said the renovation includes adding 1,000 to 1,200 new items across all product lines.

Menards operates more than 300 locations in 14 Midwestern states.

The Illinois Road store project will cost $4 million to $5 million. The northeast store renovation will be a bit less expensive at $3.5 million to $4 million.

Kelley expects to break ground on the BMW and Volvo showrooms this summer or fall and open in fall 2019. The Cadillac and Buick GMC dealerships will follow, with showrooms scheduled to open in fall 2021.

Kelley’s dealerships include GMC, Buick, Chevrolet, Cadillac, Ford, Volvo and BMW on seven car lots in Fort Wayne and Decatur. 

A significant factor in his decision to invest tens of millions in the business is the fact that his son, Jim; daughter, Stephanie; and other 30- and 40-year-olds are on deck, ready to run the business in future years, said Kelley, 65.

Auto sales have reached record highs in recent years, following the Great Recession. The deals have allowed Kelley Automotive Group to rebound as well, Kelley said.

In the wake of settling founder Jim Kelley's estate, the family sold majority ownership to local entrepreneur Keith Busse, chairman and co-founder of Steel Dynamics Inc.

The cash infusion gave the founding family some breathing room. Since then, the Kelley family has bought back some of those shares, making Busse and his son, Aaron Busse, minority owners.

"Without Keith," Kelley said, "I wouldn't be here today."

It's unclear whether the area Kelley Automotive is vacating will thrive after its departure. But at least one local professional sees potential for the move to prompt a retail infusion in the area.

Barry Sturges, a local commercial real estate broker, will market Kelley's current car lots for owner Capital Automotive REIT. He's optimistic that other car dealers or vehicle-related businesses will want space on Avenue of Autos.

Kelley said his lease on the property doesn't expire until spring 2022, which gives Sturges time to find new tenants. Sturges, who was interviewed by phone, agreed.

"I really haven't thought about it," he said, adding that the buildings are solidly built. "There's numerous opportunities." 

sslater@jg.net