In 1977, Andrew Lappin, 23 years old and fresh out of college, marched into town from Boston and booked himself a room in a fleabag hotel on South Michigan Avenue.
He planned to make it big in industrial real estate--a losing racket, according to all the odds. But in those first few days, his greatest concern was the hookers and pimps who kept him awake doing their business in the parking lot beneath his window.
"This hotel was a staging place for all the pimps in Chicago," Lappin recalls. "My father came to visit me, and he says, 'You can do better than this.' So, he books me a room in the Conrad Hilton. That was before the renovation. It was cavernous and empty. I was the only guy on my floor; it was like living in a deserted tunnel. I paid 23 bucks a night. And that's where we started."
Lappin's come a long way since then. Now vice-president of Shetland Properties, his family's firm based in Massachusetts, Lappin has overseen the transformation of the once-deserted Sunbeam appliance factory, over 1.5 million square feet of space sprawled across 47.5 acres of land at 5400 W. Roosevelt Road.
It's about as far west as you can go and still be in Chicago. Across the street to the south is Cicero, a working-class suburb; to the north and east are Austin and North Lawn, two predominantly black communities starved for investment.
But inside Sunbeam Park, business is humming. Financed by $8.5 million raised from an Industrial Revenue Bond backed by the state, Lappin subdivided the factory into smaller operations. All told, 37 businesses operate there--using about 70 percent of the plant--including warehouses, light industry, and distribution outlets, and Lappin is aggressively pursuing others.
His sales pitch is simple: If you want the fancy frills of the modern age, go suburbia. But if you want to save cash, I've got a deal on rent that can't be beat. In a sense, he's turning the disadvantages of industrial Chicago--its age and decline--into a major selling point.
"What he's doing is like a salvage operation," says Rob Mier, the mayor's assistant for development. "It's like going to a secondhand shop and finding a beautiful tuxedo that was worn three times. Because it's secondhand, it costs $100 instead of $300. That's really the essence. Because these buildings were discarded, they were reacquired cheaply and the new owner can put them on the market at a low price."
The great exodus that depleted Chicago's industrial community began in the late 50s and early 60s. The primary reasons included the city's high labor costs and the lure of suburban amenities.
"The biggest thing is labor, it's so much cheaper to do business in the south," says Lappin. "These businesses say, hey, why should I bother with the unions. I'll go south, where they'll work for next to nothing compared to up here.
"A lot of others who moved just don't want the city, they want the suburbs. They want this big complex, with a pond and ducks and grass everywhere you look. Drive through the suburbs, you'll see these industrial parks--they look like college campuses. That's the big thing. It's still going on. Out in Lake County, they're plowing over cornfields, pushing out to the Wisconsin border.
"It's all to satisfy what we call the first-tier market. That's a real estate term. From a user point of view, you're first tier if you're paying top dollar. You're paying for new construction, landscaping, water features, the glorious parkland. It's an image thing. The consumer drives up and sees it all, and he says, 'Ah, this is a successful company.' The stockholder feels better about his investment. And from the employee's point of view, as long as he has parking, it's a more enjoyable environment to work in."
The migration took thousands of well-paying manufacturing jobs out of the city. "In 1970, Chicago had about 9,000 factories employing 450,000 people," according to a recent article in the Tribune by Donald Haider, a professor at Northwestern's Kellogg business school. But "in 1987 it had 5,000 factories employing fewer than 200,000 workers. Manufacturing employment dropped from 34 percent of the city's total employment to 23 percent."
The city's industrial base had bottomed out, and it was time for enterprising scavengers to take over. "It was the same way in the northeast," says Lappin. "My dad had a manufacturing business, and in the early 60s he needed to expand. He took a look at the old Pequot Mills, it was a textile factory with over 1.5 million square feet of property. My dad only needed 300,000 feet, so he subdivided the rest and rented it to others. He had it leased in no time. Thus was spawned the idea that you can find a niche for those renters who don't want a first-tier product."
A few years later the family sold its manufacturing business, and Lappin's father, Robert, moved into industrial real estate full-time. In 1977, Andrew was dispatched to establish a base in Chicago. His first project here was the conversion of a former Carson Pirie Scott warehouse in Pilsen. That venture, however, was not as difficult as the Sunbeam effort.
"That factory was sitting there, generating no revenue and creating no jobs," says Danny Davis, alderman of the 29th Ward, where the plant is located. "This is an area that needs jobs. It was a situation begging for something to happen."
"Sunbeam had its small appliance division here," says Lappin. "At its peak, they employed about 7,000 people. In the early 60s it dropped off. They had split their operation in two and had moved one part to Louisiana and the other to South Carolina. They closed the plant in 1981."
For a time, some developers talked of turning it into a shopping mall, but the money wasn't there. In 1985, Lappin made his first visit. "I liked what I saw," he says. "It was accessible. We're near public transportation and every highway. That's still Chicago's strong point: location, accessibility to customers, supplies, and labor. For all the talk of big industrial parks, the suburbs like Lake County couldn't make it without the labor supply in Waukegan, North Chicago, and now, with the closing of Chrysler, Kenosha. If you don't have a labor force--and I'm talking five- or six-dollar-an-hour people--you wouldn't see Lake County booming.
"To make this deal work, though, I needed a break on taxes. The taxes here can kill you. I can do a 60,000-square-foot brand-new building in Lake County, and the taxes are 80 cents a foot. In Chicago, they're two dollars."
So, Lappin applied for a tax break--a laborious trek that brought him face to face with city and county officials. "The county taxes industrial property at 40 percent of its assessed value. They'll knock that down to 16 percent if, like us, you're investing in an economically distressed area. Before the assessor will do that, you need City Council approval.
"So, I go to the City Council. Well, my alderman is Danny Davis. And let me tell you, I love Dan. This is a man of vision. He ought to be the next mayor. But at the time, what do I know about Danny Davis? From what I read in the papers, you know, I thought he was the next Eldridge Cleaver.
"So I go to him, and he says, 'Andy, fine, no problem. Call me anytime. You have my support.' Okay, but this is 1985, in the middle of council wars. Bernie Hansen's in charge of the council committee that has to approve my request, and Hansen's a member of the 29. So right away I worry, I'm gonna have trouble from the administration.
"Hansen tells me, 'I think it's a great project, it has my stamp of approval.' So, we're sitting on the council floor, waiting for the committee to vote, and the phone rings. It's the mayor's office, and the word comes down that there's a problem. Danny says, 'Don't worry, I'm with you on this.' He talks to the fellows upstairs and then says, 'I just got the word. The problem is first source.'
"First source means that you have to hire Chicago residents first. I can't believe it. I say, 'First source. Are you kidding me? Every Monday morning there's a line of people standing out the door waiting to sign up to work.' I mean, that's the beauty of this location--it's got a labor pool. I want to hire from this community. I work with all the community groups on hiring. That's why this project is a go. And they're talking first source."
Lappin got his tax break, as well as an Industrial Revenue Bond, arranged by the state Department of Commerce and Community Affairs, and then moved to the next phase: renovation and rental.
"This place looked like a bomb hit it," says Lappin. "We had to dismantle, cut, cart, haul, you name it, all this equipment out of here. We hired the graduating class from Airco Technical Institute. We were up to 125 people working here, with 60 cutters, 10 hours a day, six days a week. We hauled $100,000 worth of debris. That's over 500 Dumpsters."
Finding tenants, however, proved to be a more daunting task. "The first thing you have to deal with is perception," says Lappin. "This is the west side, so right away people are afraid of crime. Now, we don't have a crime problem here. We have a fence-enclosed parking lot with spaces for over 1,000 cars. But if people don't come here, they don't know that. The key is to get them out here, so they can see for themselves.
"You know, I never lock my car door. Never. I have an '88 Saab convertible. It's brand-new. The doors are unlocked. If you walk down to my car, and you open the door, you'll say, 'Hey, it's not locked.' And I say, 'I know, I never lock it.' And what does that say? That's a statement. I'm saying, 'Hey, it's safe here. I feel secure.'"
After safety, the primary selling point is rent. "Once we got the lower assessment, we were in business," says Lappin. "Our gross rent includes real estate taxes, so we can knock the rent down to about $2.75 to $3 a square foot. That's very competitive. Our first tenant is E.J. McKernan. They buy aerosol cans on a secondary market, remove the paint, and then resell them. They come from Melrose Park. We knew their lease was coming up, so we went after them.
"The next tenant was Midwest Stationers, an office supply warehouse that was located on the north side. They were days away from signing a new lease agreement in the suburbs. A broker brought them over here. They looked at the place and said no way. We start talking, and I can see, they're warming up.
"We wind up talking to the president of the company in New York City. I remember we were basically begging him to sign the lease. The numbers carry themselves. But right until the last minute, he says, 'What the hell are we doing? If [McKernan] leaves, we're all alone.' So, he wants me to put in the lease that if in two years I don't have more tenants, he can leave.
"I said, 'No. I can't do that.' I need more stability than that when I go out for other tenants. I said, 'I'm coming out to New York tonight, and you're signing the lease.' He said, 'I don't like ultimatums.' But we went out to dinner, and he signed. And he saved $80,000 a year on 40,000 feet."
Lappin is proud of the outcome of that transaction.
"To some companies, the suburban location is meaningful. There was one company--publicly owned, I should add--and we could have saved them a quarter of a million dollars in rent over three years. After months of deliberation, [their chief executive] said no. I said, 'Don't tell me you talked to your board of directors.' He mumbled something back. He was gonna lose all that money just to stay in the suburbs.
"You see, I want everyone to know that it's great out here, that the city's not dead. We have great relations with the community. Listen, Danny Davis invited me to his annual dinner. I bought a whole table. It was fantastic. Here we are, a table full of white people, and everybody rises and sings the black national anthem. It was wild.
"But, you know, Lu Palmer, he was the master of ceremonies, called me up and gave me an award for community service. And then he asked me to say a few words. I wasn't expecting that. I was touched. It's gratifying to take something that was raped and left for dead and watch it come back to a productive and profitable use. It's nice to know that we're not just stomping into a cornfield out in Lake County, and plopping down a building. We know that we've gone against the grain, we're swimming against the prevailing tide. We know that we've made a difference."
Art accompanying story in printed newspaper (not available in this archive): photo/Bruce Powell.