Proposed deal would require retail, restaurant development before self-storage at former Kmart in Rockford

By Kevin Haas
Rock River Current
Get our free e-newsletter

ROCKFORD — A proposed deal for the former Kmart at East State Street and Mulford Road would require developers to activate at least two retail or restaurant spaces before moving forward with a self-storage business inside the vacant retail space.

Developers would also have to front the city $150,000 as collateral. That money would go into an escrow account that they would forfeit if they’re unable to develop the lots in front of the old Kmart, 5909 E. State St.

Related development: Here’s what’s planned for part of the old Kmart on Sandy Hollow Road in Rockford

On Monday, a City Council panel decided those requirements weren’t enough to earn its support. The full City Council won’t make its decision until at least June 17 after a final vote was delayed Monday night.

U-Haul, which owns the property, wants to bring 60,000 square feet of climate controlled self storage to the former Kmart site. An additional 35,000 square feet of the retail space would be converted to climate controlled pod-style storage, called U-Box, where customers fill a portable storage unit for safekeeping in the space.

They’re working with developer Orput Companies, which also owns and operates Edgebrook Shopping Center among other developments, to bring new business to a shuttered KFC on the site and to build three new properties for retail or restaurants.

U-Haul purchased the property after Kmart closed in September 2018. It was one of 120 Kmarts the company purchased across the country with plans for self-storage use.

But the area isn’t zoned to allow for self-storage. The redevelopment deal is pitched as a compromise to give the city what it wants with new retail development while allowing U-Haul to create the self-storage business it wants.

“I saw this opportunity, being a Rockford resident, as a way to revitalize this corner,” Greg Orput, president and CEO of Orput Companies, said during Monday’s committee meeting. “We’ve had great interest in the retail on the site. We’ve worked diligently with the city to try to make this a positive between the city of Rockford who doesn’t want self storage (and) with U-Haul who does want self storage.”

If City Council doesn’t approve the redevelopment deal, Orput said the property will likely sit vacant.

“That is not any kind of a threat, I don’t want it to be perceived as that,” Orput said at the meeting. “We’ll drop out of it and the property will sit. They’re not going to sell it and backfill it. They’re not developers.”

Orput was questioned by City Council members Monday about the need for self-storage and why U-Haul waited six years before bringing its proposal forward. Previously, Alderman Mark Bonne had echoed an opponent to the development’s comments suggesting that U-Haul was intentionally letting the property sit vacant in order to “inspire desperation on the council to approve this.”

“That couldn’t be anything further from the truth,” Orput said. “U-Haul is the second-largest operator of self-storage; they’re the largest truck rental industry in the United States. … They do not do real-estate development. …

“Was there a lack of activity, yes, but it was from nothing more than being a giant multinational company.”

More business: Lawsuit claims Beef-a-Roo owes a half-million dollars in unpaid rent. Here’s how the company responds

Orput said U-Haul’s analysis showed there is a need for self-storage because there isn’t a climate-controlled option within a 3-mile radius of the site.

“There is a need in the market, as much as it has been represented that there is not a need,” Orput said.

He said there has been interest from potential restaurant and retail tenants in the former KFC, which closed in late 2018, as well as in the other three future properties Orput would build.

U-Haul would deed the lots in front of Kmart to Orput Companies, which would be responsible for that portion of the development. Orput would also be responsible for fronting the $150,000 in an escrow account.

The proposed redevelopment deal requires Orput Companies to meet several milestones before permits are issued for the self-storage facility. Those milestones: securing a lease for a national user of the existing shuttered KFC and develop or sell at least one additional lot along East State.

“It is something we feel supremely confident we’ll be able to call back from escrow within the first two and a half years,” Orput said.

The developer would also be required to install landscaping to obscure the sight of U-Haul trucks from Mulford Road, and a green space would be built in the center of the Kmart lot to help curtail stormwater runoff and flooding.

More business: Rooted picked this venture to expand its North End Rockford business

What’s next

The City Council’s Planning & Development Committee voted against a redevelopment deal Monday in a voice vote. Alderman Bill Rose voted in favor of the deal.

It had been the city’s intention to bring that deal forward a week ago, but the proposal wasn’t ready in time for a separate committee-level vote on a special-use permit. In that vote, made by the Code & Regulation Committee on May 28, aldermen voted 3-1 against permitting the self-storage facility.

Both matters were delayed from a final vote Monday night. Per City Council rules, the first time a matter appears before the full City Council it can be delayed at the request of just two of the 14 aldermen.

Both the proposed redevelopment agreement and the special-use permit vote will be back before the council on June 17.

“While not perfect, State and Mulford will never look the same from the standpoint of the level of landscaping and the life that’s going to be on the corner once we get finished with it,” Orput said.

This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on X at @KevinMHaas or Instagram @thekevinhaas and Threads @thekevinhaas