Fila USA, lashed by falling sales and fickle consumers, has sold its Sparks headquarters and 120 acres of surrounding land to a Baltimore real estate developer who intends to construct a $100 million office and industrial park there.
The roughly $14 million sale to P. Fred'k Obrecht & Son represents the latest move by the athletic sportswear company to revive itself in the face of declining sales.
As part of the sale, Fila will remain in its three-story headquarters through 2004, with options to stay until 2014. Its lease with Obrecht will cost the company roughly $6.75 million over the next five years.
"This gives us flexibility, opens up our credit line to devote resources to product development, upside in future development and the ability to lease space to bring in revenue," said Jon Epstein, Fila USA's chief executive officer.
Roughly 30 percent of Fila's 90,000-square-foot headquarters is not being used and may be subleased, Epstein said. Fully rented, the space could generate about $450,000 a year for Fila.
The company also is to receive proceeds from any land sales or development, although Epstein said he did not know exact percentages that the company would derive. Obrecht could develop as much as 800,000 square feet of office space on the site, said Marty Storck, Obrecht's director of construction, although it is expected that the actual development will contain much less space.
Development is tentatively scheduled to begin in the third quarter of this year.
"This agreement will allow us to develop an extraordinary parcel of commercial property, and will serve to enhance the economic viability of Fila as well as Baltimore County," said Thomas Obrecht, a P. Fred'k Obrecht & Son principal. "It's a great opportunity for us."
Fila acquired its Sparks headquarters and adjacent land for $11.5 million in December 1995, and spent about $2.5 million to renovate the former Farm Credit Bank building. "For those companies that want to own their own building, the park will be ideal, because you just can't find suitable land out there," said John Childs, a senior vice president at commercial real estate firm Casey & Associates Inc.
The sale of its headquarters marks the latest Fila move to cut costs and improve profitability in response to widening losses. In November, Fila eliminated 68 sales employees to cut costs and turned its sales effort over to independent contractors. That move came on the heels of layoffs of more than 250 employees and the closing of stores from New York to San Francisco.
Epstein said the company also intends to retain Ryder Corp. to take over its distribution operations in the near future.
Those moves come in response to a fourth-quarter loss of $2.18 per American depositary receipt, as compared with a loss of $1.17 a year ago. By comparison, in the final quarter of 1996 Fila earned 68 cents per American depositary receipt.
Pub Date: 3/05/99