For sale: Borders corporate headquarters in south Ann Arbor listed for $18.349 million
File photo | AnnArbor.com
File photo
For sale: “Ideal high-image corporate facility” in Ann Arbor, according to marketing materials.
The price: $18.349 million. The size: about 460,000 square feet.
The tenant: Borders Inc.
It’s a quiet listing - so quiet that building owner Agree Realty Inc. didn’t return phone calls asking about the listing. Local commercial real estate insiders say many local brokers have signed confidentiality agreements to gain access to information.
That's because the listing may dial up speculation about the future of the bookseller, which once filled the building, but - as layoffs continue - now employs an estimated 600 people in the headquarters.
The property is located at 100 Phoenix Drive, just south of I-94 and east of South State. It’s in Ann Arbor, near the city’s southern border.
It’s not the first corporate headquarters to hit the market in recent years. The former Flint Ink building in Ann Arbor Township, for example, was sold this year to Masco Cabinetry for a division headquarters.
It’s also not the first high-profile building near State and I-94 to hit the market this year: The 777 Building at State and Eisenhower - which totals 410,000 square feet in two buildings- sold earlier this year, too.
But the combination of several factors makes it interesting on the real estate front:
• It’s one of the largest buildings in Ann Arbor. It’s more than three times the size of the Masco building, for example, and just less than half the size of Domino’s Farms.
• Even at that size, the purchase price of $40 per square foot pushes it into the bargain realm. The 777 Building sold for $159 per square foot. Part of that may be condition - 100 Phoenix Dr. was renovated in 1998. Part of it also could be the difficulty of repositioning the space in today’s market because a user of that size is hard to find. And Borders no longer needs all of the space and has had some of it up for sublease.
On the other end of the spectrum, the Masco building - which had no tenants and was purchased by an owner-occupant - sold for $23 per square foot.
• There’s an existing corporate tenant in the building, with a remaining 12 years on the lease (plus options to extend the deal, it appears). The quality and duration of the lease should be dictating much of the list price. By comparison, the recent sale of the 777 building for $65.2 million means that building (and the quality and duration of its leases) was worth 3.5 times the Borders building. It’s not an equal example, but it does come close as a “comp" for a large building that isn't owner-occupied.
Aside from the building, changes continue at Borders. The company recently realigned some corporate staff as ownership and leadership attempts to stabilize. It's also setting up a holiday strategy that includes a broader range of non-book merchandise. Electronic books and devices also play a role in its announces repositioning strategy.
Real estate-wise, the company announced in May that it would “aggressively pursue lease buyouts” at underperforming stores. Its annual lease obligations for its entire real estate footprint is about $500 million per year.
Of that amount, about $9.26 million goes to Agree Realty, the publicly held real estate company based in Farmington Hills that not only holds store leases, but also owns the Borders headquarters. According to its filings, 27 percent of Agree’s $34 million in rental income comes from 17 leases to Borders.
Local real estate experts are saying that the listing of the Borders headquarters appears to be a step toward diversifying a real estate portfolio that’s heavy on three major tenants. The other two are Walgreens, with 28 stores; and Kmart, with 12 properties.
The building was purchased by Agree’s Phoenix Drive LLC in July 1996 for $7,965,396, according to city records. It’s now assessed at $14,566,500 - giving it an estimated market value of about $29 million.
While Agree takes a stab at diversifying its portfolio, the city also will have a stake in the outcome of the listing. At its current valuation, the property generated $818,456 in property taxes in 2009.
Paula Gardner is Business News Director of AnnArbor.com. Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.
Comments
Rumpleshirtskin
Fri, Oct 8, 2010 : 11:33 a.m.
@Paula Gardner, Did you contact Borders to ask if they were moving?
EmDubs
Fri, Oct 8, 2010 : 7:36 a.m.
Ok everyone... settle down. The building is not owned by Borders. They lease the space. The selling of the building is from another company that owns the building and Borders has the lease rights for the building even after it is sold to another company. Now... let's take a breath and relax. It's funny when there is a positve story on Borders there is hardly any comments. I guess we live in a world where bad news sells for the media.
McCann
Thu, Oct 7, 2010 : 3:24 p.m.
@stunhisf "Are you telling us that Panera Bread,Applebees,Macaroni Grill,Olive Garden and others held a gun to the folks living in A2 and forced them to buy from their McCorporations?" No. "One thing for certain is you know what you are getting when you go to a chain." You said it. @record Mogul Sorry, and SALUTE! I didn't mean to start a turf war. All
johnnya2
Wed, Oct 6, 2010 : 12:33 a.m.
@eyeheart So you take the most expensive place for pizza in A2 and compare it to Ypsi. Wow, I guess that means you are so spot on. Sava has dollar burger nights, as does Bar Louie. Pizza is available at Packard Pub AND Frasers for much cheaper. Parking in Depot Town at certain times can be a challenge when it is busy in Ypsi. I suppose if price is your only concern, there are places all over the world cheaper.
stunhsif
Tue, Oct 5, 2010 : 8:08 p.m.
What is happening to Borders is very sad but "progress happens" and those that don't change or adapt go bye bye. As for @McCann, "I too long for the days of School Kids, Wazoo, Second Chance and Dooley's, but Mcorporatization of A2 happened because people let it." Are you telling us that Panera Bread,Applebees,Macaroni Grill,Olive Garden and others held a gun to the folks living in A2 and forced them to buy from their McCorporations? Ridiculous of course! Panera Bread is every bit as good as Zingerman's and far less expensive. One thing for certain is you know what you are getting when you go to a chain. I will agree with EyeHeartA2 in that Ypsi holds the best bang for the buck with free parking. I've been going to Sidetrack for 30 years and love Pub 13 and Aubree's. I quit A2 back when the City Council started getting into other people's business more than they did taking care of their own business. I have several friends who work for Border's so I hope they find some way to make it. As for selling the property good luck, you'll need it. Hopefully the U-M doesn't buy it as it would take another property off the tax roll.
record mogul
Tue, Oct 5, 2010 : 4:24 p.m.
Since the question has been raised by readers, I'm happy to report Wazoo Records is very much alive and well!! We have been in town since 1974 serving several generations of record buyers,right across form the old Borders on State Street.
Macabre Sunset
Tue, Oct 5, 2010 : 3:50 p.m.
Borders was a destination in the original State St. location. Now it's just another overpriced competitor for Amazon. Somehow, I don't think Build-a-Bear is the answer. Unless they want to rebrand themselves as Chuckie Cheese light. If they want to fill the place with children, provide some thick walls so it's still useful for those of us who like books. What keeps me out of Borders, even when I'm out and wouldn't mind looking for a quick read? 1) I have no access to independent book reviews, like I do when I'm on Amazon. 2) So many of the books are on shelves I can't reach. Yes, square footage is precious. But I do not want to have to crawl on my knees or find a ladder just to browse. 3) I'm not sure they're still hiring clerks who like books. I have no confidence my questions can be answered by anything other than blank stares.
Lokalisierung
Tue, Oct 5, 2010 : 2:13 p.m.
"Yep, for a night out on the town, Ypsi is fun and half the price of AA." I agree with your love for Ypsi don't get me wrong, but I'm a little lost to where the "half price" comes from. If it's just to do with parking, that's kind of a hard comparison because of the size of the areas we're talking about.
Lokalisierung
Tue, Oct 5, 2010 : 2:09 p.m.
"I too long for the days of School Kids, Wazoo," Is Wazoo gone? "Here's what might work: a bookstore with a lot of books. Less stationery. Fewer gadgets. More books and fewer CDs, DVDs, and Wimpy Kid t-shirts." Here's why that doesn't work. The borders downtown is massive, and I'm sure the rent is just as massive. How many book can you actually sell to people? Quite a lot in this town, which is why there are so mnay bookstores, but that measn more compitition. I don't buy books, but at a time I bought DVDs and CDs. Of course now I don't buy CDs because I can download them, cds are pointless now. DVDs are next to be phased for alot of people. Which just leaves books.
McCann
Tue, Oct 5, 2010 : 12:59 p.m.
@EyeHeartA2: I too long for the days of School Kids, Wazoo, Second Chance and Dooley's, but Mcorporatization of A2 happened because people let it. Why anyone would eat a chain restaurant in a town with so many unique offerings like A2 is beyond me. It was "quirky" because the people were. Most of those types have moved on due largely to the cost of living, many relocating to Yipsi, Ferndale and -hard to believe but true- Detroit proper. On a side note, Barnes and Noble has problems of their own, the Riggio's are just more adept at manipulating their stock price and the media.
Somewhat Concerned
Tue, Oct 5, 2010 : 12:03 p.m.
Here's what might work: a bookstore with a lot of books. Less stationery. Fewer gadgets. More books and fewer CDs, DVDs, and Wimpy Kid t-shirts. Less music blaring from the ceiling that is picked by the store employee with the weirdest, most esoteric taste, and more silence or music recognizable by at least two other people not from the Planet Zork. You have to root for a hometown company. Unfortunately, this company seems to thrash around trying one thing after another, where none of those things is "be a well-stocked, pleasant bookstore."
Killroy
Tue, Oct 5, 2010 : 11:52 a.m.
@ EyeHeartA2, gosh, I remember those days as well. When I was kid, Border's on State Street was the ultimate destination. :)
Paula Gardner
Tue, Oct 5, 2010 : 11:27 a.m.
@imsteved, The only reason for AnnArbor.com to cover Agree (which is based on Oakland County) is to report on changes regarding its Ann Arbor portfolio or Ann Arbor-based tenants. I'd welcome a chance to talk to them about their intent when it comes to listing the Borders HQ, but they didn't return calls (They also didn't return previous calls about the westside Walgreens they also developed.) However, if any readers have information on whether this seeming diversification regarding Borders affects other Agree properties with Borders as the tenant, you can email me directly by following the link at the end of the story. @McCann, A bankruptcy could open all of those leases, ala Blockbuster's reorganization. I also don't have information on whether there are buy-out clauses in the lease.
Woman in Ypsilanti
Tue, Oct 5, 2010 : 11:25 a.m.
I just hope that when Borders goes under, some quirky independent store will fill the niche for a large downtown bookstore.
McCann
Tue, Oct 5, 2010 : 11:04 a.m.
Borders Group has a long-term lease with Agree Realty that guarantees occupancy -even if the building is sold- for the next ten years or more.
imsteved
Tue, Oct 5, 2010 : 10:36 a.m.
*sigh* I'm glad to see annarbor.com is carrying on the News' tradition when it comes to reporting on Borders. Dig deep, deep into the article (if you care to move past the headline) and you'll get to the gist: "...the listing of the Borders headquarters appears to be a step toward diversifying a real estate portfolio thats heavy on three major tenants." What should have been an article about about Agree and the impact on the current tenant becomes another "Borders is going out of business story."
glimmertwin
Tue, Oct 5, 2010 : 9:23 a.m.
It appears the love affair between Ann Arbor and Borders is nearing its end. Very unfortunate. I don't see this company being around much longer. Question is, who will purchase the scraps?
Edie64
Tue, Oct 5, 2010 : 9:15 a.m.
I think Borders is bracing for an eventual liquidation. If you only knew the train wreck that is Borders these days.
Rumpleshirtskin
Tue, Oct 5, 2010 : 9 a.m.
You know what's as quiet as the listing? It's that there no call out that Borders still resides at the same address. You almost get the impression from the headline and most of the article that Borders Headquarters is moving. There are lines that allude to it but no mention of it. I think that would be an obvious question when reading this article.
Rumpleshirtskin
Tue, Oct 5, 2010 : 8:42 a.m.
They're selling half of the facilities, not both buildings.
Killroy
Tue, Oct 5, 2010 : 7:37 a.m.
Good-bye! Darwinism at its finest. UM probably won't buy the complex because they just bought Pfizer. No wonder Ron Marshall, who received $805,744 in 2009, is smiling from ear to ear.
salineguy
Tue, Oct 5, 2010 : 6:21 a.m.
U-M will buy it, not pay taxes. Same Story Different Day. Next.
racerx
Tue, Oct 5, 2010 : 6:07 a.m.
Let the liquidation begin! Maybe when they are having their going out of business sale, I can finally go in the store and buy a twenty year old CD at the I-tunes price of $1 per song and not the as listed price of $30!