Surely, the sale of Borders' Ann Arbor, Mich., headquarters for almost $18.4 million adds to the persistent rumors of the company's imminent demise. But the truth is more complicated: Borders' financial health is certainly a factor, but the corporate HQ sale is more about the intentions of the building's owner, Agree Realty.
No Impact on Borders
According to AnnArbor.com, the 460,000-square-foot building, which Agree Realty bought in 1996 for nearly $8 million, is one of the largest in the city. That's far more space than Borders needs, having whittled its corporate staff down to approximately 600 employees (an absolute headcount is hard to obtain). Borders has even begun to sublease vacant office space, even as it currently pays about $9.26 million of its annual $500 million in lease obligations to Agree Realty.
Borders spokeswoman Mary Davis confirmed the sale in a statement to DailyFinance, but clarified that the bookseller's long-term lease doesn't expire for another 12 years and "will not be affected" by a potential sale. "In commercial real estate," she notes, "it's common for leased buildings to seamlessly change ownership without tenants or their already-agreed-upon lease terms being impacted."
Local real estate experts told AnnArbor.com that putting the building on the block "appears to be a step toward diversifying a real estate portfolio that's heavy on three major tenants" -- Borders, Walgreens (WAG) with 28 stores, and Kmart (SHLD) with 12. Apparently, Agree Realty wants to reduce its exposure with the bookseller. By putting Borders' HQ up for sale, Agree Realty is signaling that it must put its own future ahead of its tenants', and that some other company is better off owning the building that's home to a company that's busy cleaning up internal messes.