Gap offers $18 million for Joppa HQ Merry-Go-Round complex still might go to a higher bidder

3 others seek to buy

Trendy clothing chain has distribution center in Edgewood

June 06, 1996|By Alec Matthew Klein and Kevin L. McQuaid | Alec Matthew Klein and Kevin L. McQuaid,SUN STAFF

Gap Inc., the trendy national retailer, has agreed to pay $18.5 million to buy the last great symbol of the once-funky Merry-Go-Round empire -- the defunct retailer's sprawling 1 million-square-foot headquarters in Joppa.

"It is official. I did accept the proposal from the Gap," Deborah Hunt Devan, the court-appointed trustee overseeing the bankrupt company, said yesterday.

But it's not quite settled. Devan can accept another offer -- if it's a higher bid for the chain's home base.

Under bankruptcy rules, Gap is considered the "stalking horse," which means it has established the floor for bidding. Other potential buyers would have to top Gap's bid to buy the Merry-Go-Round complex, an 800,000-square-foot warehouse and about 200,000 square feet of office space.

A hearing in U.S. Bankruptcy Court likely will be set in the next several weeks to approve the offer or hold an auction if other bidders surface. Either way, Harford County is certain to reap the benefits -- potentially hundreds of jobs and millions in tax revenue.

Merry-Go-Round creditors also could see some dividend from the sale, but only after an estimated $14 million mortgage is paid off.

"This is the first we've heard of it," county spokesman George F. Harrison said of the Gap proposal.

But he added, "It's very important to the county. It was of great concern to the county when Merry-Go-Round went out of business."

Although the retailer's headquarters was appraised last year at about $30 million, local commercial real estate experts have said its true value is much less because of the building's office space -- situated in a market with few large office users.

But at least three other potential bidders have come forward, sources said.

Constellation Real Estate Group, a Columbia developer, offered $16 million for the building last month, and two other potential bidders -- as yet unidentified -- have expressed serious interest.

Gap apparently wants to buy the Merry-Go-Round complex for a distribution center, but the company yesterday would acknowledge only that it is considering the acquisition.

"We're looking at adding that building to complement our existing facility as a way to accommodate future growth," said Gap spokesman Warren R. Hashagen.

In 1988, the San Francisco-based apparel chain built a state-of-the-art distribution center in Edgewood, about three miles from the Merry-Go-Round complex.

The Edgewood facility alone gives Gap enormous space -- 750,000 square feet -- with expansion potential up to 2 million square feet.

The nearby Merry-Go-Round complex offers not only more space for Gap's rapid expansion, but also gives it 26 miles of specialized conveyor equipment, once worth $34 million. The sale includes the conveyor and heavy-duty shelving in the warehouse.

Gap is already taking advantage of Merry-Go-Round's demise. Sharing a common clothing customer -- the teen-ager -- Gap has picked up market share in Merry-Go-Round's absence.

Gap, which also operates Banana Republic, GapKids and Old Navy, recently reported record net income of $81.6 million in the first quarter, a 63 percent increase from a year earlier on sales of $1.1 billion.

The retailer, which opened 225 stores last fiscal year, plans to spend $350 million in 1996 to add another 200 to its nationwide tally of 1,718 stores.

Pub Date: 6/06/96

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