Deal on table for former Mikasa warehouse

The cash-poor owner of a high-profile warehouse that once handled imported china and tableware has set a place for the potential sale of its cavernous building.

The deal illustrates to an extreme degree the troubles plaguing the commercial real estate business by showing how a once-plum industrial property has lost tens of millions of dollars in perceived value in the grips of the longest recession since World War II.

American Commercial Inc., which sought bankruptcy protection last week, has arranged a sale to a Canadian apparel maker that's willing to pay $20 million for the vacant Mikasa Inc. distribution center on Clements Ferry Road.

That figure works out to $34.50 a square foot, less than half of what the owners had been seeking when they listed the property for $41.5 million two years ago.

The would-be buyer, Gildan Activewear Inc. of Montreal, is a "stalking horse," meaning the U.S. Bankruptcy Court and ACI will consider competing offers provided they beat the minimum in increments of at least $500,000.

Gildan is entitled to a $350,000 breakup fee if a rival bidder prevails.

An auction date has not been set.

Gildan spokeswoman Genevieve Gosselin said the importer of socks and T-shirts was drawn to the property because it is looking to expand its U.S. distribution network.

"We believe it is a good option for Gildan," she said Wednesday.

Gosselin said it's premature to comment about the number of jobs and other details since the company hasn't yet bought the building.

"It may or may not happen at this point," she said.

The distribution center was considered an economic development coup back in the day. Still reeling from the Navy base shutdown, the Charleston area was hungry for new jobs in 1996, and it scored big that year when officials plucked the Mikasa deal from the jaws of Savannah.

The company, then controlled by an affiliate of Millville, N.J.-based ACI, spared no expense on its elaborate, custom-built warehouse, which required a super-flat floor to ensure the highly sensitive automated equipment worked properly.

In all, the 580,000-square-foot building cost about $60 million when completed in 1997.

A decade later and under new ownership, Mikasa targeted the ACI-owned warehouse and adjoining retail store for closure. The stated reason was that the property was too expensive to keep open.

A court document outlining the terms of the Gildan deal shed some insight into ACI and Mikasa's thinking at the time.

In short, the distribution center was a costly lemon, with ACI executives determining "that there were several problems with the warehouse that were not reconcilable with their business" shortly after the structure was completed.

For unexplained reasons, the warehouse was designed to handle a different size and type of cargo pallet than what Mikasa and ACI used elsewhere.

"This caused labor costs to increase and more products to break ... when being shipped or packed," ACI said in its court filing.

Also, the company said it learned too late that "the warehouse was located well outside of the main trucking lanes, and, thus excess costs were generated in the shipping ... of products."

ACI blamed its bankruptcy on some costly litigation it is battling, noting that it has nearly six times as many assets as debts. It's seeking to unload the local warehouse because it is the company's largest and most liquid holding. The sale is expected to generate enough cash to pay creditors in full and fund the rest of the restructuring.

Also named as a debtor in the case is Mikasa's former majority owner at the time the warehouse was built: American Commercial I Inc., which no longer has any assets, according to the filing.

Mikasa has changed hands again since pulling out of Charleston. The business is now owned by New York-based Lifetime Brands Inc.

Reach John McDermott at 937-5572 or jmcdermott@postandcourier.com.