Office Depot loss
“It’s déjà vu all over again,” Steven Abrams said Wednesday morning. As it turned out, he was premature.
Abrams was speaking after confirmation came that No. 1 office-product retailer Staples wants to buy No. 2 office-product retailer Office Depot, based in northwest Boca Raton. He was anticipating another campaign by the city and Palm Beach County to keep the headquarters of the Fortune 500 company here.
Wednesday afternoon, though, Staples CEO Ron Sargent said that if federal regulators approve the move, the headquarters would be in Staples’ hometown of Framingham, Mass., a Boston exurb. The company would consider keeping “a presence” in Boca Raton.
In 2013, Office Depot merged with then-No. 3 office-product retailer Office Max, which was based in Naperville, Ill., a Chicago exurb. That merger prompted a campaign by Boca Raton and Palm Beach County to land the headquarters of the combined company. The county and the city won, but everyone knew that the move to Boca might not be permanent.
Just months after new Office Depot CEO Roland Smith arrived, talk began of a Staples-Office Depot deal. The Office Depot-Office Max merger had been a deal for survival, given the competition from Amazon and discount brick-and-mortar retailers. Staples might have been No. 1, but its profit rose last fall only because the company was closing about 200 stores. Office Depot had announced that it would close 250. Estimates are that Staples would save $1 billion a year in costs from the merger.
So now Boca Raton faces a loss of the city’s largest private employer, which will be a blow to the city’s image as a business hub but hardly a fatal one, because the city didn’t do anything wrong. The key factors were beyond the city’s control.
Unlike the last time, the city was at a disadvantage because the dynamics are different. Last time, Office Depot was the larger company. This time, Staples is the larger company and the prospective buyer. The default position would be to stay in Framingham. (Footnote: Staples is in Framingham because the company started as a venture of Boston-based Bain Capital, which Mitt Romney once led. In 2012, Romney cited Staples as a success story from his days as a private equity guy.)
Staples’ decision, though, undercuts the theory advanced regularly by Gov. Rick Scott that Florida’s tax structure will make out-of-state companies “buy a one-way ticket” to the state. Florida has a lower corporate tax rate than Massachusetts and no personal income tax. Office Depot’s 210,000-square foot Boca complex is newer and carries less debt than Staples’ complex in Massachusetts. And that still wasn’t enough.
The area’s courtship of Office Depot goes back more than two decades. Incentives helped persuade the company to move into new headquarters on Congress Avenue in Delray Beach. About 15 years later, the company talked about moving, and incentives kept Office Depot and installed the company in its current location near the intersection of North Military Trail and Clint Moore Road.
The latest deal helped retain Office Depot after the Office Max merger. It included $1.5 million from Boca Raton’s business recruitment and retention fund, based on Office Depot keeping 2,010 jobs and adding 548. Mayor Susan Haynie told me Tuesday that the first payment was due on March 31. Each year’s payment was to have been based on numbers from the previous year.
Office Depot hasn’t isolated itself. Haynie said Smith had her and City Manager Leif Ahnell to lunch just after he started. Abrams said the company’s general counsel gave him a heads-up about the merger. Realistically, though, the big player has been the Starboard Value investment fund, which has stakes in both companies and pushed Office Depot toward the Office Max merger before pushing Staples and Office Depot toward this one.
The Federal Trade Commission must approve the latest merger. Staples and Office Depot tried to combine in 1997, but regulators didn’t go along. Conditions, though, have changed—especially the competition from online retailers. Even if the FTC said no, the future of Office Depot in Boca Raton would be iffy.
You feel most for employees of the two companies, especially those who moved from Illinois to Boca and now face either another long move or the loss of a job. Boca will be OK. The city survived the loss of far more jobs when IBM moved, leaving just a “presence.”
But Office Depot’s headquarters near North Military Trail and Clint Moore Road soon could be as empty as Office Depot’s old headquarters on Congress Avenue in Delray Beach. Chasing companies with performance-based incentives can be part of a business plan, but the most important part of the plan should be to make Boca Raton and the county a place where businesses start and grow, not just where they move, and maybe stay.
Newer (and smaller) Mizner on the Green
I had been hearing for some time that the developers of New Mizner on the Green—the mega-condo project in Boca Raton—were downsizing. This week, there is confirmation of a Newer New Mizner on the Green.
A representative of a public relations firm that is working with the developer, Elad Properties, told me Wednesday that the project is “getting smaller.” The original proposal was for four towers that would average slightly more than 300 feet in height. There are as yet no details and no new design, the representative said.
Elad submitted its drawings last summer, but the city hasn’t acted because developers envision the project for an area—east of Mizner Boulevard near Royal Palm Place—where the height limit is 100 feet. For the city council to consider the original version, a council member would have to propose a planning amendment. No one has.
It had become clear that the first version, which would replace the Mizner on the Green rental complex, wouldn’t happen. Elad will reveal its new plan as a new council takes office. The question is whether the new plan will be different enough to make the council take a new attitude.
Delray’s trash finally put out
After almost seven hours of presentations and discussion Wednesday, the Delray Beach City Commission decided to seek a new trash hauler.
The commission voted 3-1 to rank Southern Waste Systems first among the five bidders and negotiate a contract. The decision overturned the ranking of an appointed selection committee to put Waste Management first, even though Southern Waste Systems was the low bidder. Mayor Cary Glickstein and Commissioners Jordana Jarjura and Shelly Petrolia favored Southern Waste Systems. Adam Frankel favored Waste Management. Al Jacquet again was absent for another big decision.
I will have much more about this in Tuesday’s post.
Land regs fly
At Tuesday’s meeting, the Delray Beach City Commission approved the proposed Land Development Regulations for the Central Business District. The vote was unanimous.
The commission is set to take a second and final vote on Feb. 24. There seems to be reason to think that the proposal wouldn’t pass again, though Commissioner Al Jacquet made a point to say that he was voting yes on first reading, which could mean that he still has questions.
Delray being Delray, and development being the issue that it is, there could be some maneuvering over the next three weeks by those whom the changes would directly affect. As Planning and Zoning Director Dana Little said before the vote, though, he was impressed by how little criticism he heard from residents about the proposed new rules – and residents are the ones most affected.
The Palm Beach campaign tab
If everything supposedly is more expensive in Palm Beach, that also applies to local elections.
On Tuesday, the town had three scheduled elections. Mayor Gail Coniglio was reelected without opposition. The four candidates in the two contested town council races raised almost a combined $1 million.
Michael Scharf topped them all, raising nearly $360,000. He lost to incumbent Michael Pucillo, who raised “just” $155,000. In the other race, challenger Danielle Hickox Moore raised almost $240,000. She beat incumbent Bill Diamond, who raised nearly $200,000.
Turnout? Thirty-six hundred voters.
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You can email Randy Schultz at randy@bocamag.com
For more City Watch blogs, click here.About the Author
Randy Schultz was born in Hartford, Conn., and graduated from the University of Tennessee in 1974. He has lived in South Florida since then, and in Boca Raton since 1985. Schultz spent nearly 40 years in daily journalism at the Miami Herald and Palm Beach Post, most recently as editorial page editor at the Post. His wife, Shelley, is director of The Learning Network at Pine Crest School. His son, an attorney, and daughter-in-law and three grandchildren also live in Boca Raton. His daughter is a veterinarian who lives in Baltimore.
