No Takers for Agere's 1.1M-SF Computer Chip Plant

Agere has been trying to sell the 17-year-old, 1.1 million-sf property on Orlando's south John Young Parkway since January. The company isn't disclosing an initial asking price.

But area industrial real estate brokers familiar with high-tech properties tell GlobeSt.com on condition of anonymity the building itself will probably be valued at $500 per sf or at least $550 million.

The specialized equipment inside the plant would probably bring the closing price to the $2 billion range, brokers speculate. If sold, the deal would be metro Orlando's largest commercial real estate closing on record.

In disclosing fiscal third-quarter financials for the period ended June 30, the company also announced it would keep the 1,100-employee plant open to September 2004, instead of shutting it down as initially planned at the end of this year. The work force is down from a peak 1,800 in 2000.

Keeping the plant open for another two years is encouraging news to Orange County chairman Rich Crotty, a longtime high-tech industry backer who mostly feared metro Orlando would lose the jobs in an industry the area has been trying to build up for the last 10 years.

The county also could face losing $3 million in annual property taxes Agere has been paying over the past six years if Agere abandons the property at some point. Agere is the county's largest taxpayer after Walt Disney World Co. And Universal Orlando, according to the Orange County Property Appraiser's office.

For Agere, however, the plant's operation and its overhead isn't helping its balance sheet, the company reports. Agere lost $332 million or 20 cents per share on revenue of $560 million in its most recent reporting period. That compares with a loss of $1.1 billion or 68 cents per share on sales of $927 million in the same 2001 period.

AT&T opened the plant in 1984. Lucent Technologies bought the property in 1996 when Agere assumed its operations. Agere has been spending $300 million a year to operate the wafer fabrication operation. Lucent formally spun off Agere as a separate company June 1 of this year.

But the red ink at Agere has been flowing steadily. In its first fiscal 2002 quarter that ended Dec. 31, 2001, Agere lost $375 million or 23 cents a share Agere. In the same 2000 period, Agere lost $4 million or zero cents a share.

The real estate component is a key strategy in Agere's plans, area brokers intimate with the company's plans tell GlobeSt.com. Besides Orlando, Agere is consolidating operations in Reading, PA; Breinigsville, PA and one undisclosed site in New Jersey.

The consolidations are expected to reduce Agere's total square footage in the two states by about two million sf or 50%, a factor that would help lower operating costs, the company has previously confirmed.

In December 2001, Agere sold its high-tech plant in Madrid, Spain to London-based BP for an undisclosed price. BP plans a $100 million retail convenience store expansion in Central Florida over the next two years.

When Agere put the plant up for sale in January, the company projected the physical property and its ongoing plant operation would be sold within a 12-month to 18-month period.

The computer chip plant is one of the largest and most visible industrial properties to go up for sale in metro Orlando in over a decade, according to brokers who follow this market.

Without even knowing the tentative asking price, brokers tell GlobeSt.com the property will probably go for the highest price ever paid for an industrial asset in Central Florida.

Agere's January announcement, in a prepared statement posted on its Internet site, shocked local and state elected officials who had previously pledged a total $100 million in economic incentives to the company if the workforce remained at 1,400 or higher.

That deal was voided in 2001 when Agere trimmed its staff to 1,100. Until then, Orange County had paid the firm $1.8 million out of $21 million initially promised; Orlando paid $500,000 out of $1 million pledged.

Agere president/CEO John Dickson couldn't be reached at GlobeSt.com's publication deadline. But in a previously prepared statement, he said the company is confident it can cut a deal quickly.

"The company has had preliminary discussions with potential buyers who can benefit from the facility's technology and process development capabilities, as well as the talents of its workforce," Dickson said six months ago. Agere would buy products as needed from the new owner.

On Agere's 1,100 employees, Dickson said they would be part of any deal made with a buyer and remain with the operation.

George D. Livingston, founder/chairman, Realvest Partners Inc., Maitland, FL says Agere's departure could be an opportunity for a new player to hit Orlando turf.

"You have a state-of-the-art, ready-to-go plant that should succeed when the market turns," Livingston tells GlobeSt.com. "My guess is that it will be sold and a new manufacturer will take over" the business.

The worst scenario for the property is that it will wind up being vacant and a white elephant on the market.