American Apparel Talks Industrial Land on Earnings Call

DOWNTOWN LOS ANGELES — It's quarterly earnings season, and yesterday afternoon American Apparel reported its quarterly numbers. The Downtown-based manufacturer announced revenues 45% higher than a year ago, but stocks were down this morning likely due to lower profit numbers.

On an afternoon conference call, an analyst asked AA head Dov Charney about lease negotiations on the company's headquarters at 7th and Alameda. The current deal expires around the end of this year, and Charney was guarded but confident that a new arrangement would be worked out with property owner Meruelo-Maddux.

From the earnings call transcript found on Seeking Alpha (section starts on the bottom of page 6):

Mickey Schleien – Ladenburg

What is the status of the renewal of the lease on the headquarters building? ...

Dov Charney

The first question regarding the situation with the real estate in Los Angeles, there's a surplus of industrial real estate in downtown Los Angeles so we have an enormous amount of optionality there. We obviously have some loyalties to our current landlord. We're going to see what we can do there.

There could be some savings in that arena or we could look at some other alternatives in the area, like we've just rented a toy building and there's an additional industrial space we rented as well, and we're seeing rents way down on that in terms of the industrial real estate in Los Angeles. So I think we're going to be okay over there. ...

Mickey Schleien – Ladenburg

I want to make sure I understand what you're saying on the headquarters. My understanding was that that lease is almost up, I don't know if it's December or January but it's pretty near term. Wouldn't this be something you'd have to resolve very soon in order to avoid a dramatic disruption of your production?

Dov Charney

I don't want to get into it on the call, but I think we're going to be okay over there. We have a lot of optionality, and I don't want to disclose the terms and conditions of all of that. I think that we'll work that out. Adrian and others will have to get involved and there's a little bit of negotiation that needs to take place, but I don't think that's a concern.

American Apparel occupies roughly 800,000 square feet in the Alameda Square complex where it is headquartered. The company in July added approximately 300,000 square feet via a lease on the former Imperial Toy Company building at 7th and Santa Fe.