Company Stays in Area But at Price of Its Independence REAL ESTATE By Shelly Garcia About a year ago, Ross Thomas, a partner at Delphi Business Properties, called to plant a bug in my ear about a company that was thinking about throwing in the towel and moving out of state. It’s an issue that has been top of mind for real estate brokers, whose livelihood depends on the health of the local business community. Thomas got his wish in more ways than one. The company is remaining in the local area, and Thomas just negotiated a new lease that will more than double its size. But there’s no collective sigh of relief about the state of local industry, particularly independently owned industry, in the real estate community just yet. The company in question is really not the same one that Thomas first called to talk about. That company, Fitness Products International, was struggling to eke out decent profit margins as the cost of doing business in California, what with workers’ compensation insurance, health care and other expenses, rising exponentially. Although the owners were able to cobble together a temporary plan, the long term prospects were not good. And indeed, within a year of restructuring (including layoffs and the closure of a warehouse), they sold the company to Precor USA, a unit of Helsinki-based conglomerate Amer Group Plc. Now called Precor Strength, the company will be moving into a 101,000-square-foot industrial building in Valencia. Its employee base, which hovered around 100 when it was sold for $11.8 million, is already greater by half, and the new owners intend to add another 80 workers once they are ensconced in their new quarters. But if the old Fitness Products International is out of the woods, its because of the deep pockets and clout of its new owners, not a lesson in how independents can weather the storm of skyrocketing costs. Thanks to Precor’s publicly traded-parent, which also owns Wilson sports equipment, the U.S. company, based just outside of Seattle, has completed about $30 million worth of acquisitions in the past six months. The purchase of Fitness Products will give Precor a product assortment spanning the full range of fitness equipment. Precor is a well-known maker of elliptical machines, treadmills and other cardio equipment, but it did not manufacture strength training equipment. Fitness Products, which marketed mostly under the Icarian name, made a full complement of weight training and resistance machines. In addition to Fitness Products, Precor acquired ClubCom, a provider of private television networks and other technology for gyms and health clubs. together the acquisitions make Precor a one-stop shop for its customers. The company’s ability to vastly expand the production output at Precor Strength will help it to amortize the costs that the former owners were unable to absorb. “This allows us to triple the daily output of where we’re at now,” said Rick Baker vice president for engineering and operations at Precor. The fitness industry, like many others, is consolidating. Large health clubs are getting larger and small independents are disappearing. These large chains are seeking to leverage their size by consolidating their purchases with just a few manufacturers, and the more products a maker can offer, the larger its sales revenues with each customer is likely to be. Smaller manufacturers don’t have that luxury. But the good news is that the San Fernando Valley’s skilled labor force is viewed as an advantage by outsiders such as Precor. Theoretically, the company could have moved the operation to Seattle, with its other facilities, but the new owners did not want to lose the skill set that current employees bring to the operation. “The workers have tribal knowledge, and we just purchased the company and our plan is to grow the business, so we don’t want to lose the employees,” said Rick Baker, vice president of engineering and operations for Precor. Indeed, Precor has already given the workers at the plant an across-the-board 3 percent raise, and it has boosted pay for welders by $6 an hour. “We increased second shift differential as well as we added lead and supervisor shift differential,” said Backer. “We wanted to make sure we secured the workforce as best we could.” The workers who move with the company will also receive $25 a month for gas. With the move to Valencia from Sun Valley, Precor will no longer be located within the Los Angeles limits. But the company will remain in California, something its former owners may not have been able to accomplish. And its move adds a little to the tight supply of industrial space in the Valley Thomas is now marketing the old, 48,000-square-foot facility in Sun Valley. Thank heaven for small favors. Bill Foreman, the landlord in Valencia, was represented by Jim Ebanks of Realty Advisory Group. Apartment Sale A 100-unit apartment complex in Northridge just sold for $10.5 million, or $154 a square foot. Balboa Ranch Apartments, built in 1969, has a mix of studio, one- and two-bedroom apartments. Monthly rents range from $538 to $1,295. Gregory Harris and Thomas Flanagan, brokers with Marcus & Millichap Real Estate Investment Brokerage, represented the private investor who bought the property. The seller was The Sterman Co. in Encino. Corporate Pointe Deal Quest Diagnostics Inc., which earlier acquired Unilab, has leased a 38,795-square foot building at Corporate Pointe-West Hills as it integrates the acquisition. Todd Doney and Nico Vilgiate, brokers with CB Richard Ellis, represented Quest in the 15-year deal valued at more than $10 million. Brad Koehler at Trammell Crow Co. represented the landlord, an affiliate of Kennedy Associates and MEPT. Senior reporter Shelly Garcia can be reached at (818) 316-3123.