Officials: Canton poised to survive Reebok departure

The Reebok sign on Royall St. could soon be replaced with another company’s logo. (Michelle Stark photo)

There was a widespread feeling of shock and disappointment across Canton last Thursday as residents awoke to the news that Reebok, one of the town’s biggest and most high-profile corporate neighbors, would be departing its Royall Street headquarters for the greener — and apparently younger and trendier — pastures of Boston.

Even the town’s top officials, some of whom had been part of the negotiations to lure Reebok away from Stoughton nearly 20 years earlier, were jolted by the surprise announcement as they read about it in the Boston Globe on the morning of November 3, less than 24 hours after Reebok parent Adidas had broken the news in a meeting with employees.

Exactly one night earlier, the head of Reebok security had telephoned the Canton Police Department to inform them of an impending public announcement, but no other details were provided and the message was not relayed.

“I learned about it like the rest of us, which was in the papers last week,” noted Selectmen Chairman Bob Burr, who was still digesting the news as of Monday morning.

Burr, in fact, said he is personally not yet convinced that Reebok will leave, noting that “a lot can happen between now and September [2017],” which is the company’s projected target date for the move. If Reebok were to pack up and go, then Burr said it would certainly be a setback for the town but “not a long-term setback,” as he believes the town is well-positioned to rebound from such a loss.

In the meantime, he said Canton officials have made it an “immediate top priority” to learn as much as they can about the company’s plans and how it may affect the town’s bottom line. “We’re reaching out to Reebok right now to find out more about the details of their proposed move, and if and when we get more information we will supply it,” he said.

Town Administrator Charlie Aspinwall said the town did receive a call on Friday afternoon from Reebok CEO Matthew O’Toole, who apologized for the lack of notice and said he is “putting folks in his company in touch with the town so we can discuss things going forward.”

In terms of the financial impact for Canton, a departure of this magnitude is bound to sting at least some — Reebok’s world headquarters currently has the third highest assessed value in the town at $43.56 million, trailing only Eversource and the Avalon apartment complex, and it was the largest single real estate tax payer last year with a total bill of $1,108,308.

Yet even if the facility were to remain vacant for a period of time, the property itself would still retain significant value and would still be subject to property taxes, according to Finance Director Jim Murgia.

In that scenario, Murgia said that Reebok would likely apply for an abatement to reduce its overall tax burden, although it would not be enough to make or break the town’s budget.

“Hopefully it will not have any kind of a major impact to us,” said Murgia. “Luckily, we’re not so dependent on Reebok, unlike some communities that have one major [commercial taxpayer]. For us, we have a very diversified tax base, so I don’t think it will hurt us that much.”

As for the tax increment financing (TIF) agreement that the town had signed with Reebok — which effectively amounts to a sizable tax break for the company — Murgia said the deal was good for 20 years and is not due to expire until the 2019 fiscal year; however, it is still not clear what would happen to the agreement if Reebok were to leave Canton before then.

According to Aspinwall, the terms of the TIF are currently being reviewed with town counsel, but at first glance it appears as if the deal would remain in place for the next two years while in the last year “it remains to be seen.”

“You have to be very careful with TIFs because communities can be taken advantage of,” noted Canton state Representative and longtime town assessor Bill Galvin. “But the town of Canton has always been very cautious with the way we handle these agreements, and in the case of Reebok, they have been a very good corporate neighbor and have stepped up to the plate time and time again.”

Although acknowledging that he was a “little upset” that Reebok didn’t notify the town of its plans in advance, Galvin said the company has been far more than just a taxpayer over the past 16-plus years; rather, it has become a contributing member of the community that has given back in big and small ways — from donating the use of its fields and facilities to sponsoring the annual Reebok/CABI Road Race, which has raised hundreds of thousands of dollars for Canton charities and nonprofit organizations.

The Reebok Canton Road Race has raised hundreds of thousands of dollars for local nonprofit groups.

Another key beneficiary over the years has been the Canton Public Schools, specifically the athletic department at Canton High School, which receives an annual allotment of uniforms and apparel that equates to a retail value of $30,000.

Additionally, Reebok donated $250,000 in seed money to help fund the cost of the CHS turf field, and just last year, professional designers from the Adidas Group worked with a broad coalition of students, staff and community members to rebrand the school with a new primary and secondary logo.

Coincidentally — or unfortunately, depending on one’s perspective — it is the rebranding of Reebok itself that appears to be driving the company’s move to Boston. With sales not meeting internal expectations since the Adidas acquisition in 2006, Reebok has shifted away from team sports and embraced a new “social fitness” model, highlighted by key partnerships with CrossFit and the Ultimate Fighting Championship (UFC).

According to Kasper Rorsted, CEO of the Adidas Group, this new direction for Reebok has shown encouraging signs in the North American market, and the move from Canton to Boston is an attempt to create a “more focused set-up” for the brand that will enable it to better connect with consumers.

To achieve this more “streamlined” approach, Adidas plans to eliminate 150 jobs while moving another 150 to different locations by March 31, 2017. The remaining 650 employees currently working in Canton would then move to the new Boston-based facility that will be “100 percent focused on Reebok.”

“With this decision, we will give Reebok more freedom to operate globally, paired with more responsibility specifically in the U.S.,” indicated Rorsted in a statement issued last week. “In return, we will get a more focused organization fully dedicated to Reebok and fitness. We are convinced that today’s announcement will help us to win in this important market and make Reebok stronger.”

If the move does occur as planned, Burr said that Canton would waste little time in finding the right kind of corporate partner to take Reebok’s place.

“Canton right now is perhaps in the best financial position that it’s been in its history,” he said. “We have over $10 million in free cash and other assets, we have the highest available bond rating, we have three train stations, and a very reasonable tax rate. Canton is very attractive. Reebok, a very large organization, saw the benefit of being in that location for nearly 20 years, so there’s a lot to continue to be optimistic about in Canton. It’s an attractive place.”

Galvin added that the Reebok property itself is “very desirable” and he does not think the company will have a problem finding a buyer.

“And there could be a silver lining in all of this,” he said. “We could end up getting another good company to come here to Canton.”

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Posted by Jay Turner on Nov 11 2016. Filed under Business, News. Both comments and pings are currently closed.