Mandate

Smithfield Foods is among the world’s largest pork processors, with over 52,000 employees in North America and Europe. Annual sales in 2016 exceeded $16,000,000,000, with exports to more than 40 countries. Over 80 years old and still headquartered in the founding city of Smithfield, Virginia, Smithfield Foods has developed exponentially through both organic growth, as well as mergers and acquisitions. The result became an unwieldy and sprawling production portfolio with a short-list of properties deemed surplus, obsolete, or too costly to sustain. The principles of Global Food Properties were engaged to inspect the first wave of seven properties; confirm price, achievable value, and time-on-market expectations; and then formulate a sale campaign for the expedited disposition of the surplus assets.

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Context

Even in the best of times, marketing  meat processing plants can be challenging. Functional obsolescence, remote locations, heavy use, and competitive concerns severely impact demand. Particularly in recent years, food-safety concerns and increasingly stringent FMSA and FSIS directives override the price and speed-to-market advantages presented by available raw and fresh meat plants. As referenced above, these challenges can be compounded by a general industry-wide reluctance to sell discounted capacity to competing processors.

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Process

As in every engagement, Global Food Properties inspected all seven (7) properties, followed immediately with binding price, value, and time-on-market expectations. Recognizing competitive concerns would likely necessitate redeployment beyond the sector, the focus highlighted value-enhancing finishes and infrastructure appealing to non-competing uses within refrigerated and frozen foods, pet food, and pharmaceutical industries. This first wave of plant restructuring included facilities in Florida (2), Nebraska, Kansas, Virginia, Iowa, and Ohio. Additionally, we provided Valuation Opinions on properties in Alabama, Wisconsin, North Carolina, and even Hungary.

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Results

Global Food Properties blitzed local, regional, and national markets, understanding a compressed time frame was as important as generating sales proceeds. In less than 20 months, Global Food Properties eliminated over 1,103,825 SF of functional obsolete space, all of it in thin, tertiary markets. Recognizing the importance of managing competitive concerns, Global Food Properties elicited buyers from the metals recovery, construction, speculative investment, and pharmaceutical sectors, with only one facility in the Florida Panhandle trading to an approved, micro-cap meat processor. The quick success achieved with the Smithfield restructuring buttresses a Global Food Properties key axiom: Who you choose matters.