Nothing screams the holidays more than a “year in review.” Typically reserved cataloguing celebrity deaths, our 2019 summation focuses on a topic far more interesting, at least to us: Noteworthy trends on the property side of the global food industry. So without further adieu, our observations.
Trend 1: Bundled Asset Sales Increase
Historically, food manufacturers bifurcated the disposal of property and equipment at the plant sale; equipment liquidators auctioned off the personal property, and brokers sold the real property. In 2019, we saw more bundling of plant and equipment to one buyer, whether it be a like-kind user, an opportunistic investor, or a non-competing buyer requiring some but not all of the remaining assets. Likely reasons include the desire for an accelerated sale and certainty of closing; Sellers vacating certain product categories, allowing competitors unfettered access to equipment and capacity; and the reality that functionally obsolete properties require a bit of “sweet” to offset otherwise “bitter” valuations, and lumping in the equipment allows for a ready source of capital.
Trend 2: Food-Safety Drives Plant Siting
Global Food Properties’ co-founder recalls the decades’ long evolution of how plants were sited.. In the late 20th century, process and building engineers led the due diligence, analyzing a plant’s physical condition, infrastructure, and utilities; if deemed adequate for repurposing, second and third waves followed, and a decision was made. Next, in the early millennial years, plant expansions and citing focused on labor profiles, “right to work,” and local schools and hospitals and the overall appeal of the community itself. Most recently, and post-2011 FSMA enactment, property reviews increasingly center on safety, from recalls to third-party audit conformity; if incoming and sanitation teams identify lax standards and building deficiencies, the plant is struck from the short-list of options.
Trend 3: Alternative Assets Under Increasing Scrutiny
Lastly, it follows logically that if pre-existing pathogens are the bane to next-generation occupancy, then facilities with no exposure to biohazards would increase in appeal. We note of particular interest will be non-food properties that check most of the boxes, which include large and expandable footprints; adequate clear heights to accommodate automation; a linear configuration, where through-put is the antidote to thin margins; elevated utilities and redundant infrastructure; and monitored access and control. Recent examples of non-food properties we see short-listed include a large computer assembly plant (structure and physical security), temperature controlled warehouses (refrigeration infrastructure, without contamination concerns), a liquid crystal manufacturing plant (elevated utilities, physical infrastructure), and community-owned “spec” buildings (size, expandability, no pre-existing contamination). While an emerging trend, we believe increasing food safety-concerns will continue to influence how producers identify, acquire, and repurpose second-generation facilities.
With that brief look backward, we turn forward, and wish you festive holiday and prosperous New Year.