Copyright 2003, Traffic World, Inc.
Trucking industry executives are fond of talking about all their whoop-de-do bells and whistles, about how they deliver "information as well as packages" and how valuable their services are to the overall economy.
For all truckers'' tracking and tracing, picking and packing, cross-docking and all their other guarantee-or-it''s-free value-added services, the fact is the land truckers are parked on often is more valuable than anything else they bring to the market.
Simply put, some trucking entities may be worth more dead than alive.
The most recent example is Consolidated Freightways, the $1.5 billion-a-year giant which closed a year ago and whose bankruptcy estate so far has reaped an estimated $235 million from auctions of 123 of its former terminal properties. There are approximately 100 more to go, with 40 to be sold at regularly scheduled monthly auctions.
There are a few old CF gems still on the market, including:
-- Chicago: 253 doors, 37 acres, appraised at $13 million.
-- Memphis, Tenn.: 231 doors, 80 acres, in negotiations, appraisal undisclosed.
-- Columbus, Ohio: 213 doors, 100 acres, price reduced.
But the star will be CF''s old Newark, N.J., facility, which promises to be a hotly contested property when it goes to auction this month. That''s because it meets the three most important criteria in real estate - location, location, location.
It is one mile from Newark Liberty Airport, one mile from the Port of Elizabeth and close to the former Conrail railhead. There is a $6.5 million starting bid for the 90-door, 14-acre facility.
"Geographically, it''s a Ground Zero location for any major transportation/logistics operation," one northeastern carrier executive said.
Even trucking real estate, hardly the Class A stuff that real estate agents dream of, is proving valuable. "New Jersey real estate is valuable regardless," Mindy Lissner, a real estate broker with CB Richard Ellis, recently told The New York Times. "Any sort of company looking for a cheaper alternative can find possibilities with these tired, worn-out old buildings."
Even CF''s tired, worn-out, old equipment has brought in more than expected. CF has auctioned off more than $50 million in equipment since its liquidation began a year ago. That includes approximately $45.2 million for rolling stock tractors and trailers, mostly - plus another $1.3 million for dock equipment, $2.5 million for shop equipment and $1.2 million for other hard assets so far. That''s about $15 million more than expected, according to people familiar with the sales. "Property sales are going very well," Steve Shields said.
Shields should know. As president of San Diego-based Transportation Property Co., which specializes in sales of transportation companies and warehouse properties, Shields has 17 years of industry experience and says CF properties have been selling at a brisk pace. In overseeing the CF liquidation, Shields has directed the sale of assets in the largest bankruptcy in U.S. trucking history.
CF so far has achieved a good percentage over appraised value for its properties, and it has plenty of desirable properties left at what very likely could be desirable prices. In fact, CF''s estate has received 115 percent of the appraised value of its old terminals. CF''s 226 terminals had been valued at $425 million with about half the properties left for auction.
The typical auction calls for 10 or 20 properties every month. They are conducted in Los Angeles. Most of the bidding is done over the telephone, although a few bidders show up in person, Shields said.
Many buyers have been non-transportation companies, although the biggest buyers have been rival trucking companies.
FedEx Freight bought at least four properties in key strategic locations at apparently bargain prices. The most expensive purchase was by Phoenix-based Swift Transportation, the nation''s largest publicly held truckload carrier, which spent $26 million on a 399-door former CF terminal on 80 acres in Mira Loma, Calif. Yellow Transportation has not bought any properties and has not been an active bidder yet, according to Shields.
FedEx bought CF''s former Nashville, Tenn., facility (216 doors on 122 acres) for $12.5 million. It also bought one in Laredo, Texas, (93 doors plus a warehouse on 20 acres) for $6 million. That is virtually new, having been built two years ago by CF. Roadway bought an 80-door facility in Long Beach, Calif., on eight acres for $8 million. Most recently, 12 former CF terminals were auctioned off Aug. 14 for a collective $6.2 million.
The CF parcels have been the stars of the market, however. Shields said the three-year freight recession has ebbed the demand for trucking facilities, as truckers hunkered down to stick with what they had.
"Generally the truck terminal market is slow because of the overall health of the industry," Shields said. "There are fewer carriers and a reduced need for facilities. That results in lower demand. Less demand means lower property values."
Shields said that non-CF properties that five or 10 years ago that would have gone fast are still on the market.
"In the CF situation we were lucky that it was a mature company," he said. "It had a lot of assets that were constructed decades ago. There''s been a lot of growth in the areas where CF had a presence. CF also had good-sized facilities. Many carriers had their eyes out for a strategic operation."
That''s because of changes in real estate values since old line carriers such as the former 73-year-old CF first bought the land for their terminals. Back in the 1950s and 1960s, when some trucking companies first negotiated their real estate deals, land was relatively cheap.
Nowadays, because of suburban sprawl and other factors, this once god-forsaken real estate that used to attract little business except for truckers is sometimes the object of bidding wars among developers craving more open space.
Also, for transportation purposes, it often is hard to build a new trucking terminal these days, several carrier executives said. That''s because more restrictive zoning and noise ordinances may make it more difficult for trucking companies to use once open land for truck terminals.
"In many cases, you''re talking several years for the development process to construct a terminal in a major market around the country," Shields explained. "All the things that constituents don''t want is what trucking thrives on - noise, congestion, pollution and big trucks. Buying an older terminal is clearly going to be cheaper and more timely to buy and rehab than to build from scratch."
In the macro sense, industrial real estate has been in what Shields called "the doldrums" the past few years. There are high vacancy rates across the country. There is pressure on lease rates now. The only factor continuing strong is sales of properties because of low interest rates and flight of capital out of the equity markets into the real estate market, he said.
"That is helping prop up values," Shields said. "If rates were high and the market were good, the industrial real estate market would have been hit hard."
Trucking, fishing and mining are at the bottom of the market. There''s less demand for the carriers'' capacity right now and thus less pressure on building new facilities, which has reduced demand.
The pending Yellow-Roadway merger is expected to add to the available properties list. Although Yellow Corp. Chairman, President and CEO Bill Zollars says there will be no large-scale combination at the start, nearly everybody in trucking expects the new company eventually will achieve economies of scale through some terminal closings.
In Long Beach, Calif., for example, either Yellow''s or Roadway''s facility probably will be large enough to handle the combined business of Yellow-Roadway Corp. If either terminal comes on the market, one trucking executive said, rival truckers may be interested. It''s just part of a trend that makes trucking entities valuable long after the last piece of freight is delivered.
Copyright 2003, Traffic World, Inc.