• October 23, 2017

Arcadis Report Reveals How Companies Benefit By Planning Ahead for Surplus Property Disposal

Industrial firms face financial risks by holding idle properties

Highlands Ranch, Colo. - Some of the world’s largest corporations have no strategic plans to sell or redevelop surplus properties, according to the 2017 Global Surplus Property Disposal Benchmarking Report published by Arcadis (EURONEXT: ARCAD), the leading global design and consultancy firm for natural and built assets.

Major corporations are often left with millions of dollars of idle surplus property; this occurs when industrial firms acquire new companies with redundant properties, automotive companies relocate plants, or oil and gas firms shut down a refinery or consolidate retail stores. This report, the first ever global surplus property management benchmark, examines reasons why progressive firms are finding success with their disposal plans while others struggle. It outlines key findings and highlights the steps taken by best-in-class firms to successfully and effectively dispose of properties.

Download the report at http://arcad.is/SP-2017ca_pr.

“With the industrial real estate market booming in western economies and the availability of property diminishing, now is an excellent time to take advantage of disposing of surplus property,” said Arcadis Senior Vice President Mark Fenner. “By planning strategically, corporations realize major benefits such as higher profits, an optimized asset portfolio, reduced liabilities, healthier balance sheets and an improved public image.”

The report surveyed executives from more than 30 large, primarily multi-national firms representing a variety of industrial sectors with a combined gross revenue of $1.5 trillion and approximately $2 billion in surplus property holdings in 2016.

Key findings from the companies surveyed include the following:

  • Thirty-five percent have no formal plan for surplus property disposal, resulting in missed opportunities for reducing business risks such as financial, environmental, legal and reputational factors.
  • Eighty-one percent do not prioritize surplus property disposal at an executive level, lessening the focus and reducing potential gains from effective disposal.
  • More than 90 percent reported selling surplus properties individually rather than as a portfolio, which increases average transactional costs and often leaves companies holding harder-to-sell, lower-valued properties. 
  • Fifty-four percent spend more than $5 million annually in carrying costs to hold onto surplus industrial sites. Such costs include compliance, permits, licenses, taxes, utilities, security and site maintenance. 
  • More than half held less than $25 million in total environmental liability for cleanup of their surplus properties, and 82 percent said environmental cleanup was concentrated on only a few properties. While most companies perceive remediation as a barrier, progressive firms are successfully selling contaminated surplus properties with few legal or financial hurdles. 
  • Very few firms (11 percent) are investing in redevelopment, which can increase property values and deliver financial gains by tapping into the market value of the surplus properties.

According to the report, successful companies are finding innovative solutions to disposal. For example, global energy producer Bayernoil closed a redundant, 266-acre German refinery. Arcadis assisted by helping to strategically break the property into parcels which could be sold to generate cash for remediation. Within two years, a parcel was decommissioned, remediated and converted into a 16,000-seat soccer stadium while the remaining property was sold and converted into a business park. This project improved the quality of life for residents and businesses and contributed to stronger bottom line performance for Bayernoil, according to Fenner.

To unlock the hidden value of redundant properties, Arcadis outlines several recommendations for corporate executives, including the following: 

  • Elevate property disposal to the executive level or C-suite. This leads to swift action for sales of bulk properties. 
  • Sell now due to current market conditions and while vacancy rates in the industrial market are at record lows. 
  • Adopt a portfolio strategy. Selling surplus properties one by one is slow and costly. In contrast, the transaction cost of a portfolio is relatively inexpensive and owners can bundle low-value properties with higher valued assets. 
  • Sell environmentally contaminated property and allow buyers to remediate. Current environmental regulations are known factors with few new regulations being imposed, and the rate of returning environmental liabilities to the sellers is low. 
  • Don’t focus solely on profit as the motive for selling surplus property. Firms should concentrate more on timely and effective disposal, as holding costs are often underestimated and steep. Strategic disposal reduces the size of portfolios faster, lowers total cost of ownership and enables executives to focus on their core business.

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Marc Lumpkin

Corporate Communications +1 303 471 3485 Ask me a question
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