Multinationals cannot find buyers for former factories' plots

The sale of unused assets, once the fastest way to bolster a company’s cash reserves, has in the past year become a cumbersome process, at the very moment pressures on cash are at their peak.

The old plants of some top FMCG producers, such as Unilever, Colgate-Palmolive or Cadbury, are likely to stay on the market for much longer than the normal duration of the sale of such assets, of six to nine months. Are producers willing to wait for the right price considering financing difficulties are putting pressure on them to find new cash sources? Plots of land put up for sale include assets belonging to Cadbury sweets producer or Overseas bakery group, located in Bucharest. Cadbury has recently announced it planned to sell two plots of land, one in a semi-central area of Bucharest, the old location of Kandia-Excelent chocolate plant, and the second in Voluntari, near Bucharest, after in 2006 the sale of some unused assets significantly contributed to the fourfold profit increase from 2005. In their turn, Overseas owners in June 2008 put up for sale the location of Lujerul bakery plant, with the over three-hectare land plot being at that time valued at around 30m euros, a sum that can no longer be obtained because of the steep demand decline. “I saw plots of land for which owners cut prices to one third of the original levels. Many price decreases revolve around 20-25%,” says Attila Peli, head of the Investment Advisory Group Joint Ventures department of Colliers real estate consultancy. Last year, producers could not sell their large unused assets as the limited access to credit seriously hurt real estate developers. “The tighter financing of land acquisitions was felt on the market as early as the beginning of 2008. Since then, the number of deals with plots of land has shrunk considerably. Practically, last year saw no new deals with locations of some former plants,” specifies Attila Peli. “Moving plants from the central area of cities to their outskirts is an older trend (…). Producers also sell plants because they are assets with a high value, but at present I believe the main reason is they are bringing cash inside the firm and the need for cash is the strongest,” explains Peli. “In the following period, I expect to see a rising number of former plants put up for sale. The problem is who will buy them,” Peli adds.