The Tail Wagging The Dog - Rethinking The Equipment Auction

Occupiers follow a trodden path when closing a plant. Identify a property broker, redeploy assets needed at other facilities, and hire an equipment auctioneer. We advocate selectively rethinking the latter, as non-essential equipment included in the sale may define a next generation use, accelerate demand, elevate value, and minimize vacancy.

Leaving equipment in place presupposes nothing is proprietary, and the intrusion of competitors will be managed. But skilled advisors can do both, either in market targeting or selective cannibalization of processes and lines. More broadly, our concern is the uncontested reflex to auction everything, from squeegees, ladders, and desks, to refrigeration, boilers, and bulk tanks. Not all surplus assets should be viewed equally; there is a meaningful distinction between value-adding “infrastructure” and portable commodity assets.

In sum, the reflexive to bifurcate the equipment from the plant may be unwise. Absent extraordinary circumstances, it never makes sense to recover $500,000 at auction when it shaves millions off the property value. But we see this frequently, where if not managed, the equipment “tail” wags the property “dog.” Auction proceeds are easy money, but the underlying equipment may yield far more if left to support the property.

Experienced advisors can manage the removal of proprietary equipment and competitors, recommending at the outset what items might define use, drive value, and compress time on market. In some cases that may be infrastructure, in others it may be surplus assets, but who advises you matters. Generalist brokers react and take orders. FIN’s principals are respectively proactive, with the experience to reach for a value often lost in a siloed process.