Gilroy Foods property deal implodes
Owner of Olam Spices still seeks buyer for the properties
GILROY >> A deal for the sale of the Olam Spices property, a garlic and onion farm in southern Santa Clara County, has been uprooted by coronavirus-linked financial turmoil, according to regulatory filings in Asia and local real estate documents.
Fresno-based Olam West Coast has bought 174 acres in Gilroy from a unit of Mesirow Financial, an investment firm — the exact
property that Olam sold to Mesirow in December 2019, Santa Clara County real estate records show.
The collapse of the original deal appears to be a high-profile local example of economic woes and financial uncertainties spawned by the deadly bug.
Chicago-based Mesirow Financial, under the terms of the original deal, bought from Olam West Coast six Gilroy parcels totaling 174 acres at and near State Route 152 in Gilroy between Cameron Boulevard and Holsclaw Road.
Gilroy Foods & Flavors, officially known as Olam Spices, produces an array of products, including garlic and onions. The Gilroy operations are a unit of Olam West Coast, which in turn is owned by Singapore-based Olam International, a food and agribusiness titan.
Olam West Coast sold the acreage in late December 2019 to Mesirow for $110.3 million, county documents show. As part of the transaction, Olam West and Mesirow struck a deal to share some of the revenue from the agricultural operations at the Gilroy garlic and onion facility.
Soon after, however, the coronavirus outbreak ushered in numerous uncertainties
worldwide, including the financial markets. And that caused complications for Mesirow to complete all the requirements of the transaction, according to regulatory filings.
“Olam International was notified by Mesirow that, because of significant financial market disruption and challenges arising from COVID-19, it has been unable to secure the required debt and equity financing to meet its obligations under the promissory note,” Olam stated in a regulatory filing.
The agricultural giant reviewed options but decided it had to scuttle the deal to sell the Gilroy properties. In late May, Olam West Coast bought back from Mesirow the exact parcels it had sold just a few months earlier for the same $110.3 million price as the December property deal.
“Olam decided that it was in its best interest to mutually agree with Mesirow to terminate the tiered revenue sharing arrangement and for Mesirow to transfer the titles of the real estate assets to Olam,” according to a regulatory filing.
Despite the zig-zag nature of the transactions, Olam West Coast intends to remain an agricultural player in the Bay Area.
“Olam Spices plans to operate the garlic and onion processing facility in Gilroy, California for the long term,” Greg Estep, chief executive officer of Olam Spices, said in comments emailed to this new organization.
Still, Olam stated in a regulatory filing that it hasn’t given up efforts to sell the properties. “The company has initiated the process of identifying new investors for a sale and tiered revenue share arrangement for the real estate assets,” Olam said in the regulatory filing.
Olam West Coast has owned the Gilroy Foods operations for a decade.
“Our employees are members of the community and our plant is a fixture in the town,” Estep said. “Everyone knows when you smell the sweet aroma of garlic wafting from the Olam Spices facility, you’ve entered Gilroy, the garlic capital of the world.”
Even if the pandemic impeded the property sale, the outbreak appears to have bolstered business at Olam Spices Gilroy. “We have seen strong demand for our U.S. garlic and onion products during the pandemic, the result of consumers spending more time cooking and eating at home,” Estep said. “We’ve also observed an increasing shift from manufacturers looking to switch their supply to U.S.-grown products in an effort to mitigate risk.”