BALTIMORE -- McCormick & Co. Inc., in a major strategy shift seen as the signature of an aggressive new top management, says it is selling most of a commercial real estate portfolio worth several hundred million dollars.
The long-awaited decision, which was announced Tuesday, ends more than three years of deliberations by the company's management over whether to sell its valuable commercial holdings in the Baltimore-Washington corridor, Pennsylvania, North Carolina and Florida.
Among the properties owned by the company is Silver Spring Metro Plaza, a 700,000 square foot, three-building office complex located across Colesville Road from the Silver Spring Metro stop. The $100 million project, which was developed in conjunction with Caruscan Corp., a Toronto-based real estate company, is the largest and most expensive project so far in the redevelopment of downtown Silver Spring.
The decision by McCormick, which is based in Hunt Valley, Md., will largely return the company to its traditional base in the spice and food industries. Analysts had been speculating for some time about the company's plans for its McCormick Properties division.
"Everybody has been speculating about what they'd do with that real estate for years," said Michael Riehl, an analyst at Chesapeake Securities Research Corp. "It looks like they're becoming aggressive in redirecting those assets."
Depending on the timing and volume of the property sales, which are expected to occur over the next year, McCormick could net as much as $225 million, said James J. Harrison Jr., the company's vice president and chief financial officer.
"We feel the market conditions are right to go ahead with a sale of this kind," he said. "There's a very strong demand out for the type of commercial and industrial properties McCormick owns."
However, a developer involved in a competing project in Silver Spring said yesterday there was a fear in the real estate community that McCormick, which like other developers has had trouble finding tenants for Silver Spring Metro Plaza, might have to sell the complex and properties too cheaply. That would depress the value of other commercial real estate in the area, the developer said.
Harrison said the proceeds of the sale will be used for acquisitions, paying off debts and buying back shares of McCormick's common stock.
The proposed sales drew applause from Wall Street, which has largely discounted the underlying value of McCormick's properties in its share price and, some say, has remained unimpressed by the modest growth of revenue in the company's seasonings business.
"We see this as a sign that management is not only committed to its stated goal of maximizing shareholder value, but yet another sign that it is becoming increasingly aggressive in light of announcements made during the past several weeks," said David Leibowitz, an analyst at American Securities Corp. in New York.
Over the past couple of months, McCormick has announced plans to acquire five companies in related businesses, including Spice Islands, one of its largest rivals in the $850 million spice and seasonings markets.