Keith Darby, welcomes newly dubbed Cold Storage King of South Florida Michael Mandich of the Mandich Group, a leader amongst South Florida businessmen.
q1: Michael as more consumers have discovered the convenience of shopping for groceries online during the pandemic the cold storage warehouses market has seen explosive demand. How has this cooler freezer demand affected the Mandich’s group cold storage business?
MM: There’s been a divide, no doubt, in this economy. Whether it’s real estate, whether it is people that have higher earnings vs. more service oriented jobs. Cold Storage has been a net beneficiary for most cases. Some food service, particularly here in South Florida, there has been that had adverse effects. But by and large the cold storage and industrial real estate industry has been very resilient through the pandemic seeing net absorption, rental increases, increased demand pretty much across the country. Mandich Group has six facilities currently soon-to-be seven more adding another one this month in in Bloomington, Indiana to be about a 160,000 square feet and just to Echo the demand by example….so we put the property under contract and with a large organic distributor called KeHe, who was selling the property because they were expanding into a 460,000 square foot facility down the road. As soon as we went under contract we were negotiating with two different tenants on the potential space which is a combination of cooler freezer temperature control. So this will be an e-commerce third party for filler for candy so that’s like I mean you don’t even think about candy, ie. frozen Candy, frozen treats and on behalf of Targets and Walmarts and Amazon’s I mean you don’t realize all the back end of the supply chain but ‘industrial warehouses’ are the most efficient and cost-effective manner to get it to multiple destinations in a relatively quick way. Mandich is humbled, fortunate and lucky to be on this huge growth pattern. Mike and his wife are converters, where as they previously didn’t normally buy groceries online during the pandemic and he doesn’t want to say they hundred percent adopted online grocery shopping, but it became you at least 50-60% of their purchases and because there busy life had the Mandich’s on the run, was nice and convenient that bags that you ordered the night before show up first thing in the morning.
q2: We know it is the Mandich’s group goal to be the largest privately held cold storage companies in North America. Where should other Landlords and commercial real estate practitioners be sending you opportunities from? What areas of North America interest Mandich Group’s portfolio expansion?
MM: Mandich group likes the central Florida industrial cold storage Market best; anywhere along the I-4 Corridor. When you think about Drive times to any of our major Florida cities, the centrality and the fact that it’s kind of a lane into South Florida. Compounded by the fact that truckers do not want to go beyond the I-4 corridor given South Florida traffic; it’s an extra three and a half hour drive time and they typically don’t get a load out of South Florida. South Florida is just not much of a net producer. South Florida is a huge net consumer. Secondly favorite industrial cooler freezer cold storage market – we love the Midwest. The midwest is just where stuff is as made and produced and it’s the crossroads of America. In the midwest, you got good drive times to most major Midwest cities. I think with two of Mandich Group’s properties you can get to almost 80 million people within a 5 hour drive. Obviously as our population here in South Florida continues to benefit from population migration from New York, California and additional north american cities, the cold storage industrial market will continue to be the hottest sector in industrial real estate.
Q3: How do you see the future of cold storage as it pertains to new developments? What factors should an industrial developer take more into consideration for newer institutional or owner user facilities?
MM: There is a new wave of speculative Cold Storage development going on in the country right now and that was untouchable or unthinkable in the not too recent past. Speculative cold storage development was typically more built to suit a particular cold storage specific use or purpose with a specific customer in mind. Nowadays, you’re seeing capital recognizing and understanding that there’s a demand in the industrial market. More groups are now willing to risk investing in the industrial cold storage market for potentially higher returns. Mandich points out that it is a very nuanced business. Cold storage ownership is probably not something you’re going to want to do if you haven’t totally understood being in the cold storage business. If you are capital sources probably best to partner with somebody who does understand the cold storage business. There seemingly is a lot of capital available. Capital demand whether be on the lending side or the equity side and it used to not be much of an Institutional buy either as you saw as a very Niche part of the industrial world. Nowadays, you see every player you can possibly imagine, whether it’s JP Morgan Chase, MetLife, I mean you go down down the list and and they’re all knocking on the doors trying to find out how they can get a piece of the action. Mandich mentioned he is using this time to take advantage of all time low financing rates.