L.A. Firm Finds Hostess Filling

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West L.A. real estate investment firm Hackman Capital Partners LLC sees potential for profits in the truckload of goods it recently acquired from the wreckage of bakery behemoth Hostess Brands Inc.

Hackman bought 140 properties along with 3,400 trucks and bread-delivery vans last month in a New York bankruptcy auction of Hostess’ former holdings. The firm paid $62.5 million for the portfolio, which includes factories, warehouses and retail storefronts in 34 states.

Michael Hackman, the real estate firm’s founder and chief executive, said he plans to turn around the properties and sell them within the next year. He expects buyers will be bakeries, manufacturers and even residential developers. Some sales are already under way.

“We’re coming to terms on deals even as we speak,” Hackman told the Business Journal last week. “We’ve entered into transactions on a dozen properties already and the list keeps going up every day.”

The vehicles in the deal – many of them emblazoned with the familiar Wonder Bread logo – will again be sold at auction, likely to another bulk buyer. Hackman paid roughly $1,000 for each of the vehicles.

The properties acquired in the sale, which closed Aug. 29, were all that remained of Hostess after the company dismantled its business and sold off its most valuable assets – its brands. Hostess was then renamed Old HB Inc. for the remaining liquidation.

Hackman Capital, which boasts an in-house team of attorneys that monitors commercial bankruptcy filings in the United States for potential acquisitions, specializes in flipping distressed industrial properties and the equipment that often comes along with them. Last year, the firm was part of a venture that bought a shuttered paper mill in Snowflake, Ariz., under bankruptcy proceedings. The seller was Canadian company Catalyst Paper Corp. with U.S. headquarters in Long Beach. In similar transactions, the firm bought a shuttered solar plant in Devens, Mass., and a closed steel plant in Beech Bottom, W.Va, also last year.

Including the Hostess acquisition, Hackman owns more than 270 facilities throughout the United States, totaling about 25 million square feet.

Hackman said he’s confident his firm can make the most of the scattered remnants of Hostess. The portfolio includes roughly 3 million square feet of real estate and he estimates that he paid less than $20 a square foot. The firm expects to get more than $30 a square foot.

“These are not risky assets,” he said. “They are vacant, which I guess has some risk associated with it, but most of these properties are located on main distribution points near highways and major thoroughfares. They just need a little TLC.”


Early offers

Hackman Capital, founded in 1986, began evaluating Hostess properties before the struggling baked-goods company announced in the fall that it would close shop and sell its assets. Hackman, which had a relationship with a financial firm consulting for Hostess, learned early on that the company was considering liquidation.

“We knew Hostess was getting into financial difficulty,” Hackman said. “We began to look at all of their assets. They had over 1,000 properties back then.”

Hackman Capital, which employs almost 50 people at its headquarters and in offices in Boston and Columbus, Ohio, offered to buy all 1,168 properties in a bulk sale last year after Hostess filed for Chapter 11 bankruptcy for the second time in less than a decade. The Irving, Texas, bakery company turned the offer down in favor of first selling its 30 or so brands. Earlier this year, private equity firms Metropoulos & Co. and Apollo Global Management LLC acquired most of the defunct bakery’s brands, including Twinkies, in a $410 million deal.

Meanwhile, Hackman was closely monitoring the action. Once the final brand sale had closed, the firm stepped in to gather up the crumbs left from the iconic American bakery.

The leftovers include 20 properties in California, 11 in Ohio, 10 in North Carolina, eight in Louisiana and 91 additional ones in 30 other states. Seven of the 140 total properties in the portfolio are bakery plants, including a 127,000-square-foot food-processing plant at 2330 Ripple St. in Glendale.

The portfolio also includes dozens of midsize warehouses and distribution depots, such as a 35,000-square-foot depot building at 6111 Gramercy Place in South Los Angeles.

Hackman Capital originally offered Hostess $58.3 million for the 140-property portfolio. The cake company accepted Hackman’s proposal and drafted an agreement, then brought the bid to bankruptcy court. There, one other bulk bidder – a consortium of auctioneers who joined forces to make a play for the portfolio – pushed Hackman to increase its bid to the $62.5 million sale price.

David Rush, chief financial officer for Old HB, told the Wall Street Journal that the company received about 200 qualified bids for individual properties in the portfolio, but believed a bulk sale was better for the bottom line.

Hackman said the sale of the portfolio was a win-win for both his firm and Old HB.

“It was a win for us because we bought all these assets on a bulk basis at a significant discount to market, and it was a win for the Hostess estate because they saved a tremendous amount of money by not attempting to go through and make 140 different sales,” he said.

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