Disposing of Non-Core Assets with Minimal Disruption

What strategies can companies employ to effectively identify and dispose of non-core assets while minimizing disruption to their operations? How can companies assess the potential financial benefits and risks associated with such disposals?

The interesting thing about life science assets is that they don't depreciate as quickly, or they don't become obsolete as quickly as an office asset, right? Once you make a large capital investment in a life science asset, I would, I would argue that the mechanical systems, the MEP, the infrastructure that has, in many respects, 30 plus year, you know life, the benches, the other infrastructure, the lab, actual space. There's plenty of labs that are 50 years old that are working very functionally today.

So that's, that's a very interesting distinction from an office asset, right? The capital expenditure should be less. So many life science companies tend not to just sell their assets right off the bat. They tend to continue to put the marginal amount of capital, the capital expenditures to upgrade the labs over time. But so, it's not a very common thing that you see, life science companies sell their assets. However, from time to time, as I mentioned earlier, a lot of these large pharma corporations built these centralized locations, these mega campuses. Sometimes they have more than one and there's a little bit of redundancy, especially if they're in, you know, a close by geographical area.

In the case of our campus at NEST, we bought that from Merck in a sale leaseback. They actually had another campus that was only 10 miles away. They thought a lot of the labs were redundant, especially some of the manufacturing that they had. And it turns out that, you know, it was efficient for them to consolidate. That does happen from time to time, and they will, they will look to monetize some of these assets, you know, as a percentage of their annual revenue. You know, the sale from this real estate tends not to be very meaningful to them, so it's not usually a priority for them. Actually, what they do is, typically, is they upgrade facilities to equate, right, or to achieve ability to manufacture. You know, with the new science, right? The science, the innovation is moving so quickly that some of these manufacturing facilities, these GMP, the good manufacturing processes, these bio manufacturing and has to be upgraded pretty, pretty frequently to address the fact that innovation is changing so quickly.