Iowa town saddled with empty Tyson plant sees glimmer of hope

There was a time not too long ago when Cherokee, Ia., leaders felt as if they were held hostage by the massive Tyson Foods plant sitting vacant on the town's doorstep.

Tyson, once Cherokee's largest employer, decided in September 2014 to shutter the 250,000-square-foot plant, taking with it 450 jobs.

The plant has been empty ever since, with Tyson holding on to the lease to squeeze out competitors who might use it. Meanwhile, Cherokee officials chafed at the dormant site.

"You sit there and you drive by this empty plant every day that was the heartbeat of the community for a long time," Mark Buschkamp, director of the Cherokee Area Economic Development Corp., said.

But Cherokee may be a step closer to replacing the loss of its largest employer.

The property owner has listed the site with Chicago-based Global Food Properties, and local leaders are optimistic that the plant will eventually hum with life. 

"We do feel more confident than before," said Cherokee City Manager Sam Kooiker.

It hasn't been easy getting to this point.

As criticism mounted toward Tyson for holding on to the vacant building, the company last July offered to buy out its lease, which doesn't expire until 2020.

With a nearly $400,000 payment, Tyson officials said they would leave the plant's future to the owner.

"We hope the owner will accept our offer, which would end Tyson Foods’ ties to the plant and give the owner complete control over finding a new tenant," Tyson said in a statement last year outlining its proposal.

But that offer went nowhere, as the property owner worried about ongoing costs of security, maintenance, utilities and property taxes — all of which Tyson continues to cover under its lease. 

Aside from ending years of back-and-forth, a new company could bring much-needed job opportunities, Kooiker said.

Though unemployment is low — Cherokee County's unemployment rate was 2.2 percent in May — the city manager said many workers are underemployed and would gain from more competition. 

"It would be a major shot in the arm for northwest Iowa," he said. "It will be good for the entire region, all the way from Orange City to Storm Lake and the Sioux City metro."

Still, it remains unclear how Tyson will handle any offers to take over occupancy of the plant.

Under the lease, Tyson could retain control through 2020, with an option to extend the agreement another 15 years.

In a statement to the Register, Tyson Spokeswoman Caroline Ahn said the company continues to perform its obligations as outlined in the lease. 

"We are aware that the building owner is marketing the property, and have a plan in place for tours for interested buyers or lessees," she said. "We won’t comment on hypotheticals but are always willing to consider serious proposals for future uses of the facility."

The company did not say whether it plans to extend the current lease beyond 2020 or if its previous offer to leave is still on the table.

Jeffrey Counsell, co-founder of Global Food Properties, expects Tyson will agree to leave the site if a new buyer or tenant makes an offer. The plant and its 45-acre site are listed for about $2.5 million. 

"We believe Tyson will do the right thing and will be a willing participant in a deal," said Counsell. "Is there a possibility they could be obstructionist? Yes. I think that's everybody's worst concern, but there's no reason to think they will."

Unlike the relative speed of residential home sales, a large industrial property can take 12 to 24 months to sell, Counsell said.

Most food processors will expand existing operations or build new factories. But there is demand for used properties in good condition, such as the one in Cherokee, he said. 

"There's a scarcity of supply," Counsell said. "There are not a huge number of competing options. At the moment, particularly in the Midwest, particularly for large properties, the market’s very thin."

Mark Langfan, the New York real estate investor whose father owns the Cherokee plant, said he envisions three potential outcomes of a transaction:

• A new landlord could purchase the plant and keep Tyson as the tenant until at least 2020.
• The property is leased to a third party if Tyson agrees to vacate its current lease.
• The property is sold outright to another manufacturer if Tyson agrees to vacate its current lease.

Langfan said his family is willing to accept a below-market offer "so that we can get people in Cherokee working."

Tyson currently pays his family about $125,000 in annual rent, he said. 

"I think there’s a good chance that it will be occupied," he said. "I know that my father is willing to take a serious haircut in terms of a rent or a value of the building sold. We are not looking for the top of the market."

The city plans to voluntarily annex 126 acres of adjacent farmland belonging to former professional football player and Cherokee native Adam Timmerman.

Officials believe that site will help build out an industrial park in the area. They also hope to annex the Tyson plant, which uses city utilities but sits just beyond the city limits.

Buschkamp said bringing life back to the plant will not only boost the economy but also the morale of local residents. 

"There will be an emotional and psychological impact of having someone else in there," he said.