Covenant Logistics seeks new buyer after $45M California terminal sale goes awry

Dive Brief:

Covenant Logistics Group’s planned $45 million sale of a Southern California terminal fell apart after the buyer walked away, President Joey B. Hogan said in a financial disclosure document on June 21.
The company is in “active discussions with other potential buyers but does not currently have an agreement to sell the terminal,” according to the document. The sale is part of its goal to boost stockholder returns.
Covenant planned to relocate personnel and equipment to other locations and lower its operating expenses by $500,000 a year following the sale, the company said in its announcement of the deal on May 19.

Dive Insight:

Space in Southern California has become a prized commodity as surging demand for imports pushes up rents and stresses availability. Asking rents reached an all-time high and overall vacancy hit a new low in Greater Los Angeles in Q1, as tenants attempted to expand their footprint in the supply constrained urban-port market, according to CBRE.

Higher prices have presented an opportunity for companies looking to boost operating expenses or stockholder returns. The hot market prompted Heartland Express, for example, to sell a terminal that the carrier initially had not planned to give up for a $73 million pre-tax gain.

“Initially, we didn’t want to sell, but the price just kept getting better and better,” Heartland CFO Chris Strain told Transport Dive.

Covenant did not name the buyer who walked away in its disclosure document, nor did it provide a reason. The company declined a Transport Dive request for comment.

If Covenant can find another buyer, the California terminal sale would be its latest footprint consolidation following the closure of its Texarkana, Arkansas, facility for solo-reefer service in March 2020. It acquired that site in its purchase of Southern Refrigerated Transport in 1998.

That facility closure was deemed “necessary to focus our staffing and capital towards our targeted business units and to lower overhead costs,” according to the company. The move resulted in layoffs for roughly 150 employees. The company relocated the rest to its locations in Chattanooga, Nashville, or Greeneville, Tennessee.