BC Tree Fruits sets course for packing-house consolidation

Core business

BC Tree Fruits Cooperative has purchased 85 acres near Kelowna International Airport for a new packing plant and cider facility as part of the ongoing consolidation of its real estate holdings.

The new site, on Old Vernon Road, will let the co-op develop a state-of-the-art packing plant to replace its existing facilities in Winfield and Kelowna. The deal is set to close at the end of May. A purchase price wasn’t disclosed.

Concurrent with the purchase, the co-op is selling its Penticton facility. Past years have seen the co-op sell its properties in Kelowna and Naramata. The existing facilities amalgamated into the new packing plant and warehouse will be sold when construction completes.

A timeline for the project hasn’t been disclosed. A decade ago, estimates put the price of upgrading the co-op’s facilities at $40 million. A study last year regarding the industry’s competitiveness noted that upgrading or replacing facilities would be “very costly.” Government funding would be tough to get unless the industry was seen as critical to the region’s economy.

Old Vernon Road runs through the Agricultural Land Reserve, creating another potential hurdle.

“[Our] board of directors and senior executive will be working closely with all levels of government over the near future laying the framework for the new facility,” the co-op said in a statement announcing the purchase.

Calls to the co-op were not returned prior to deadline.

Industrial straits

The pressure on industrial land in Kelowna rivals that of the Lower Mainland. Colliers International reports that vacancies at the end of 2018 stood at 1.7%, while lease rates increased 12.6% from a year earlier to $13.51 a square foot. Just 188,000 square feet was added in the final quarter of the year, with vacancies unaffected.

Government willingness will be critical to the success of the BC Tree Fruits Cooperative’s project. While it has the land, it now faces the task of navigating what CBRE Ltd. recently called “Canada’s difficult entitlement and project approval process, which can prove to be lengthy and extaneous.”

The co-op is among the industrial users that face hurdles from local government in the past. Two years ago, District of Lake Country council asked the co-op to provide $223,000 in frontage improvements to mitigate the effect on municipal infrastructure during upgrades to its Winfield packing house. The expansion boosted the plant’s footprint by just 3,978 square feet.

Dig the dirt

Farm Credit Canada’s annual farmland values report at the beginning of May indicates moderate to strong demand in most of B.C. for farmland in 2018. The activity helped boost the value of the benchmark farm property by 6.7%, in line with the national average of 6.6%. This was the sixth straight year farmland values in B.C. increased.

The strongest demand was in the Okanagan as well as the Cariboo-Chilcotin.

“Farm expansion continued to be the main driver of the province’s farmland market, while urban and investor demand was less of an influence than in previous years,” the report stated.

Properties in the Lower Mainland ranked as the most expensive in Canada last year, with deals maxing out at $218,000 an acre. The average price in the South Coast region was $94,657 per acre, up 6% from 2017.

The biggest leap in price was on Vancouver Island, where the benchmark property increased 21.7%. Properties ranged from $21,500 to $79,300 per acre, with the average being $50,858 per acre.