Seven months after putting its Woodinville, Washington, brewery up for sale, Craft Brew Alliance (CBA) today announced that it has reached an agreement to sell the facility to Sound Commercial Investment Holdings LLC for $24.5 million.
In an interview with Brewbound, CBA chief Andy Thomas described Sound as a “Washington-based real estate holding company” that has “no interest in operating a brewery.”
As part of the deal, Sound has agreed to purchase the existing brewing assets and resell them. The company is planning to use the location for office space. Thomas added that an unnamed energy drink manufacturer is considering a storage space lease agreement.
The transaction – which is subject to various closing conditions – is expected to be finalized before the end of the year. CBA will cease operation of the onsite Redhook pub on December 29.
As of press time, it’s unclear whether the pub would remain open in the New Year, but all existing brewpub employees will be eligible to receive a severance package, Thomas said.
The location was listed for sale in May after CBA and Pabst Brewing jointly terminated a contract brewing arrangement. As part of the original agreement between those two companies, Pabst had an option to purchase the Woodinville facility by the end of 2018.
Discussing the sale process, Thomas said CBA conducted conversations with “a lot of smaller brewers,” noting that, for many, a purchase “didn’t make sense.”
“There wasn’t a lot of interest to use it as a brewery,” he said. “It validates a little bit of what we had known — it is not in the best location for a scaled production brewery.”
The decision to sell the Woodinville location is part of a broader strategy aimed at rationalizing its brewery footprint and improving gross margins. Those efforts have included shifting outsourced production of certain CBA brands from Memphis’ City Brewery to Anheuser-Busch’s Fort Collins facility, as well as the closure of a brewpub at the Widmer Brothers brewery in Portland, Oregon.
CBA has also shifted its focus toward smaller brewery taprooms, anchoring the Redhook brand in downtown Seattle with the opening of Brewlab and expanding innovation brewing efforts in Portland.
It’s unclear whether CBA will also look closely at the brewpub currently operating at its Portsmouth, New Hampshire, production brewery. Thomas said the company is considering its options.
“We are taking a look at how our pubs are evolving as the business evolves,” he said. “The three pubs were a priority for us to figure out. They were legacy strategies that came along with legacy breweries, and we are taking a look at what the right future is for that location.”
“Woodinville was in the works, Portland was a priority and now our attention turns to Portsmouth,” he added.
In a press release, CBA said it “anticipates a negative impact on 2017 earnings per share in the range of $0.02 to $0.03 as a result of contingencies and transaction costs directly related to the sale,” or about $500,000.
Proceeds from the sale could be used to pay down some of the company’s “debt revolver,” Thomas added.
“We will look at everything and figure out what the most prudent investment strategy is,” he said.