Despite an overall decline in Chinese investment in the U.S., one of China’s largest tire manufacturers is moving forward with plans to develop a $530 million plant in LaGrange, Ga.
Sentury Tire has hired real estate services firm JLL to help it find a developer for the 1.7 million-square-foot building on a 430-acre site, which would be its first North American plant. The factory would employ up to 1,000 workers and use state-of-the art technology such as fully automatic tire-building machines and retrieval and storage systems.
“The cool thing is that we have been able to build plants from scratch (in other locations),” said Rami Helminen, chief executive of Sentury Tire North America. “This kind of plant has not yet been built in the U.S.”
The plant will be developed using a process known as “build-to-suit.” Sentury, which announced its plans to build the LaGrange plant last year, is looking for a developer that will put up the capital to construct a $200 million building following Sentury’s specifications.
That developer will own the property, and Sentury plans to sign a lease for roughly 25 years.
The Chinese company, which was founded in 2007, also will spend more than $300 million in equipping the plant that is expected to be able to produce roughly 30,000 tires a day.
Mr. Helminen said Sentury is following this facilities strategy because it wants to concentrate its investment in equipment and technology instead of the physical building. “Our primary assets are the processing equipment that require constant upgrade,” he said.
Sentury is moving ahead with its plant to develop the tire plant at a time when Chinese investment in the U.S. is declining, partly because of new restrictions in that country on foreign investment. In August, the value of completed Chinese foreign direct investment deals in the U.S. dropped to $212 million, the lowest monthly total since May 2015, according to Rhodium Group, a research firm.
“The impact of tighter Chinese outbound investment controls is hitting…the U.S.,” Rhodium said in a report last month.
Investment from mainland China in U.S. commercial real estate had been growing steadily until recent months. In July and August, it totaled $11.4 billion, compared with $12.9 billion in the same period last year, according to Real Capital Analytics.
Sentury and JLL are searching for a developer at a time when construction activity is surging in many parts of the country thanks to the improving economy. Industrial build-to-suit projects under way in the U.S. at midyear 2017 totaled 50.5 million square feet, compared with 41.2 million square feet at the same time last year, according to JLL.
“There are projects of all varieties going on in all major markets,” said Todd Torok, managing director of JLL.
Mr. Torok predicted that interest in the Sentury project will be keen because of its size and prominence.
“This is going to be a high priority for any developer even if they have to drop another assignment to take this one,” Mr. Torok said.
Mr. Torok said the project was on a “fast-track” and that Sentury hopes to select a developer in the fourth quarter of this year. Construction is expected to begin next year and take about one year to complete.
Sentury produces brands like Landsail, Groundspeed and Delinte. About 30% of its sales are in North America.
Mr. Helminen said Sentury began looking for a site in early 2016 and initially considered 42 locations in 12 states. The company based its decision on workforce, infrastructure and the package of incentives offered by the local and state governments.
“We got a fairly nice incentive package that included the land” in the LaGrange deal, Mr. Helminen said.
Sentury will likely continue building tires in LaGrange for decades, he said. “This is fairly heavy industry,” Mr. Helminen said. “Once the plant is there, it’s there for good.”
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