Dark Dominicks going unfilled

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storewanderer
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Dark Dominicks going unfilled

Post by storewanderer »

http://www.chicagobusiness.com/article/ ... till-empty

"Albertsons has been in talks with 24 Hour Fitness to fill some of the vacancies, according to real estate sources. A spokeswoman for the San Ramon, Calif.-based fitness chain, which is not in the Chicago area, did not respond to requests for comment. Dowling declines to comment on the talks."

"Although the 19 vacant Dominick's buildings have different owners, Albertsons has long-term control over many of the spaces through its leases. In some cases, it has exercised options to extend the leases on empty spaces, according to real estate sources.

By keeping control of those spaces, Albertsons can sublease them to nongrocery retailers that don't compete with Jewel stores, or consider opening its own stores.

“In most cases, the landlords would rather have control of the space,” Witherell says. “In reality, most of the spaces are controlled by (Albertsons).”

In the most unusual scenario, Itasca-based Tony's Finer Foods has been unable to open a store in a Schaumburg building it owns. Tony's announced plans last year to take over a former Dominick's on Roselle Road, shortly before buying the building for almost $6.9 million in July, according to Cook County property records.

But Albertsons has exercised an extension option on the space as part of a lease signed with the previous property owner, according to people familiar with the situation. That means Tony's faces the possibility of collecting rent from Albertsons but being unable to open its own store there.

Village spokeswoman Allison Albrecht says “negotiations are ongoing” but declines to comment on who is involved in the talks. Tony's representatives could not be reached for comment.

“Since last year when Albertsons acquired Safeway, we have been actively marketing (the Schaumburg store) and believe we will have a solution in the near future—which might include our operating the location,” Albertsons spokesman Brian Dowling says in a statement."
arizonaguy
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Re: Dark Dominicks going unfilled

Post by arizonaguy »

It's pretty genius that the #1 grocer in Chicago still owns 19 "dark" sites after its parent company bought the parent company of the former #2 grocer.

Part of me expects a handful of the Haggen sites that Albertsons obtained possession of to suffer the same fate.
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Re: Dark Dominicks going unfilled

Post by marshd1000 »

arizonaguy wrote:It's pretty genius that the #1 grocer in Chicago still owns 19 "dark" sites after its parent company bought the parent company of the former #2 grocer.

Part of me expects a handful of the Haggen sites that Albertsons obtained possession of to suffer the same fate.
I am thinking the same thing. I just wrote about this in the Haggen thread. In fact, I think that the landlords of the Burien 5 Corners Shopping Center blocked that sale of the Haggen there for that reason. Here's what I had just written:

I went into the Albertsons on NE Sunset Blvd. So when I was making a purchase, I spoke to a checker that had helped me many times at the North Burien Albertsons on 128th St. This fellow had transferred from the North Burien store to the Sunset Blvd Renton store a month before he would had been prohibited to do so. So I asked him what he had heard about the two Burien properties that were supposed to go back to Albertsons. I should say that of course, these are rumors and could be inaccurate. So he was under the impression that the Burien 5 Corners store was closed and thought it would stay closed. So I had to correct him that it is still open as a Haggen. I also told him that it was one of the "core" stores but had been offered for sale. So during the last auction, that store was awarded to Albertsons. But from what I understand there is a issue with that happening. So I am wondering if somehow the owners of the shopping center it is in found out that Albertsons may have wanted that store to keep it dark or lease it out to a non grocery business? This particular store is only 12 blocks from a busy Safeway.
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Re: Dark Dominicks going unfilled

Post by pseudo3d »

arizonaguy wrote:It's pretty genius that the #1 grocer in Chicago still owns 19 "dark" sites after its parent company bought the parent company of the former #2 grocer.

Part of me expects a handful of the Haggen sites that Albertsons obtained possession of to suffer the same fate.
Albertsons didn't purchase Safeway to take over the Chicago market for certain, as Dominick's was already dead and gone three months before the deal was even announced. Safeway tried to get rid of all the remaining Dominick's stores, and still had 19 left, which indicates that Safeway still couldn't sell 'em all.

Albertsons is far from unique as to who does this. H-E-B (#1 in the markets they served) took over numerous Albertsons stores when they bought them out in Central Texas, and either left them as dark stores (later filled by non-retail) or in some cases, created two stores within less than a mile (the near-total monopoly in Kerrville, TX comes to mind...two HEBs and a Walmart Supercenter for miles around!)

They do that to their own stores too (sometimes closing two for one new "Plus" store), leaving an empty spot that was once a walkable grocery spot for nearby college students. Publix (also #1) ran with the Albertsons purchase they got, either by keeping two stores open to blot out competition or keeping the better one. Kroger has also blocked former competitor/former stores from food or drug use as well, though they don't usually have big acquisition events.

I don't know what Albertsons' plan is for the Haggen stores are. They plan on re-opening the Lake Havasu City Albertsons (half a mile away from a Safeway), so clearly they can still run close-proximity stores.
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Re: Dark Dominicks going unfilled

Post by klkla »

pseudo3d wrote:Albertsons didn't purchase Safeway to take over the Chicago market for certain, as Dominick's was already dead and gone three months before the deal was even announced. Safeway tried to get rid of all the remaining Dominick's stores, and still had 19 left, which indicates that Safeway still couldn't sell 'em all.
You really don't think they were discussing one of the biggest mergers in the supermarket industry three months before it was announced? You really think Safeway just decided to up and close an entire division that was losing a very small amount of money, instead of just closing the particular stores that were losing money, immediately before they merged with the number one chain in the area? There's no way that could be coincidental.
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Re: Dark Dominicks going unfilled

Post by pseudo3d »

klkla wrote:
pseudo3d wrote:Albertsons didn't purchase Safeway to take over the Chicago market for certain, as Dominick's was already dead and gone three months before the deal was even announced. Safeway tried to get rid of all the remaining Dominick's stores, and still had 19 left, which indicates that Safeway still couldn't sell 'em all.
You really don't think they were discussing one of the biggest mergers in the supermarket industry three months before it was announced? You really think Safeway just decided to up and close an entire division that was losing a very small amount of money, instead of just closing the particular stores that were losing money, immediately before they merged with the number one chain in the area? There's no way that could be coincidental.
Even if the "The decision to sell Safeway in 10 minutes" theory wasn't true, there are plenty of things to support that being coincidental. I might pull up some information that Safeway was rumored to sell, but the actual buyer was sure from a done deal. Even after Albertsons and Safeway officially announced it in March 2014, many assumed that they would just use the chain for real estate purposes. The merger didn't happen for almost another full year.

Besides, "closing unprofitable stores" can only go so far. The Dominick's chain had been failing for years and closures had happened (I imagine the 2005 closures that were announced for the Texas Division prior to Lifestyle also affected Dominick's too) and Safeway had tried to offer the chain up for sale several times. By the time they closed, they had less than a third of the market share than Jewel-Osco. Safeway decided that the best choice was to just auction off what they could, close the distribution center, and get out of town. This is the chain that had previously decided to do the same to Genuardi's (which wasn't nearly as isolated as Dominick's was) or the Canadian division. It's the same reason why chains pull out of whole markets. I can't imagine all the Kmarts in the Houston, Dallas, or San Antonio areas were money-losers when they pulled out of those markets entirely in 2003, nor the stores in Northern California and Florida when Albertsons pulled out, or, going back a few years, the stores in the Houston market.

EDIT for summary purposes: The Dominick's/Jewel-Osco connection is one of the markets that would benefit Albertsons the least. The Safeway additions of Phoenix, Denver, Dallas-Fort Worth, Southern California, and the Pacific Northwest bolster their flagging presence there. Even when Dominick's was alive and well, their market share was uniquely lower than Jewel-Osco's by a substantial amount.
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Re: Dark Dominicks going unfilled

Post by klkla »

I have some ocean front property in Phoenix to sell you if you believe it's coincidence. j/k

Years ago Safeway had a tentative deal with SuperValu to buy Dominick's for $180 million IIRC. The deal fell through for a couple reasons and would have represented less than 10% of what Safeway had paid for the chain a few years earlier.

But despite all their problems Dominicks was still #2 in the market and the operating loss was very small. Most of the stores had been remodeled. There was certainly some value in selling parts of the company rather than just closing up shop in a hurry like they did. The discussions with Albertson's must have already been ongoing at this time and they knew they would never get regulatory approval to merge in that market so poof... Dominick's just disappeared. Problem solved. Sure, it's a coincidence :|
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Re: Dark Dominicks going unfilled

Post by pseudo3d »

klkla wrote:I have some ocean front property in Phoenix to sell you if you believe it's coincidence. j/k

Years ago Safeway had a tentative deal with SuperValu to buy Dominick's for $180 million IIRC. The deal fell through for a couple reasons and would have represented less than 10% of what Safeway had paid for the chain a few years earlier.

But despite all their problems Dominicks was still #2 in the market and the operating loss was very small. Most of the stores had been remodeled. There was certainly some value in selling parts of the company rather than just closing up shop in a hurry like they did. The discussions with Albertson's must have already been ongoing at this time and they knew they would never get regulatory approval to merge in that market so poof... Dominick's just disappeared. Problem solved. Sure, it's a coincidence :|
Safeway was already going off the wheels by the time Dominick's closure was announced (I seem to remember that it was on the market one last time before Safeway started closing it)...closing Genuardi's, selling off their Canadian division, spinning off their gift card division, and I believe it was you that told me that they were going to spin off the property development arm anyway.

Secondly, remodeled stores aren't going to make much of a difference if no one shops there, though they do make the stores sold more valuable. Just ask how A&P's A&P Fresh stores went. Most of the Houston Randalls stores were remodeled, yet even with that, Kroger and H-E-B ran circles around them. Everyone believed that at the rate things were going, the Texas stores would be shut down by the end of 2014, as Safeway was shuttering non-core assets and their demise had been rumored for years.

Besides, if this all ties into what I've dubbed the "Haggenspiracy", then Safeway wouldn't have sold it to that many operators. 7 went to WFM, 12 went to Mariano's (now J/O's biggest competition), 4 went to Joe Caputo & Sons, 9 went to Jewel-Osco, at least initially, and 13 went to other operators. The other stores probably even sold off fixtures.

Anyway, I agree that there's a possibility that it wasn't a coincidence, but to say that "there's no way it was a coincidence" just by a theory "they must have done X somehow" is, well, tin-foil hat territory.
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Re: Dark Dominicks going unfilled

Post by storewanderer »

I actually think the closure of Dominicks (which was handled in the same exact manner as the closure of Genuardi's) is what instigated the Albertsons purchase of the company. I think at that point, what was going on at Safeway caught their attention too loudly and they decided okay, can we make a play for this whole company? And so it went.

It would not surprise me if they started talking while Dominicks was in the process of closing (while other stores had already been making offers on some stores) or very shortly after. This may have motivated Safeway to hold on to more of those properties than they normally would have held on to when "exiting a market." Those empty Dominicks would be very attractive to Albertsons to help keep a competitor out that may impact Jewel and they realized this was a "silent benefit" of buying Safeway.

Also the FTC should have studied those dark stores in Chicago and required divesting as necessary. When ABS/ASC merged in 1999 they looked at each company's development sites and even required some sites to be divested off. I feel like the FTC really rubber stamped the Albertsons/Safeway merger.

Dominicks Stores were not exactly low volume. A lot of the larger lifestyle stores were actually very nice stores and did medium-high volumes, but less volume than Jewels did. They had closed most, but not all, of the lousy stores. Those unremodeled locations were dire but I think it represented less than 6 stores at the time of closure. This is why Dominicks was almost breaking even when they closed it. They had already closed so many stores...
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Re: Dark Dominicks going unfilled

Post by wnetmacman »

As a case of why grocers shouldn't hold dark space;

Winn-Dixie cited in their 2005 bankruptcy over 500 stores whose leases they still held for many years after closing the locations as one of the main reasons why they filed for it in the first place. The cost of holding leases on dark stores was over half their expenses.
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