Albertsons to raise $720 million in store sale-leaseback

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Re: Albertsons to raise $720 million in store sale-leaseback

Post by architect »

arizonaguy wrote: October 4th, 2017, 7:37 am Kroger has "deeded" many of its Fry's stores to "dummy" LLCs with Cincinnati addresses in the Phoenix area.
This is actually just a normal course of business, and is likely not the same as what Albertsons is doing as Kroger has not imminant plans to divest these stores as a whole. Any smart business splits their assets among multiple companies so that if one is sued, only a small portion of the company is affected. The Texas stores owned by both Kroger and Albertsons follow a similar pattern to the AZ stores you mention. Even still to this day, the owner of most Tom Thumb/Randalls locations is listed on tax rolls as "Randalls Food Markets," rather than Safeway or Albertsons.
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Re: Albertsons to raise $720 million in store sale-leaseback

Post by pseudo3d »

wnetmacman wrote: October 4th, 2017, 10:53 am
pseudo3d wrote: October 4th, 2017, 8:23 amThat's my point--Albertsons isn't closing these locations.
No, but Seritage didn't immediately either.
By the time Seritage happened, it was really too little too late, and I don't think Seritage included non-operational properties at the start. The mention of Dominick's makes me believe that they threw a few of the stores in there.
To my knowledge, Sears and Kmart never opened any real locations post-2004 and only remodeled very few of them. Albertsons, OTOH, actually has invested in its store base. And if Safeway had the same amount of money Sears did when it was bought, then we could actually see Albertsons/Safeway really cook.
They actually did remodel some. While ABS is remodeling like wildfire, it isn't contributing enough, and in most cases is causing them to lose business. Sears spent a lot of money buying multiple technologies and ideas, and they all failed. This is the same path.
The big problem with Albertsons is resets with Safeway-like merchandise mixes. That's what's killing them, not remodels in and of themselves. Sure you could find a lot of similarities between Albertsons and Safeway but there are a number of key differences.

+ CEO actually has a real business background and not a hedge fund investor
+ Unified distribution centers (I don't think SHLD ever merged their respective DCs)
+ No business ideas from the acquired companies were killed off (poor Sears Grand)
+ Made/makes effort at expanding store base (also something Sears/Kmart NEVER did)
+ Sees Amazon.com as a legitimate threat (Plated)

It would be interesting to see Albertsons try some interesting prototypes like Sears did, but if they don't follow through and take lessons from it, then it would be pointless anyway. What's troubling is that this isn't actually freeing up cash, it's just juggling assets around to balance the books. Why don't they just sell the stores directly to landlords? I guess that having a separate company they control would help if it was preventing them from getting evicted by landlords or just getting out of the leasing business (keep in mind, for instance, Albertsons LLC had held onto some of the 2006 closures and leased them out to non-food businesses for at least a decade...the Waco store, which became a charter school, has only recently bought that building).

Until we really know what stores are sold and the implications of those stores, it would be difficult to jump to any conclusions.
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Re: Albertsons to raise $720 million in store sale-leaseback

Post by klkla »

Regardless of who controls the entity that is buying the properties, the deal should inject $720 million cash into the company. And hopefully they will use the cash to pay down debt. That is at the core of Albertson's problems right now.
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Re: Albertsons to raise $720 million in store sale-leaseback

Post by storewanderer »

I think (hope) the move is to raise cash to help operations, plain and simple.

Paying down debt would greatly help operations as it would reduce Interest cost and let them throw that cash at labor and/or price instead.

They need to focus on being better. The focus the first couple years seemed to be on questionable growth and we see what that did to the financials...
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Re: Albertsons to raise $720 million in store sale-leaseback

Post by pseudo3d »

There was an article on CoStar about the leaseback but the article disappeared almost immediately for some reason.

http://archive.is/zqR1i

Some facts that can be gleaned:
- Seems CF Albert LLC was just a holding company to sell to Kimco.
- The property sale will be used to pay down debt.
- Kimco owns nearly 10% of Albertsons, so it's in their interest to make sure the stores are okay and not throw the leases under the bus
- Albertsons doesn't see themselves doing this as a regular occurrence.
- They mention that "most of the most valuable properties" weren't included.
- They mention they may be selling a "couple of distribution centers" in the future (in addition to the ones already on the market, like the now-closed Randalls site, or the Vons DCs which were sold last year and are operating on leases).
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Re: Albertsons to raise $720 million in store sale-leaseback

Post by pseudo3d »

Last week, four Jewel-Osco stores were sold and leased as 20-year leases. One of them appears to be a Dominick's and despite being converted to Jewel still has the original Dominick's aisle markers. The lease-buyback from 2017 wasn't specific, but were these the Jewel stores mentioned, or new ones? The 2017 document had one of the stores listed under the Dominick's company, but this can't be one since the remaining Dominick's stores would've been sold outright or kept empty (I can't see Safeway leasing this store to Jewel, even briefly). It's possible a fifth store was sold off (an empty Dominick's) and not listed since it isn't an operational Jewel.

http://www.dailyherald.com/business/201 ... tores-sold
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