🛒 Kroger-Albertsons Merger: California Impact

[ClownLoach]

I disagree that Safeway (Albertsons) has any inherent expertise in California with mixed use developments over Kroger. Other areas like D.C. are different and are for a different board. The only "secret sauce" they had is they owned the property that they redeveloped, and they added additional retail. Any residential component was sold to a third party.. They then sold the property signing very favorable leases and future lease options for their stores. They did this in many sites in CA and WA and even HI. Whole Foods didn't own their properties. They signed some expensive leases on terribly designed mixed use properties. The Tarzana & Encinitas stores should be textbook examples of poor design. The underground parking and store access were terrible

All of what you just said Safeway does, selling the properties while negotiating in both very favorable leases as well as retail-first designs, are skills that I see no evidence Kroger possesses. They make a big one time cash-out profit and wind up with a new store that surpasses the volume of the old. My understanding from numerous conversations with Real Estate brokers is that non-traditional configurations with rooftop or subterranean parking and mixed use are up to 40% less productive. Safeway does not have that problem which is unique.

If you want great examples of their inept urban design see the disastrous Ralphs in Downtown San Diego and the Downtown LA Ralphs. They're just as poorly accessible as the Tarzana and Encinitas closed Whole Foods.

California is going to force this mixed use urbanization on everyone with their preposterous "shook the Magic 8 Ball" mandates of additional housing that lacks any rhyme or reason and that means that in all of these cities who have to "find space" or either risk being sued by the state or now lose control of their own developments through the infamous "builders remedy" laws. And all of these developments that "must" be built all wind up being the same luxury apartments and condos we keep talking about. Once again we can debate the economy and whatever else but the state is explicitly forcing this upon existing cities even if they're out of land to develop, instead of smartly putting a greater burden on areas with open land that can be developed which ironically will be more affordable for residents. The state doesn't want to build 25,000 homes in say Victorville that'll sell for $300K and are taxed on that when they can try to force 13,000 more into places like Huntington Beach where each will be worth $1.5M and thus bring in 5 times the tax revenue per unit. That's why they designed the "goals" to somehow penalize the most valuable areas while underutilizing the faster growing markets.

The easiest space to build these mandatory apartments and condos is these shopping centers, and once again I cannot make it clear enough that the best outcome is for say Albertsons to call a developer and say "hey, I hear Huntington Beach needs to build 13,000 more units even though the land is 100% built out, let's make a deal and design a new mixed use complex for our Beach Blvd store then partner with the city to get it done. We'd like the best corner which is here and a larger store and..." versus getting the call that a developer is going to force a replacement of the center through builders remedy, which in turn will also result in an effectively forced eminent domain thanks to the fact that the developers are now more powerful than the city, and that there won't be any room planned so they need to have their million dollar a week store closed by the end of next month... Or if they're allowed to stay they get the back corner, limited signage and street access, challenging or impossible logistics, and crappy parking plus a terrible lease. So they are left with only an awful decision or a horrible decision. With the current situation in the West, Kroger and Albertsons are going to have to stay ahead of the process and embrace it, or be run over by it. Seeing as how Ralphs has not even demonstrated they can hold onto existing productive leases (like the very busy store they lost to Amazon Fresh in Encino), I don't think they are engaged enough or capable of coming out of this better off than they are today.

[storewanderer]

I disagree that Safeway (Albertsons) has any inherent expertise in California with mixed use developments over Kroger. Other areas like D.C. are different and are for a different board. The only "secret sauce" they had is they owned the property that they redeveloped, and they added additional retail. Any residential component was sold to a third party.. They then sold the property signing very favorable leases and future lease options for their stores. They did this in many sites in CA and WA and even HI. Whole Foods didn't own their properties. They signed some expensive leases on terribly designed mixed use properties. The Tarzana & Encinitas stores should be textbook examples of poor design. The underground parking and store access were terrible

All of what you just said Safeway does, selling the properties while negotiating in both very favorable leases as well as retail-first designs, are skills that I see no evidence Kroger possesses. They make a big one time cash-out profit and wind up with a new store that surpasses the volume of the old. My understanding from numerous conversations with Real Estate brokers is that non-traditional configurations with rooftop or subterranean parking and mixed use are up to 40% less productive. Safeway does not have that problem which is unique.

If you want great examples of their inept urban design see the disastrous Ralphs in Downtown San Diego and the Downtown LA Ralphs. They're just as poorly accessible as the Tarzana and Encinitas closed Whole Foods.

California is going to force this mixed use urbanization on everyone with their preposterous "shook the Magic 8 Ball" mandates of additional housing that lacks any rhyme or reason and that means that in all of these cities who have to "find space" or either risk being sued by the state or now lose control of their own developments through the infamous "builders remedy" laws. And all of these developments that "must" be built all wind up being the same luxury apartments and condos we keep talking about. Once again we can debate the economy and whatever else but the state is explicitly forcing this upon existing cities even if they're out of land to develop, instead of smartly putting a greater burden on areas with open land that can be developed which ironically will be more affordable for residents. The state doesn't want to build 25,000 homes in say Victorville that'll sell for $300K and are taxed on that when they can try to force 13,000 more into places like Huntington Beach where each will be worth $1.5M and thus bring in 5 times the tax revenue per unit. That's why they designed the "goals" to somehow penalize the most valuable areas while underutilizing the faster growing markets.

The easiest space to build these mandatory apartments and condos is these shopping centers, and once again I cannot make it clear enough that the best outcome is for say Albertsons to call a developer and say "hey, I hear Huntington Beach needs to build 13,000 more units even though the land is 100% built out, let's make a deal and design a new mixed use complex for our Beach Blvd store then partner with the city to get it done. We'd like the best corner which is here and a larger store and..." versus getting the call that a developer is going to force a replacement of the center through builders remedy, which in turn will also result in an effectively forced eminent domain thanks to the fact that the developers are now more powerful than the city, and that there won't be any room planned so they need to have their million dollar a week store closed by the end of next month... Or if they're allowed to stay they get the back corner, limited signage and street access, challenging or impossible logistics, and crappy parking plus a terrible lease. So they are left with only an awful decision or a horrible decision. With the current situation in the West, Kroger and Albertsons are going to have to stay ahead of the process and embrace it, or be run over by it. Seeing as how Ralphs has not even demonstrated they can hold onto existing productive leases (like the very busy store they lost to Amazon Fresh in Encino), I don't think they are engaged enough or capable of coming out of this better off than they are today.

Safeway had a division called Property Development Centers at the time they were sold to Albertsons and as they were dumping off IL/PA operations they were pushing that division as a way to extract value out of their company to enhance shareholder value (similar to how they handled Blackhawk but Blackhawk was obviously a much more lucrative thing and quickly). So I would say Safeway as you point out was the beneficiary of some dumb luck in that they were sitting on these properties they'd owned for decades that had superior redevelopment potential in high real estate cost areas across the west. Had Safeway continued as a company, and continued PDC, and grown PDC, they could have become an expert in that type of real estate development.

The current Albertsons chain doesn't seem to be an expert in that type of real estate development but I suspect some of their shareholders are.

I think the Downtown San Diego Ralphs is infinitely more accessible and with a far better parking situation than the Downtown San Diego Albertsons...

[HCal]

This week's mailer only says "VONS" at the top instead of both Vons and Albertsons. Haven't seen this since they launched joint ads not too long after merging. I wonder if this means anything...

See if that continues in the coming weeks. They run a Vons-only ad for Bishop and Mammoth Lakes but it is a single page flyer. Someone may have made a mistake with the copy/paste between ad versions.

Yup, continued again this week. This is not the single page flyer for those isolated stores, but the normal full-size one. My theory is that ACI wants to stop advertising the Albertsons name in the states where it is going to be divested, and perhaps testing the practice in a few smaller markets first. If local Albertsons stores will soon belong to someone else, they want to get the public to dissociate Albertsons from Vons as early as possible. Otherwise, C&S screwing up Albertsons could harm sales at Vons if people think they are still the same company.

[veteran+]

That 5 to 6 rating your friends give is anything but a strong endorsement. There are absolutely issues going out to Englewood/DTC now also (south). Never such issues before in my experience. Before COVID the system would be rated a solid 8 out 10... and the demerit would have nothing to do with safety or cleanliness (because there were few safety issues- I never saw any), it would have to do when the train breaks in the middle of the track going east (on the way to the airport) and you sit there for an hour or two for a replacement train or repair.

Okay, but they have confidence in using the system. They just know when to use it and have not seen the level of what is being stated.

Know when to use it? So when don't they use it? Is it only usable before dark or something?

Only usable before 6pm?

That's not the best situation and again it wasn't like this before 2020.

I never tried it at midnight or anything but well into the evening 9pm etc. without issue before. Not the case anymore. Even weekends going south are more than sketchy.

Well, they live there and they use it often

I have been there 3 times since 2020. I did not witness the "scale" of the problem that has been stated. Perhaps a little worn out (which I was surprised given the clean feeling I always experience in most of Denver) and a few homeless here and there but no camping out scenarios. Also a scattering of transit police as well.

[veteran+]

Great analysis of the Laguna area!

I had a vacation cottage there so you are spot on! Lots of friends live there as well (primary and secondary homes).

[ClownLoach]

This week's mailer only says "VONS" at the top instead of both Vons and Albertsons. Haven't seen this since they launched joint ads not too long after merging. I wonder if this means anything...

See if that continues in the coming weeks. They run a Vons-only ad for Bishop and Mammoth Lakes but it is a single page flyer. Someone may have made a mistake with the copy/paste between ad versions.

Yup, continued again this week. This is not the single page flyer for those isolated stores, but the normal full-size one. My theory is that ACI wants to stop advertising the Albertsons name in the states where it is going to be divested, and perhaps testing the practice in a few smaller markets first. If local Albertsons stores will soon belong to someone else, they want to get the public to dissociate Albertsons from Vons as early as possible. Otherwise, C&S screwing up Albertsons could harm sales at Vons if people think they are still the same company.

Ads are planned 6+ months in advance. They had no idea then that they were going to do anything with C&s and the Albertsons brand. It's just a coincidence. This isn't happening anywhere else and if I had to guess that small market of just a few Vons stores probably also has higher prices than the chain thus requiring a separate ad.

[ClownLoach]

I disagree that Safeway (Albertsons) has any inherent expertise in California with mixed use developments over Kroger. Other areas like D.C. are different and are for a different board. The only "secret sauce" they had is they owned the property that they redeveloped, and they added additional retail. Any residential component was sold to a third party.. They then sold the property signing very favorable leases and future lease options for their stores. They did this in many sites in CA and WA and even HI. Whole Foods didn't own their properties. They signed some expensive leases on terribly designed mixed use properties. The Tarzana & Encinitas stores should be textbook examples of poor design. The underground parking and store access were terrible

All of what you just said Safeway does, selling the properties while negotiating in both very favorable leases as well as retail-first designs, are skills that I see no evidence Kroger possesses. They make a big one time cash-out profit and wind up with a new store that surpasses the volume of the old. My understanding from numerous conversations with Real Estate brokers is that non-traditional configurations with rooftop or subterranean parking and mixed use are up to 40% less productive. Safeway does not have that problem which is unique.

If you want great examples of their inept urban design see the disastrous Ralphs in Downtown San Diego and the Downtown LA Ralphs. They're just as poorly accessible as the Tarzana and Encinitas closed Whole Foods.

California is going to force this mixed use urbanization on everyone with their preposterous "shook the Magic 8 Ball" mandates of additional housing that lacks any rhyme or reason and that means that in all of these cities who have to "find space" or either risk being sued by the state or now lose control of their own developments through the infamous "builders remedy" laws. And all of these developments that "must" be built all wind up being the same luxury apartments and condos we keep talking about. Once again we can debate the economy and whatever else but the state is explicitly forcing this upon existing cities even if they're out of land to develop, instead of smartly putting a greater burden on areas with open land that can be developed which ironically will be more affordable for residents. The state doesn't want to build 25,000 homes in say Victorville that'll sell for $300K and are taxed on that when they can try to force 13,000 more into places like Huntington Beach where each will be worth $1.5M and thus bring in 5 times the tax revenue per unit. That's why they designed the "goals" to somehow penalize the most valuable areas while underutilizing the faster growing markets.

The easiest space to build these mandatory apartments and condos is these shopping centers, and once again I cannot make it clear enough that the best outcome is for say Albertsons to call a developer and say "hey, I hear Huntington Beach needs to build 13,000 more units even though the land is 100% built out, let's make a deal and design a new mixed use complex for our Beach Blvd store then partner with the city to get it done. We'd like the best corner which is here and a larger store and..." versus getting the call that a developer is going to force a replacement of the center through builders remedy, which in turn will also result in an effectively forced eminent domain thanks to the fact that the developers are now more powerful than the city, and that there won't be any room planned so they need to have their million dollar a week store closed by the end of next month... Or if they're allowed to stay they get the back corner, limited signage and street access, challenging or impossible logistics, and crappy parking plus a terrible lease. So they are left with only an awful decision or a horrible decision. With the current situation in the West, Kroger and Albertsons are going to have to stay ahead of the process and embrace it, or be run over by it. Seeing as how Ralphs has not even demonstrated they can hold onto existing productive leases (like the very busy store they lost to Amazon Fresh in Encino), I don't think they are engaged enough or capable of coming out of this better off than they are today.

Safeway had a division called Property Development Centers at the time they were sold to Albertsons and as they were dumping off IL/PA operations they were pushing that division as a way to extract value out of their company to enhance shareholder value (similar to how they handled Blackhawk but Blackhawk was obviously a much more lucrative thing and quickly). So I would say Safeway as you point out was the beneficiary of some dumb luck in that they were sitting on these properties they'd owned for decades that had superior redevelopment potential in high real estate cost areas across the west. Had Safeway continued as a company, and continued PDC, and grown PDC, they could have become an expert in that type of real estate development.

The current Albertsons chain doesn't seem to be an expert in that type of real estate development but I suspect some of their shareholders are.

I think the Downtown San Diego Ralphs is infinitely more accessible and with a far better parking situation than the Downtown San Diego Albertsons...

The San Diego Albertsons you're talking about was not planned out by Safeway. My experience has been that there are several executives who wind up being "lifers" who manage Real Estate strategies in these big corporations. I know of one who actually got a lifetime contract in the 90's and is (probably) still being paid on it (his ideas sucked and he was fired under new ownership but throughout that chain it was obvious when you saw a location he picked, he sure liked endcap and corner locations is all I can say). These people do not leave if they're good as they're considered to be like the "secret recipe" for many companies. Great job where you basically travel all over on the company dime to "look at sites" while running up their credit card with meal charges. There's more to the story here is what I'm trying to say.

[rwsandiego]

I think the Downtown San Diego Ralphs is infinitely more accessible and with a far better parking situation than the Downtown San Diego Albertsons...

Having shopped at both stores when I lived in downtown San Diego, my experience is the Albertsons is easier to get in and out of. It has little to do with a different design and everything to do with the location. Navigating Market and G streets around Horton Plaza is a nightmare, mainly because of the store's proximity to the bars and the convention center. Albertsons also has more parking. In terms of getting in and out as a pedestrian, I found them to be the same. Ralphs' edge is its proximity to the offices along Broadway and B streets. The place was hopping at lunchtime and was my go-to for the years I worked on B street.

And, yes, Albertsons, not Safeway, planned the downtown SD Albertsons. It opened in 2006 (long before the merger) under SVU's ownership. It was one of the first San Diego stores to feature the Premium Fresh and Healthy decor. PFE suited that store very well. The Modern Decor makes it look drab and dark. While I'm not a huge fan of the current Jewel decor, it would have been a better choice than Modern. Even Colorful Lifestyle would have been an improvement.

[retailfanmitchell019]

And, yes, Albertsons, not Safeway, planned the downtown SD Albertsons. It opened in 2006 (long before the merger) under SVU's ownership. It was one of the first San Diego stores to feature the Premium Fresh and Healthy decor. PFE suited that store very well. The Modern Decor makes it look drab and dark. While I'm not a huge fan of the current Jewel decor, it would have been a better choice than Modern. Even Colorful Lifestyle would have been an improvement.

That store was definitely planned by Albertsons Inc., but opened by SVU. So was the Albertsons in San Elijo Hills (San Marcos) which opened in 2008.
I’ve honestly found that interior to be a downgrade to stores that previously had the Jewel or Grocery Palace interiors.

[storewanderer]

Okay, but they have confidence in using the system. They just know when to use it and have not seen the level of what is being stated.

Know when to use it? So when don't they use it? Is it only usable before dark or something?

Only usable before 6pm?

That's not the best situation and again it wasn't like this before 2020.

I never tried it at midnight or anything but well into the evening 9pm etc. without issue before. Not the case anymore. Even weekends going south are more than sketchy.

Well, they live there and they use it often

I have been there 3 times since 2020. I did not witness the "scale" of the problem that has been stated. Perhaps a little worn out (which I was surprised given the clean feeling I always experience in most of Denver) and a few homeless here and there but no camping out scenarios. Also a scattering of transit police as well.

Camping out scenarios are nothing compared to the direct drug use and other things going on IN the trains in Denver since 2020. I don't care about camping out scenarios if someone is in a train camping out just there and doing nothing and minding their business; I mean, I expect to see that on these trains or subways, it has always been that way. The worst one I encountered out there in Denver since 2020 was use of lighters/matches in the train while camping out was occurring and conduct that seriously scared me and made me exit said train. Multiple times.

To their credit a few days after I reported said incidents I noticed transit police presence on some trains along the route where the issues were. They are responsive.

I don't consider the trains worn out at all but then I am using bay area BART as my baseline for that (about the most worn out trains that exist). Any train looks in great shape (and so quiet/smooth riding) compared to the BART trains.

Anyway you can downplay what I am saying if you would like, but there is quite a bit of data in Denver about what is going on, what I witnessed, this has been going on since 2020 and the few people who started to use it for commuting again in 2021 noticed it but nobody cared. As more and more people started using it for commuting again then finally in 2022 it seems like they have started to care and are trying to fix this, as they are now aware what a big issue this became. I do think they are dedicated to addressing these issues so the system can get back to how it was before 2020.

I actually just went and found this press coverage on the topic. Also nice to see there were 15,997 other complaints besides mine.

https://www.denver7.com/news/investigat ... tes-learns

From ABC7 article above: "The Regional Transportation District has received more than 16,000 complaints from riders and operators regarding drug use on buses, light rail, commuter rail and on RTD grounds since the start of 2022."

~ttps://www.reddit.com/r/Denver/comments/1775f5 ... l_and_bus/

Way off topic and I think we probably need to close this and get back to the Kroger topic going forward.