Albertsons closing Irvine, CA

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ClownLoach
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Re: Albertsons closing Irvine, CA

Post by ClownLoach »

storewanderer wrote: February 7th, 2021, 9:39 am
klkla wrote: February 6th, 2021, 10:07 pm There has to be something more to this story. WalMart has had their publicity department contact every major media company in SoCal to spread the word that the store was under performing yet there is evidence from posters on this site that this is simply not the the case. I would love to know what the truth is about this situation. I think we will know that as soon as the next tenant(s) open in the space.
If another tenant opens quickly it could simply be someone else was willing to pay more for the space or there was some other negotiation issue. Shrink, sales mix, "plumbing problems" - who knows.

Could Target want the space?

They have operated stores close together in dense areas before (see: Daly City, CA).
Its not a labor issue like the infamous "plumbing problems" store where everyone was permanently laid off with severance because "all the neighboring stores were over staffed so nobody could transfer.".

Apparently a major effort was made to allow anyone to transfer to the neighboring stores if they choose to even if it puts those other stores into the over staffed category. If they apply they get the transfer, period is what I have been told.

I think this is a simple case where Walmart signed a bad lease with a low first term but a massive increase starting with the second term which is typical for Irvine Company as their sales pitch is all about future growth. The area is going to grow so fast that you won't have to worry about agreeing to your rent doubling 10 years in. But the store clearly had a shrink problem, with aggressive Loss Prevention associates scanning receipts and looking in and under baskets when you exit, alarmed entry gates (like a modern turnstile), things you would never expect in such a nice part of Irvine.

Walmart probably presented their case to Irvine Company and said that they would not be able to handle the rent increase and turn a profit, Irvine Company stood by their ironclad lease (because once you accommodate Walmart you've got to accommodate everyone else), and Walmart probably shocked them by saying that they will turn the keys in at the end of term 1.
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Re: Albertsons closing Irvine, CA

Post by Bagels »

ClownLoach wrote: February 5th, 2021, 9:47 pmAnchors in spaces of this size like Walmart will not enter a lease without a minimum of 20 years term guaranteed, usually 20 plus two 5 year renewals. There however is an increase at the 10 year mark. I'm very familiar with the Irvine Company and how they handle these. Irvine Company for some reason has a false perception in the public as a draconian organization that will throw tenants out on the street. It doesn't work that way. I work with many landlords on large retail stores across OC and SD and I can tell you they're the most supportive and cooperative company we have worked with and not even close to most expensive. BUT most of their leases start low for the first term, many times below market, with an escape clause at start of second term where a large increase sets in. I have some connections on this one I reached out to and all I can say is this was a very last minute decision, and as surprising as it may sound for Irvine area shrink was the deciding factor. Locations like this at major freeway interchanges are prone to Organized Retail Crime rings - easy escape in multiple directions. Increasing shrink losses plus a rent increase due on next term = a closing store in the Walmart organization.
Renewal options are often at market rate for comparable square foot. Remember, Walmart took over Sears' Great Indoors lease; they were unsuccessful in re-negotiating a longer term despite almost unquestionably wholly absorbing the build out cost. The Great Indoors was the anchor of a new build shopping center that was dedicated to home design. It's certainly plausible that Sears had negotiated low monthly payments throughout its initial term -- plus a small percentage of gross receipts. The renewal options may have been up to prevailing rates, plus that small percentage of gross receipts. Walmart may have believed that they could negotiate a new lease term at prevailing rates, but if IC didn't want them as a tenant, they could've insisted upon that percentage of gross sales.

IC isn't a slumlord, but many former tenants would certainly describe it as "draconian." I've read about the organized retail theory, but let's be realistic -- the security office is adjacent to the exit, Irvine PD regularly patrols the parking lot, and the parking lot itself is practically a maze. If I'm in an IC shopping center and glance down at my phone for 15 minutes -- especially in the evening -- a cop will probably summoned to watch me. I recall two years ago, when my wife and I were in the Kohl's parking lot. We sat in the car for about a half hour while she fumbled through her belongings, looking for her paper Kohls Cash that she claimed wasn't showing up in her digital wallet on the app. Suddenly, two Irvine PD SUVs park on each side of us. We go into the store without incident and come out two hours later. The cops are still there. We drive over to Albertsons (across the parking lot). The cops follow us. We shop in there for over an hour; the cops are still watching us when we return to our car. We drive up Alton/Jeffrey to Walgreens. When we leave the store... there's the cops (I didn't notice them follow us, either)!!! Two cops, watching us for nearly 4 hours.
storewanderer wrote: February 7th, 2021, 9:39 amIf another tenant opens quickly it could simply be someone else was willing to pay more for the space or there was some other negotiation issue. Shrink, sales mix, "plumbing problems" - who knows.

Could Target want the space?

They have operated stores close together in dense areas before (see: Daly City, CA).
There's a Target anchoring the Spectrum Center, which is across the (highway). That location just completed a complete remodel given only to Target's top (best performing, most strategic, etc.) stores.

Walmart made an 11th hour decision -- heck, they still received regular shipments this past week, despite closing at 7PM for their liquidation sale. My best guess is that they couldn't come to terms on the prevailing lease and Walmart walked. The rest of the shopping center is still high-end home furnishings; I would've be surprised if IC wanted a stronger anchor. Walmart brought in traffic -- frequently causing back-ups on Alton, spilling beyond Walmart's space in the parking lot, etc. -- but probably not the variety IC would like.
ClownLoach wrote: February 7th, 2021, 11:41 amI think this is a simple case where Walmart signed a bad lease with a low first term but a massive increase starting with the second term which is typical for Irvine Company as their sales pitch is all about future growth. The area is going to grow so fast that you won't have to worry about agreeing to your rent doubling 10 years in. But the store clearly had a shrink problem, with aggressive Loss Prevention associates scanning receipts and looking in and under baskets when you exit, alarmed entry gates (like a modern turnstile), things you would never expect in such a nice part of Irvine.

Walmart probably presented their case to Irvine Company and said that they would not be able to handle the rent increase and turn a profit, Irvine Company stood by their ironclad lease (because once you accommodate Walmart you've got to accommodate everyone else), and Walmart probably shocked them by saying that they will turn the keys in at the end of term 1.
Walmart is spending $500M installing the "access gates" throughout their store fleet. All of the locations I frequent have them -- and they replaced the door greeters who previously acted as theft deterrents. With Walmart headed to $15/minimum wage -- and CA already there (and soon-to-be in some parts of the state) -- I suspect it's mostly about cost. Receipt checks are pretty standard at Walmart, and hardly aggressive at Irvine. That high school aged male with the curly blond hair... you could probably ring up a 70" TV as a few pounds of bananas, and I doubt he'd notice. Most people they just wave through. I've been in plenty of Walmarts around the country where they'll select a few items from your receipt and look for them, regardless of how long it holds up the line.

Walmart never signed a lease with IC -- they took over Sears' remaining term, absorbing all build out costs. I suspect IC didn't want Walmart as a tenant and insisted upon an unrealistic prevailing rate.
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Re: Albertsons closing Irvine, CA

Post by veteran+ »

Yup................Draconian and Ironclad...................that's the Irvine Company.

They are quite intractable and inflexible. Their way or the highway. They are very corporate and centralized and do not flex for local issues.
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Re: Albertsons closing Irvine, CA

Post by storewanderer »

This kind of makes more sense if the store started as Great Indoors then got turned over to Wal Mart simply due to Sears vacating the place, having a Wal Mart in this location obviously did not fit into the town's plan too well.

I do wonder if this Wal Mart closure would have impacted the two Irvine Albertsons closure decisions in any way, as it seems like it was not known at the point the Albertsons closures got decided.
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Re: Albertsons closing Irvine, CA

Post by Bagels »

Well over a year later...

- Bass Pro Shops will be opening its second SoCal location (and first in the LA-area) in the former Walmart.

- Both Albertsons' remained shuttered, with H-Mart listed as coming soon. Construction on the Alton location hadn't begun as of late fall, but it appears there's some activity taking place now. Elsewhere it was suggested that H-Mart may not be proceeding with the project, and the building is being used for storage (not sure by whom), so who knows? Allegedly, Aldi was interested in the former Rite Aid space in the same plaza, and Irvine Company said no, so I assume they will have another grocer soon...
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Re: Albertsons closing Irvine, CA

Post by HCal »

Bagels wrote: May 11th, 2022, 12:45 pm Allegedly, Aldi was interested in the former Rite Aid space in the same plaza, and Irvine Company said no, so I assume they will have another grocer soon...
Of course they would. Can't have a discount grocer in their upscale neighborhood... :lol:

(ALthough it's not clear whether this interest was serious or who backed out.)
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Re: Albertsons closing Irvine, CA

Post by storewanderer »

Bagels wrote: May 11th, 2022, 12:45 pm Well over a year later...

- Bass Pro Shops will be opening its second SoCal location (and first in the LA-area) in the former Walmart.

- Both Albertsons' remained shuttered, with H-Mart listed as coming soon. Construction on the Alton location hadn't begun as of late fall, but it appears there's some activity taking place now. Elsewhere it was suggested that H-Mart may not be proceeding with the project, and the building is being used for storage (not sure by whom), so who knows? Allegedly, Aldi was interested in the former Rite Aid space in the same plaza, and Irvine Company said no, so I assume they will have another grocer soon...
H-Mart has signed for the Westminster Pavilions also.

Lots of growth at H-Mart.
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Re: Albertsons closing Irvine, CA

Post by rwsandiego »

HCal wrote: May 11th, 2022, 7:05 pm
Bagels wrote: May 11th, 2022, 12:45 pm Allegedly, Aldi was interested in the former Rite Aid space in the same plaza, and Irvine Company said no, so I assume they will have another grocer soon...
Of course they would. Can't have a discount grocer in their upscale neighborhood... :lol:

(ALthough it's not clear whether this interest was serious or who backed out.)
Funny you mention not having a discount grocer in an upscale neighborhood. East Encinitas, CA (or any Encinitas, for that matter) is very upscale and the Aldi parking lot is always packed with BMWs and Mercedes and the store is packed with people who drive them. Affluent people love a deal. That's how they become and remain affluent.
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Re: Albertsons closing Irvine, CA

Post by storewanderer »

rwsandiego wrote: May 11th, 2022, 11:15 pm
Funny you mention not having a discount grocer in an upscale neighborhood. East Encinitas, CA (or any Encinitas, for that matter) is very upscale and the Aldi parking lot is always packed with BMWs and Mercedes and the store is packed with people who drive them. Affluent people love a deal. That's how they become and remain affluent.
There are the affluent folks who own houses in East Encinitas, who go shop at Aldi, and there are the ones who spend as if they are affluent folks that are in Irvine and paying rental on their apartment to Irvine Company, who go shop at whatever the flashiest most convenient store is (for those less than the majority of the time times they cook instead of go out to eat).

Maybe Aldi wouldn't do that great in Irvine... but putting a discount store in a community designed to extract cash out of residents as much as possible would be counter to the goal there. Especially if Irvine is running leases based on sales volume of the store; a cheap store is going to sell less dollars than an expensive store. So they will favor a higher priced store as it will maximize rent for Irvine.

I almost think you could put H-Mart and Aldi next to one another though. They don't really sell the same products. They may even compliment one another.
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Re: Albertsons closing Irvine, CA

Post by ClownLoach »

Bagels wrote: May 11th, 2022, 12:45 pm Well over a year later...

- Bass Pro Shops will be opening its second SoCal location (and first in the LA-area) in the former Walmart.

- Both Albertsons' remained shuttered, with H-Mart listed as coming soon. Construction on the Alton location hadn't begun as of late fall, but it appears there's some activity taking place now. Elsewhere it was suggested that H-Mart may not be proceeding with the project, and the building is being used for storage (not sure by whom), so who knows? Allegedly, Aldi was interested in the former Rite Aid space in the same plaza, and Irvine Company said no, so I assume they will have another grocer soon...
The Bass Pro development is interesting... Because Irvine Company was sending paid surveys to local apartment residents that sure asked a lot of questions about that tiny Nordstrom at the Spectrum Center... And asked about 15 different ways if Bass Pro would be a good fit in Irvine Spectrum Center itself. So I suspect that Nordstrom was ready to leave and be replaced by Bass Pro because they're overstored in the area - in fact they now have more units in the area than Macy's after all their closures - but Irvine Company probably has given them a deal to stay until they can work out a replacement. Plus they probably would have had to build more parking garages for Bass Pro and tear down/rebuild the Nordstrom to fit them in. Many years of expensive construction. Then because they were stuck with the white elephant Walmart building and Bass Pro was still on the line they worked out a deal for that center... I'm not sure if there is going to be anything close to enough parking for this store though without customers parking in the middle of the center by the Living Spaces and walking. Walmart was almost unshoppable during weekends and holidays because the parking in front was so limited and the store was completely packed. Still some strange business here..... Bass Pro is both a "most wanted" tenant as well as a opportunistic leaser - they famously want under market rent to go in, basically saying they'll build the traffic for your entire center so you'll still bring in far more rent with them (at a discount) than without them. So they like distressed properties like this. They took a white elephant closed Lowes south of Tacoma along I-5 and it still resembles one - looked like the boats were in the former garden center and they just put some wood trim around the gable shaped sign tower. Guaranteed they're getting less rent from Bass Pro than what Walmart offered.

Probably works better than tearing down everything East of the Living Spaces including the Walmart, former Office Depot etc. and putting more offices there, which was what they were floating with the city. Somehow, I can't explain it, but in this increasingly work from home culture Irvine is dramatically expanding office development and its actually working. Maybe they're on to something - people will work in the office again but it needs to be a new, cutting edge facility that isn't in a gross, congested, distant dump like downtown LA? Irvine Company canceled their new 2500 apartment units off Sand Canyon where the RV dealerships used to be ("Traveland USA") and went with really weird boxy looking offices that all have roll up walls and other features to introduce open air workplaces. Amazon just signed for a bunch of new office buildings off Laguna Canyon.
Last edited by ClownLoach on May 12th, 2022, 10:33 am, edited 2 times in total.
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