Case Studies

Southeastern Grocers

Challenge 

Southeastern Grocers is comprised of three supermarket chains including Winn-Dixie, BI-LO, and Harvey’s. Their portfolio of 750 stores included a number of closed stores with ongoing lease and rent obligations as well as locations with upcoming lease expirations. In 2016, A&G Real Estate Partners was hired to mitigate Southeastern Grocers’ future occupancy cost exposure with respect to closed stores, and to restructure leases on operating stores with upcoming lease expirations to better align occupancy costs to sales.

Strategy

A&G devised a plan to retain and actively manage local brokers in each market to identify tenants interested in the closed stores. A number of interested tenants were identified and introduced to landlords with offers to terminate leases and/or sublease the space from Southeastern Grocers. For the leases with upcoming expirations, A&G used a capitalization rate compression pitch, whereby the value created through the extension of the term was converted into lower rent in order to induce landlords to enter into lease extensions while lowering the occupancy cost for Southeastern Grocers.

Results

Of the portfolio of 36 stores assigned to A&G, seven closed store leases were terminated or subleased, and early lease extensions with rent reductions were successfully negotiated on nine stores.