Rendering of the new Safeway entrance at La Playa and Fulton
In case you haven’t heard the news, grocery chain Safeway is in the process of selling itself to Cerberus Capital Management, a private equity firm, for $9.4 billion. The deal is currently pending.
We’ve had inquiries from some readers about what this might mean for the upcoming remodel of the La Playa Safeway location.
The remodel, which will expand the store’s footprint from its current 40,000 square feet to nearly 59,000, has been in planning for several years. The project is currently in its environmental review phase, and expects to be in front of the Planning Commission for final approval by the end of 2014.
In addition to a completely new store, the remodel will also include 40-45 residential units on the north end of the property along Cabrillo and La Playa.
On Monday, Safeway Real Estate Manager Natalie Mattei sent out an email to project followers about the potential impact that the Cerebrus sale may have on the planned remodel:
Safeway is continuing with its Northern California projects on a business as usual basis. We remain very committed to San Francisco. Before proceeding with any construction, we always check budgets and evaluate return on investment. New investors in Safeway would become involved in this process, but we are confident that they will continue to consider San Francisco an important place for Safeway to invest.
Translation: We don’t really know yet.
The La Playa Safeway location presents an interesting opportunity for Cerebrus when it comes time to evaluate. That’s because Safeway owns the entire square block of land that the store sits on, which in the current San Francisco real estate market, is a very valuable piece of property that is highly attractive to developers.
Of the roughly 1,300 stores that Safeway operates, mostly on the West coast, they own about 48 percent of those locations and lease the rest, according to its annual filings [SFGate].
For a private equity firm like Cerebrus, whose primary goal is to make money for its investors within five years or so, selling a valuable parcel of SF real estate to a developer may make more sense than remodeling the aging store.
However, the La Playa Safeway also occupies a unique position in the outer Richmond and even outer Sunset as one of the largest grocery stores in the area with plenty of parking.
And with the planned remodel to include selling off the north end of the property to a developer for condominium construction, it may prove to still be an attractive investment to Cerebrus. After all, Safeway is already one of the nation’s top performing supermarket chains. Remodel the store to drive long term profits, and in the meantime, see a short term gain by selling off some valuable SF real estate on the north end.
With the Safeway sale to Cerebrus still pending, it’s a little early for the company to definitively say what will happen to the La Playa location. But given all the work and community input that has gone into the project already, here’s hoping it stays on track and brings a much needed revitalization to an important retailer in the outer Richmond.
More reading: With Cerberus, Safeway may get revitalized, or lose assets [SFGate]
5:03 am | Posted under Business
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