Landover-based Giant Food Inc., a unit of Royal Ahold NV, the Dutch supermarket conglomerate that has been struggling in the aftermath of an accounting scandal, has sold a package of seven premier strip shopping centers, each anchored by a Giant supermarket, for an undisclosed price.
Netherlands-based Royal Ahold has been selling off noncore, and non-U.S.-based assets to pay down debt after accounting irregularities at Columbia-based subsidiary U.S. Foodservice caused the Dutch company to overstate profits by $856 million over three years. The Giant-anchored shopping centers were the first Ahold assets sold in the United States since the accounting troubles surfaced in February.
A spokesman for Giant said yesterday that the sale of the shopping centers, totaling 653,000 square feet, was part of a longtime strategy by Giant. GFS Realty, Giant's real estate development arm, sold the centers, all in the Washington metro area, to Columbia, S.C.-based Edens & Avant, the nation's largest privately held owner of grocery-anchored shopping centers.
"It's Giant's business decision," said Barry F. Scher, the spokesman.
"Periodically, we sell shopping centers as part of our normal business practice. We invest the money from the sale back into the business, which means monies for new stores and remodelings. ... It's routine business practice for us to do that, and we have done it for years."
A spokeswoman for Royal Ahold could not be reached late yesterday.
The sale of the centers - three in Maryland and four in Northern Virginia - leaves Giant with 25 centers it has developed and owns, Scher said.
The Maryland centers sold are Burtonsville Crossing and Neelsville Village Center in Montgomery County and Marlboro Crossroads in Prince George's County.
The sale was "not surprising, in light of the fact that they're [Ahold] going to be looking to focus primarily on the supermarket business," said Jeff Metzger, publisher of Columbia-based Food World.
He said he would expect, "given the financial situation and the debt out there, that they'd reprioritize toward using assets toward supermarket investment."
Giant's real estate is probably the biggest asset that could be sold and reinvested in the supermarkets, he said. Owning and operating supermarkets has been de-emphasized since Ahold bought Giant Food in 1998, he said.
The centers are all considered desirable real estate because of their location in areas with strong growth, incomes and population densities, with a limited number of sites where competitors could open stores, said Kevin Barrett, a principal at commercial real estate brokerage KLNB who specializes in retail investment sales.
Grocery-anchored properties, especially those of around 100,000 square feet, including a 60,000-square-foot supermarket, are considered extremely safe investments.
"Those projects have been very, very stable and have sold for very high prices," Barrett said.
"They've been a staple of the investment activities for retail ... over the past three years."
Even with Royal Ahold's financial troubles globally and at U.S. Foodservice, "Giant is still by far the dominant grocer," Barrett said.
"They have the best real estate locations and the best operations."
Giant has sold 10 of its centers in the past three years, Scher said, and has no plans to get out of the shopping center development business. GFS last built a Giant-anchored center last year in Charlottesville, Va., and has additional plans in the pipeline, he said.
"We have been proud of our prior activities, which will continue, of building shopping centers and eventually selling them ... and using the funds for new store development and remodeling," he said.
Edens & Avant said the Giant centers will complement the company's existing properties, boosting the number of mid-Atlantic-based centers to 36. The company owns 232 grocery-anchored shopping centers in 20 states.
"We are building our asset base in the mid-Atlantic, especially around Washington, D.C., and Baltimore, and we've been an active acquirer of assets," said Terry S. Brown, chief executive officer.
The company last year bought Golden Ring Plaza Shopping Center, a 158,926-square-foot center in Rosedale anchored by Giant Food and Kids 'R' Us, for $15.9 million from Pence-Friedel. The company is developing what will be a Safeway-anchored center of more than 95,000 square feet just outside Arundel Mills mall in Hanover, to open in the first quarter of next year.
Giant's market share
Edens & Avant was interested in the Giant centers because Giant has a more than 38 percent market share in the Baltimore and Washington area, Brown said.
The occupancies range from 95 percent to 100 percent, and the centers, which average 95,000 square feet in size, have all been developed or redeveloped recently.
"They're great, well-located core in-fill assets," Brown said. "These are all great-performing Giant grocery stores."