Net Lease Landlords Win in Canceled Kroger and Albertsons Deal

A judge has blocked Kroger’s proposed $24.6 billion acquisition of Albertsons, highlighting that supermarkets are distinct from other grocery retailers. The FTC previously argued the merger would harm competition, raise prices, and weaken union bargaining power. However, the potential impact on landlords remains uncertain. Real Estate partner David M. Curry shared his insights with GlobeSt.com on how landlords could be affected.

From the article:

“News of the failure of the merger is mostly good news for landlords who count on these supermarkets as anchor tenants,” David Curry, a partner at law firm Farrell Fritz, tells GlobeSt.com. “The merger would likely have resulted in the closure of several stores for each brand, both underperforming stores and any locations in which both brands serve a given community.”

For example, says Curry, Albertsons has 134 stores in Arizona operating as Safeway and Albertsons. Kroger has 124 in the state, mostly under the brand Fry’s Food & Drug. Some of those stores would likely have had to close.

“Landlords facing supermarket closures face other challenges as well,” Curry says. “Leases often contain radius restrictions, both on the landlord and tenant side. Landlords do not want tenants having stores within a certain distance of their centers, as it inevitably leads to a decrease in foot traffic. Also, some larger tenants in these centers — particularly large chains with bargaining power such as national drugstore chains — want supermarkets in the centers in which they operate, and therefore have options to terminate if there is no supermarket anchor operating at the center.”

Read the full article on GlobeSt.com here:

Net Lease Landlords Win in Canceled Kroger and Albertsons Deal