WinCo pays $18M for a Tucson land position

WinCo Foods has paid $18 million for 11.59 acres at 5205 E. Broadway in Tucson, a three-parcel assembly near the Broadway-Craycroft corner that gives the Boise, Idaho-based grocery chain a property position in a city where it operates no stores. Sunbelt Stores sold the property, which totals about 505,000 square feet of land and nearly 120,000 square feet of existing buildings, in a transaction first reported by Connect CRE and brokered on the buy side by Edward Beeh of SRS Real Estate Partners.

The existing buildings are not empty: At Home, Angry Crab Shack, and Pei Wei Asian Kitchen occupy them, so the purchase buys an occupied retail asset rather than a vacant pad. But the more logical object is the ground under those tenants, given that WinCo runs more than 140 employee-owned warehouse stores, sells groceries in bulk, competes on low prices, and has no Tucson location.

Spread over the full 505,000 square feet of land, the $18 million price comes to roughly $35.65 a square foot; applied to only the nearly 120,000 square feet of buildings, it works out to about $150 a square foot. Those buildings cover just 24 percent of the property, leaving roughly 385,000 square feet of ground outside the envelope—the proportions of a site-assembly deal rather than an income-property deal.

What WinCo will do with the site remains unstated, and it doesn't have to be: if it builds, the grocer enters Tucson owning its dirt at about $1.55 million an acre in a market it has yet to serve; if it doesn't, the corner keeps its occupied retail and the tenants keep paying rent. Either way, the existing leases buy time while the property holds the right to become a store. That right is what the purchase secures, and the tenants currently writing checks on East Broadway are effectively paying WinCo to keep that option open.