UNFI sells the real estate of 15 Cub Foods locations

Unable so far to sell the 79 Cub Foods stores it owns, United Natural Foods Inc. (UNFI) has found an alternative to glean cash from the supermarket chain.

UNFI Chief Executive Steve Spinner announced on Wednesday that it will sell the real estate of 15 Cub stores for $170 million. The sale represents 1.1 million square feet of retail space. It is expected to close by August.

As part of an agreement with the unidentified buyer, UNFI will then pay rent on the store spaces.

"There won't be any noticeable changes in the stores," said UNFI spokesman Mike Wilken. "It's just the real estate changing ownership."

Until the sale closes, UNFI is not releasing the locations of the 15 stores.

UNFI purchased Eden Prairie-based Supervalu for $2.9 billion in 2018, chiefly to bolster its wholesale business with Supervalu's. But it also gained the firm's retail chains — the biggest of which is Cub, the market leader in the Twin Cities — and Supervalu's debt. Both have been burdensome to UNFI and its executives have sold most of Supervalu's other retail assets, including Shop 'n Save and Farm Fresh in St. Louis and the mid-Atlantic states. Last year St. Cloud-based Coborn's purchased the Hornbacher's chain in the Fargo-Moorhead area.

In a conference call with investors on Wednesday, Spinner said the proceeds from the real estate deal will be used to "repay outstanding debt."

The timeline for the sale of the stores, which Spinner expected to occur in early 2020, has now been extended to the end of 2020.

"You don't have to be a rocket scientist to figure out that this is a really tough climate to sell retail and Cub is an incredibly strong banner," Spinner said. "It's No. 1 market share, makes a lot of money, it throws off a lot of cash. And so we're just not going to give it away. The process is taking longer than I think we had expected, just because of the general climate within retail."

In addition to Cub, UNFI also owns the Shoppers grocery chain. In the last several months it sold 19 of 43 Shoppers stores, located in the Washington, D.C., and Baltimore areas. Fifty-three Cub stores are corporate-owned. The remainder are independent.

John Ewoldt • 612-673-7633