Whole Foods Can’t Do It Alone (In Gowanus)

wholefoods-1008.jpgGowanus Whole Foods isn’t dead, as we speculated last month, it’s just very badly burned. The supermarket needs a developer-partner to finish the job at Third and Third, reports the Brooklyn Paper. But what does that mean? A mini-mall? Another Toll Brothers-style mixed use development? The Fairway model, with residential units above? Nobody knows, since this mysterious developer isn’t named, and since the rezoning of the area is still in progress; if the current plan goes through, the Whole Foods site would be restricted to commercial and manufacturing. Not surprisingly, the root of the problem is money. To get a loan, you need an enormous amount of cash, said commercial broker Chris Havens. It’s not worth it to them to put cash in the building.
Whole Foods Needs a Partner on Gowanus Job [Brooklyn Paper]
Gowanus Whole Foods Looking for Breeding Partner [Curbed]
Photo by mhwolk.

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  • I shopped in the new, vast, Whole Foods on Greenwich St. near the West Side Highway (cross street is Warren St. maybe?) yesterday and I was floored. Outside of ALL of Battery Park City’s stroller kids seething and screaming, demanding their sesame noodles with cucumber maki or whatever precious morsels they weren’t getting fast enough, it was an amazing event. Its near a ton of trains, parking sort of exists (standing definitely does) and best of all it was nearly empty (except for the aforementioned hollering, echoing stroller babies).

    Although just as overpriced as everywhere else, the fish and meats looked great, the market is the biggest one I’ve seen in Manhattan, it was clean, accessable and just a delight. THere wasn’t even a line!

    Who needs a Gowanus Whole Foods? You can’t get there from anywhere anyhow.

  • Even with Whole Foods profits losing last year and with the general economy in the tank, lets not forget that Whole Foods is a 5 billion $ company. Why they can’t scramble the dosh to do this project is beyond me.

  • well, it may not be dead dead but it sure is on life support. Developers need loans to build. The current loan market is beyond dead. It means that any development is decades away at best. They have decided this is too expensive a project for whole foods with limited returns. So they will turn it over to an unnamed developer so their only exposure is the lease they will sign.

    How many years down the road is this? they have plans they have spent much money and have decided to not walk away completely but to turn it over to someone else. Yep its not dead….really.

  • It’s only a flesh wound.

  • Whole foods owns the land. They are not going to walk away from this property. We are not talking about some rinky dink company here. They will get it done.

  • In a decade or so, if we’re lucky. And no matter how big a company they are, who knows if Whole Foods will even be around by then? I predict a mini-mall with a K-Mart will be there by 2017.

  • “Even with Whole Foods profits losing last year and with the general economy in the tank, lets not forget that Whole Foods is a 5 billion $ company. Why they can’t scramble the dosh to do this project is beyond me.”

    Do you really not understand?

    How are they a 5 billion $ company?

    There current market cap is 1.6 billion and there stock is off 75% in the last year. For the July quarter they had negative cash flow and $34,000 in net income. They haven’t announced numbers for their Sept. quarter, but it is hard to be optimistic about them. And with the credit market gone to hell, they either can’t borrow or can only borrow on lousy terms.

  • there = their…

    First, word processors convince us all we don’t have to be so careful with our typing since it is so easy to edit. Then online forums don’t let us edit.

    Sigh.

  • Northsloperenter-

    “Do you really not understand?”

    Well, actually I do understand pretty well, I think.
    Here is an article, oddly enough from -today’s- New Yorker:

    http://www.newyorker.com/archive/2006/05/15/060515crat_atlarge

    And yes, I do understand how market cap differs from total revenue.

  • Note the date on that article: May 15, 2006.

    A bit out-of-date, no?

  • ? Article is from 2006. ?

    It quotes their share price at $62. It is currently $11.

    Oh, and I’m an idiot cause their july quarter was $34,000,000, not $34,000.

    Revenue is a dicey thing. In 2007 they had 182 million net income with 6.5 billion in revenue.

    It just doesn’t seem like they have the cash flow to fund expansion without borrowing or having partners.

  • It will take a partnership – like everything is trending these days – reducing exposure and increasing the equity to get a loan. Whole Foods will put up the land as collateral and a developer will build it with some cash and more borrowed money. They work out a deal where they both reduce risk and hopefully profit something in the end with different ownership percentages and then they can sell or hold their stake in the end. This will happen but it will take more time.

  • apologies due…

    I found the article online and cited todays date from their ledger. My bad.

    But I see my original $5 bil revenue is $6.5. But whats a bil and a 1/2 amongst good friends?

  • Two tidbits from the Financial Times:

    Whole Foods Market Inc (WFMI:NSQ) set a new 52-week low during today’s trading session when it reached 11.44. Over this period, the share price is down 75.55%.

    Over the last five years Whole Foods Market Inc (WFMI:NSQ) consistently underperformed the Dow Jones Industrial Average index.

  • daveinbedstuy

    First of all, both market cap ($1.6B today) and revenue ($7.9 B over the Last 12 Months) have nothing to do with profitability and ability to expand.

    here’s how cash flow works: These are the Latest 12 Months numbers…

    Net Income $ 146 MM
    + Depreciation 237 MM
    - Dividends (106)MM
    ———
    Cash Flow 277 MM

    They have been investing (capital expenditures) at the rate of $536 MM over the latest 12 months so that means that cash flow does not cover capital expenditures and they will need to continue to borrow. Long-term debt has risen steadily over the past 12 months from $970 MM to $1,094 MM with Equity at $1,504 MM. Not that risky a capital structure but they are surely seeing a few things:

    A slowdown at the top line
    Higher operating costs
    Tougher credit markets

    I didn’t bother to check to see what they’ve said about reducing store openings or closing some existing stores but the current level of profitability and the current capital structure ARE NOT a hinderance to going forward with this project. That said, I’m sure its the most problematic of all the potential locations for issues like DOB and DEP.

  • Thanks Dave. Nice to hear from somebody who has a better grasp of these things.

  • another Thanks to Dave.

    A few of us here have the skills, um…to pay the bills.

  • Never going to happen….the location is simply too difficult to build on profitably