Bankrupt Internet grocer Webvan Group Inc. transferred its lease on a 125,000-square-foot Fullerton distribution facility to Cardinal Logistics Management, which runs food for convenience store giant 7-Eleven Inc., according to real estate sources.
Cardinal will take over the remainder of a 10-year lease originally signed by online grocer HomeGrocer Inc. before Webvan acquired it. Seven years remain on the lease. Property broker CB Richard Ellis, which handled the deal for Cardinal, declined to comment at Cardinal’s request. Cardinal executives also declined to comment for this story.
The deal came as Webvan, which filed for bankruptcy this year, is preparing to sell off the assets from nine such distribution centers, which held modern sorting equipment and new office furniture among other assets. Webvan representatives held an equipment sale at the Fullerton facility last week.
“It has gorgeous racks and sorting systems,” said one broker familiar with the facility. “It really is a perfect and modern facility. The building was in a great location for them.”
Executives at Dallas-based 7-Eleven Inc. also declined to comment except to say that they have been looking at opening a distribution facility in Southern California “for some time.” The company told investors last quarter that it expected to open a distribution facility within 12 months.
“A distribution facility would give us a major advantage in the market,” said 7-Eleven spokeswoman Carole Davidson. “Right now our stores there don’t get daily deliveries, so they don’t get our fresh products.”
A new distribution center also could mean more stores in Southern California, though Davidson declined to comment about the company’s expansion plans.
The lease transfer marks the official conclusion of Webvan’s presence in OC, which doesn’t have much of an online grocery business now. WhyRunOut.com, a Web-based company that delivers products from local stores, has operations in OC, but at a much smaller scale than Webvan.
Webvan, which also had a facility in Irvine last year, had dramatically scaled back its operations in OC in the months leading up to its August bankruptcy filing. The company had hoped to streamline operations and get profitable before its cash ran out. The company, which acquired HomeGrocer more than a year ago, posted a net loss of $148 million on sales of $52 million at the time it took over the facility.
Even though it consolidated its OC operation to the Fullerton facility, Webvan had its work cut out for it. Building and operating a distribution network is expensive and difficult, analysts said. Webvan also stood to compete with big established deliverers such as United Parcel Service Inc. and the United States Postal Service as it looked to sell more than groceries.
The company was working to open similar high-tech facilities in 26 cities, each worth approximately $30 million. But Webvan, which needed to raise an additional $80 million to $100 million by last summer to open the facilities, couldn’t get the job done. The company’s chief executive, George Shaheen, former Andersen Consulting chief executive, stepped down in the summer. n
