Wants to Sell 124 Restaurants : W. R. Grace Hires Realty Firm
Eager but unable to sell off many of its weaker restaurants, W. R. Grace & Co.’s restaurant group has turned to a major Irvine real estate broker to help unload nearly 15% of its struggling units.
The Irvine-based restaurant division said Monday that it has signed an exclusive agreement with Grubb & Ellis Co. to sell 124 restaurants nationwide. The move comes more than two months after Grace originally announced plans to sell the units, most of which are coffee shops outside California.
Although New York-based Grace is best known as a chemical manufacturing giant, locally the company is more widely recognized for its El Torito and Coco’s restaurant operations. The units to be sold through Grubb & Ellis are primarily under in the Carrows, jojos and Coco’s chains. Grace officials have said that none of the Coco’s in California are on the block.
Restaurant industry analysts say Grace’s decision to sign an exclusive sales pact with Grubb & Ellis is unusual and signals continued troubles in the slumping restaurant industry. “There are more sellers than buyers out there,” said Robert T. Patterson, managing partner and restaurant industry specialist at Laventhol & Horwath’s Los Angeles office.
Unusual Method
Patterson said he has “rarely seen” restaurant units marketed through commercial brokers. “This is especially unusual at the chain level,” he said.
But Grace is wise to try to unload its unprofitable operations, Patterson said. “If I’m seeing anything in the industry, it’s people holding on to losers for too long. If Grace has a significant number of non-performing restaurants, getting them off the books is a wise thing to do.”
Grace executives did not return phone calls Monday. Chairman Peter R. Grace was in Irvine Monday for scheduled management meetings, according to an executive secretary.
In February, Charles H. Erhart Jr., vice chairman and chief administrative officer at Grace, said the company expected the struggling units to sell for a total of $30 million. The troubled restaurants lost a combined $5 million last year. But Grace’s 850-unit restaurant group posted net income last year of nearly $20 million.
Grubb & Ellis expects to sell the units “in a lot of separate transactions,” said Keith H. Karpe, the firm’s vice president of public relations. But because of the variety of restaurants involved, he added, “we will not be able to market them like industrial or office buildings,” their traditional stock in trade.
Two weeks ago, a Grace management team approached company officials with an offer of a leveraged buy-out of the restaurant division. Although no action has been taken on that proposal, which probably would not include the restaurants now on the block, Grace announced earlier this month that it will sell its retail division.
