Erewhon Buys Its Santa Monica Store for $19.1 Million

What matters

1. Erewhon paid a huge price but this was not a normal real estate investment.Erewhon paid $19.1 million for a 12,500-square-foot building at 2800 Wilshire Boulevard. That comes out to $1,528 per square foot. At the time of the sale, Santa Monica retail properties were averaging about $765 per square foot. Erewhon paid almost twice that amount. A regular real estate investor would probably have a hard time to make these numbers work. But Erewhon is not a regular investor. It is buying the building for its own successful business. That changes the math.
2. Erewhon is using money from its operating business to protect its best locations.Erewhon opened this store in 2018. Eight years later, it bought the building from its landlord.If Erewhon remained a tenant, the landlord would continue owning the real estate made more valuable by Erewhon’s success. No outside landlord can eventually raise the rent. Erewhon paid up, but it removed that long-term risk.
3. The price may be easier to understand when compared with Erewhon’s sales.Reports have estimated that Erewhon stores generate approximately $1,800 to $2,500 in annual sales per square foot—far above the grocery industry average.  Impressive! That means it does 20-30M a year in that store.  That is only an estimate. Erewhon does not publicly report sales for this store.  The purchase price could be less than one year of the store’s gross sales
4. This is becoming a real estate strategy—not a one-time purchase.Erewhon has been buying more of the real estate it needs to operate. It paid approximately $12.4 million for its Glendale property. It paid $13.5 million for a Downtown Los Angeles building. It also acquired a major industrial and distribution property for approximately $51 million. Now it has paid another $19.1 million for Santa Monica. CoStar shows approximately $112.1 million of acquisitions connected to Erewhon over the past five years.