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Atlas draws Fresh interest: Upscale grocery chain with a store in Carmel considers local expansion

April 10, 2006

North Carolina-based The Fresh Market Inc. has confirmed it's interested in the former Atlas Supermarket site at 54th Street and College Avenue.

"We are looking at expanding in that area and we're looking at a lot of sites," said spokesman Eric Blaesing. "[The Atlas site] is one of them."

He added that nothing is definite and "for every 100 sites you look at, you end up with one of them."

N e i g h b o r s hope they end up with a new place to buy tenderloins.

"[A grocery

store] is what most people want," said Doug Lawson, who founded the nearby Piano Merchant in 1986.

The Fresh Market opened its only central Indiana store in Carmel in February 2005. Blaesing would not reveal the store's sales, but said, "Indianapolis is a good market for us."

Indianapolis-based Kite Realty Group Trust purchased the Atlas property from embattled Indianapolis grocer Marsh Supermarkets Inc. for roughly $2 million in January, about three months after Marsh confirmed it had shelved plans to put an Arthur's Fresh Market on the site.

The location would make a nice fit for The Fresh Market, grocery analysts say. The company specializes in the sort of upscale produce and meats that kept the cash registers humming at Atlas for 55 years before it closed in 2004.

"The Fresh Market looks for upscale demographics and neighborhoods where real estate values would be strong," said Jim Hertel, senior vice president of Willard Bishop, a food-retail consulting firm outside Chicago.

Indeed, the demographics for the area around the Atlas site are almost identical to Lake Zurich, Ill., where The Fresh Market recently opened a store-fairly affluent and fairly young.

According to the Village of Lake Zurich's official Web site, the area's median age is 34.7 and its median family income is $84,125. Within one mile of the Atlas site, the average household income is $74,332 and the median age is 34.9, according to a demographic analysis prepared for IBJ by St. Louis-based Colliers Turley Martin Tucker.

Fresh Market stores also are typically 25,000 to 30,000 square feet, Hertel said, roughly the same size as the grocery Marsh had proposed building on the site.

And the North Carolina chain has been on an expansion spree. This year, it plans to add as many as a dozen stores to its current portfolio of 56.

The privately held company's revenue is also growing. It had sales of $200 million in 2000, according to the "Trade Dimensions Marketing Guidebook." By 2004, revenue had grown to $315 million.

Some people in the retail real estate community, however, doubt The Fresh Market can afford the site

One broker, speaking off the record, said the "obsolete" Atlas building needs to be torn down. New construction could easily cost $2 million, driving rent above $30 per square foot and making it unaffordable for one large tenant. Retail rents for newer properties in the neighborhood tend to be closer to $20 to $25 per square foot.

That could make the site a risky bet for a company in an industry with slim margins. Profits continue to be around 1 cent for each dollar of sales, according to the Washington, D.C.-based Food Marketing Institute.

Parking also remains an issue, insiders say.

The property owners aren't talking.

In early March, Kite Chief Operating Officer Tom McGowan said his firm was "continuing to work with the Meridian Kessler Neighborhood Association and attempting to come up with an acceptable use for the property."

The statement came two months after Jim Garrettson, president of MKNA, reported to IBJ that McGowan said he was in talks to put a Walgreen's on the site.

The idea didn't sit well with neighbors who supported Marsh's 2005 rezoning of the property with the handshake agreement that a grocery store would get built.

McGowan did not return calls for comment on this story.

"I know it's a really controversial site in town," said Jon Stafford, The Fresh Market's director of real estate.

It's unclear if Walgreen's is still in the running. A spokeswoman could neither confirm nor deny whether the company is looking at the property.

Oddly enough, The Fresh Market had sued Marsh Supermarkets over Marsh's use of the name "Fresh Market." Marsh operates two Arthur's Fresh Market stores in Indiana.

The Fresh Market claimed Marsh's use of the "Fresh Market" phrase was a trademark violation. A judge ruled in favor of Marsh in October.
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