Sun Capital draining Marsh excess

A healthy portfolio of real estate helped make Marsh Supermarkets Inc. an attractive acquisition target for Sun Capital Partners
despite the local chain's struggles.

Now, the Boca Raton, Fla.-based private equity firm is hoping to unlock a chunk of that value by unloading what it sees as
excess real estate.

Marsh put 19 properties on the market in late February for a total asking price of $10.6 million. Up for sale are closed
stores, outlots and other retail buildings, all marketed by locally based Eclipse Real Estate.

It's not clear whether Sun has mortgages on the properties that would reduce its proceeds from sales. However, the private
equity firm appears to be well on its way toward using real estate sales to justify its $325 million Marsh purchase. Under
the deal, which closed in October, Sun paid $88 million in cash and assumed $237 million in debt.

Late last year, Dallas-based Cardinal Paragon Inc., an unsuccessful Marsh suitor, bought eight grocery locations from the
company for an undisclosed price, then sold them to Toronto-based H&R Real Estate Investment Trust for $78 million. While
Marsh signed 20-year leases to continue operating those stores, it does not plan to lease any of the properties now on the

Before the sale to Sun, Marsh owned about one-third of its more than 100 grocery locations, along with numerous other properties.
The real estate holdings give Sun a safety net in case it is unable to turn the company around, as well as a vehicle to raise
cash and pay down debt.

The properties now for sale are part of an effort by the company to cash out non-core assets, said Eclipse Real Estate principal
Bryan Chandler, one of the listing agents for the property.

"In the past, Marsh had held onto these as strategic investments for one reason or another," Chandler said. "The
new group is just looking at it in a different way."

The strategy of getting value out of real estate holdings is common for private equity funds, said Bob Shortle, president
of Indianapolis-based Periculum Capital Partners.

Shortle suspects Sun will continue to shrink Marsh's assets as it prepares the company for resale, potentially to another
grocery outfit, within a couple of years. Five years would be "long term" for a company like Sun. And it's not
looking for a modest payoff; annualized returns of 25 percent or more are expected.

"Their job is to take care of investors," Shortle said. "Create the most value, then get out."

In its 2005 annual report, Marsh listed the combined value of its land and buildings at $238 million. But in a February 2006
regulatory filing, Marsh said an appraisal showed its real estate was worth $100 million to $150 million more than the company
had listed in financial statements.

Marsh's real estate holdings led some investors to cry foul over the Sun deal, saying the private equity firm got the
grocery chain at a bargain-basement price.

Among the properties Marsh is now selling are four 1.3-acre outlots along State Road 37 in Noblesville listed at $750,000
each; a former LoBill shopping center in Greencastle listed at $2.15 million; and a half acre in front of the Marsh at 106th
Street and Michigan Road in Carmel listed for $1.2 million.

The company also is looking to find someone to sublease former Arthur's Market and LoBill stores in Danville and New

Eclipse already has talked with several potential buyers, including some interested in one property and others that might
want several, Chandler said.

Marsh spokeswoman Connie Gardner would not elaborate on the company's strategy.

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