U.S. Bankruptcy Judge James Garrity approved the sale of eight Fairway Market stores along with the retailer’s Bronx production distribution center (PDC) for $82.5 million. At a telephonic hearing held on April 14, the veteran bankruptcy judge affirmed the results of the auction that was held on March 25.
At that time, Village Super Markets successfully bid for five Fairway stores. That bid, which Judge Garrity has now certified, included four of Fairway’s five Manhattan stores (Upper West Side, Upper East Side, Chelsea and Kips Bay) as well as PDC in the Bronx for a purchase price of $76.2 million. That differs slightly from its original “stalking horse” bid which included all five of Fairway’s Manhattan units (its Harlem store is not part of this deal, although Village agreed to purchase the parking lot adjacent to that store). It does, however, also include Fairway’s Pelham Manor, NY unit (Westchester County) that both Bogopa and, reportedly, originally Amazon bid on.
Judge Garrity also confirmed that Georgetowne LLC, a Key Food member owned by brothers Paul and Pat Conte, is the new buyer for Fairway’s store on Ralph Avenue in Brooklyn which Fairway opened in October 2019. The Conte brothers operate about a dozen stores in Manhattan, Brooklyn and Queens including three Food Emporiums (former A&P-owned stores) in Manhattan. The Ralph Avenue location was another A&P property (Waldbaum’s) that Fairway had acquired at auction.
Additionally, Amazon Retail LLC has purchased the real estate leases for the Fairway stores in Woodland Park, NJ and Paramus, NJ. Sources told us that the e-commerce giant, which owns Whole Foods and is set to launch a new, yet unnamed supermarket model, will likely open those two Garden State stores in late 2019 or early 2020 after extensive remodeling.
Seven Seas’ winning bid for the Georgetowne store in Brooklyn was approximately $5 million.
Amazon’s successful bid for the leases in Paramus, NJ and Woodland Park, NJ was $1.5 million.
Bogopa (Food Bazaar), which sought to acquire six stores from Fairway as well as the Bronx PDC by making a late “overqualified” bid for $75 million, was shut out in the bidding process, although it had been listed as back-up bidder for the stores and the PDC.
And Amazon, which reportedly was interested in four stores – Pelham Manor, Brooklyn (Ralph Avenue) and the two New Jersey stores, was only successful in gaining control of the latter two units, although it had been listed as a back-up bidder for the Ralph Avenue unit ($4.6 million for the lease only).
The financial breakout of Village’s purchase is: $27 million for the Upper West Side/Broadway location, plus an additional $1.89 million in inventory; $27 million for the Upper East Side/86th Street Store, plus an addition $1.4 million in inventory; $2.6 million for the Kips Bay/2nd Avenue store, plus $1.42 million in inventory; $4.1 million for the Pelham Manor store, plus $1.84 for the inventory; $100,000 for the parking lot at the Harlem store; $0 for the Chelsea/West 25th Street store, but $920,000 to acquire the supermarket’s inventory.
Village, controlled by the Sumas family, currently operates 30 ShopRite supermarkets and three Gourmet Garage units in Manhattan. It is Wakefern’s second largest member and its only publicly-traded operator.
Fairway Market said it will continue to serve its communities by operating all of its stores, including stores not sold during the court-supervised auction, and intends to do so for the foreseeable future to accommodate the current public need for our products.
“We are pleased with the outcome of the auction and are grateful for our dedicated and hard-working employees, suppliers and distributors during this process which has taken place in these unprecedented times,” said Abel Porter, CEO at Fairway Market after the auction process was completed. “Serving our community has always been our top priority and we remain committed to providing quality items and a safe shopping environment for our customers and our employees during this global health crisis.”
According to court documents, 38 parties offered bids for the high-volume units.
With the auction results made public, that leaves six stores that did not receive offers (or successful bids) including units in Westbury, NY; Plainview, NY; Douglaston, NY; Brooklyn, NY (Red Hook); Manhattan, NY (Harlem) and Stamford, CT. As the process evolves, there’s likely to be a second round of bidding or even direct negotiations between landlords and interested parties.
Judge Garrity also approved a recommendation by Fairway to allow $1 million for bonuses to nine senior executives as part of the retailer’s key employee incentive plan (KEIP) and an additional $1.2 million to 25 associates as part of the company’s key employee retention plan (KERP). Fairway stated that the bonuses would not be activated until the bankrupt firm reached $110 million in asset sales.
Those bonus requests were originally contested by U.S. Trustees Offices and UFCW. However, the union backed off its stance when Fairway agreed to allow $70 million in claims from the union’s pension plan and also provide associates who have been laid off due to store closings two months of health care coverage and up to four weeks of severance pay.