Bids exceed expectations for Haggen stores

Haggen stores far exceeded many initial bids in a “spirited auction” this week at the Hyatt Regency Century Plaza in Los Angeles that saw the grocer offered roughly $5 million more than originally proposed, according to lawyers who attended.

The troubled Bellingham-based Haggen Food & Pharmacy is not expected to submit paperwork on the bids until Thursday because of the Veterans Day holiday. The bids must ultimately be approved in bankruptcy court.

More than 200 lawyers, creditors and investors attended the auction in Los Angeles, said James Hill, an attorney with San Diego-based Sullivan Hill Lewin Rez & Engel, which represented a seller.

“There was pretty active bidding” he said.

Smart & Final was the big winner, ending up with 11 potential stores in San Diego County.

In many cases, initial bids were far exceeded. A Chula Vista store on Telegraph Canyon Road received a bid from Carnival Supermarket earlier this month for $600,000 but was offered $2.1 million at auction to Tawa, owners of Asian-themed grocery chain 99 Ranch Market.

An initial bid of $295,000 by Smart & Final for a North Park store on University Avenue ended up going to the grocer for $2.4 million in back-and-forth bidding with Orchard Supply Hardware. Multiple bidders led to a La Mesa store tentatively selling for $1.56 million to Albertsons — $1.16 million more than its initial bid.

The majority of stores were not up for auction, instead bundled in bulk offers from Gelson’s and Smart & Final. Although also still subject to approval and negotiations, the initial purchase price offered for cherry-picked stores from the grocers could bring in millions for creditors.

Gelson’s purchase price is listed as $36 million for eight stores, including locations in Carlsbad, Del Mar and La Jolla. Smart & Final is listed at $56 million for 28 stores, including spots in Chula Vista, El Cajon, La Mesa, several San Diego locations and San Ysidro.

The senior director of the Cushman & Wakefield brokerage firm, John Jennings, said he was not surprised the stores did well at auction because vacancy rates for big box stores are so high in the county that it can be a barrier to expansion. He said it would normally be next to impossible for the bidders to get the locations.

“This was a great opportunity for them to gain quality real estate at costs below what it may have initially taken,” he said. “They can come in in one fell swoop. It was a perfect strike for Gelson’s. Those locations for them are going to be home runs.”

Other bidders to put in for the stores not included in the bulk purchase were investment firms RJS Investment Group and Vestar.

Two stores, one in Poway and another in Carmel Mountain Ranch, were still in negotiations. Although most bid prices are now set, landlords and Haggen still have to come to agreement on unpaid rent, taxes and attorney fees.

Attorney Christine Baur, who represents the landlords of the Broadway Street store in El Cajon, said the positive auction numbers are probably a good sign for the upcoming sale of Fresh & Easy locations in San Diego County.

“The auction process appears robust and active, which is very beneficial for the company, its creditors, landlords, employees and customers,” she said.

Hill, who represents the landlords of the West Washington Street property, expects the process to move quickly through the court. Approval of any store purchase will not take place until Nov. 24, according to court documents.

This story was originally published November 11, 2015 at 6:48 PM with the headline "Bids exceed expectations for Haggen stores."