Dive Brief:

• Amazon has assumed leases for a pair of Fairway Market stores in the New York metropolitan area from the bankrupt regional supermarket chain, which has concluded an auction of some of its assets, according to a press release. Amazon paid $1.5 million for the leases in the New Jersey communities of Paramus and Woodland Park.
• Fairway also sold five stores, including four in Manhattan, and its production and distribution center to ShopRite operator Village Super Market for approximately $76 million. Seven Seas Georgetowne, a Key Food member, acquired a Fairway location in Brooklyn for about $5 million.
• All of Fairway’s 14 locations, including the six sold to Village Supermarket and Seven Seas Georgetowne, will remain in operation for the “foreseeable future to accommodate the current public need for its products,” according to the press release.

Dive Insight:

The latest development in the Fairway Market saga has given Amazon an opening to the nation’s largest urban area as it prepares to launch a new grocery chain. Although details about how Amazon plans to use the real estate it is gaining have yet to emerge, the company’s decision to bid for the sites in New Jersey in the bankruptcy auction are a strong hint that Amazon has its eyes on the New York grocery market.

Amazon reportedly plans to open the first store in the new chain in Woodland Hills, California, near Los Angeles, this year, and is interested in building stores in Chicago, San Francisco and Philadelphia. The company also opened its first checkout-free grocery store, Amazon Go Grocery, last month in Seattle.

The bankruptcy auction brought in more money for Fairway than the company originally said it had been offered for its assets. The grocer said it had received a bid of $70 million from Village Super Market for as many as five stores and the distribution center when it announced that it was entering Chapter 11 bankruptcy in January, but Bogopa Enterprises, which operates the Food Bazaar chain, said in March that it was willing to pay $75 million for six stores and the logistics facility.

The bidding ultimately yielded a total of about $81 million for six locations and the distribution center from Village Super Market and Seven Seas, with the money Amazon is paying coming on top of that.

The dispersion of some of Fairway’s assets as the company looks to settle its finances caps a tumultuous few years for the grocery store chain, which ran into financial difficulty after trying to expand beyond New York and discovering that its distinctly urban model was not as attractive to suburban consumers. Fairway, which was founded in 1933 and went public in 2013, is going through its second round of bankruptcy in five years.

Fairway has been guided through the auction process by New York-based PJ Solomon, which is also advising specialty grocer Lucky’s Markets as it undergoes bankruptcy proceedings. Lucky’s, which declared bankruptcy in January, is looking to sell as many as 11 stores to Publix and Aldi in an auction expected to occur today.