Haggen’s Risky Expansion Largely Bankrolled Itself

The investment firm controlling regional grocer Haggen paid for most of the chain’s risky West Coast expansion by quickly flipping some of the real estate it got from acquiring 146 stores from Albertsons and Safeway, according to securities filings, court documents and county records.

That standard move from the private-equity playbook raised hundreds of millions of dollars and allowed the investment firm, Comvest Partners, to make a big bold bet without sticking its neck out too much. But it didn’t prevent the Bellingham-based chain from quickly foundering, putting thousands of jobs in danger.

“This is a fairly common practice among private equity funds,” says Jay Maddox, principal with Avison Young, a real-estate-services company. Maddox, who has advised clients in numerous Chapter 11 bankruptcies, says that in the Haggen case, the upfront sale of the properties “reduced the private equity fund’s risk exposure substantially.”

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