Lamperts Looking to Real Estate
By George Anderson
For many in and around the retailing business, the name Lampert connected to real estate for sale automatically brings to mind Edward Lampert, the chairman of Sears Holding, and his history of selling off company real estate assets to bolster Kmart’s bottom line.
This particular story, however, has nothing to do with Sears, Kmart or Edward Lampert. According to a report in The Business Journal of Minneapolis and St. Paul, Lamperts is an expanding chain of retail lumber stores that is seeking to sell up to 49 percent of the land those units sit on to finance new store development.
President and owner Dan Fessler said this was a new approach for the 37-store chain, but one that should increase the stake employees have in the company’s performance. “We currently own all our own real estate, and we thought it would be advantageous for both ourselves and our employees to try this,” he said.
The retailer plans to build an additional 10 stores over the next five years at a cost of up to $5 million for each unit. “If you can share some of that cost with someone else,
it allows us to build more with the same nickel,” said Mr. Fessler.
Moderator’s Comment: What do you think of Lamperts’ plan of selling land to employees to help finance company growth?
We bet Kmart employees wish they had this deal before their own Lampert began selling off property. –
George Anderson – Moderator
Assuming that this land is the kind of real estate that is not at risk and will definitely appreciate, sounds like an interesting opportunity for both the business and its employees. I find myself wondering what happens if a particular store fails on one of the employee owned sites. Who is in charge (and has the final say) when it comes time to negotiate a new deal and do the employees have any vote in this (with a 49% stake)? I am also curious about how the employee recovers his investment if she or he wants to cash out.
Sounds like a cheap interest free loan to me. What good is owning land unless you are going to get some rent payback? How much will the employees have to pay for the land? Will they get to buy their share at fair market value? Who determines the price of the land? How do they get their money out if they want to liquidate?
Why not convert the company into an ESOP? Or sell bonds to the employees that pay above market interest rates? Am I missing something? How do the employees get compensated for their financial contribution? To me, this sound like only a novelty way to have ownership with no real plan on benefiting the employees. Reminds me of those commercials around Christmas where you pay to have a star named after somebody. Or the time Southfork Ranch from the old Dallas TV show was selling one square inch plots.
I’m with David; we’re too short on details here, but it sounds fishy. It is either well-intentioned or nefarious but somehow I doubt it’s a good deal for the employees in the long run. Given today’s real estate prices, and the fact that the land is by definition already priced in expectation of commercial development, and already has a designated commercial use, what’s the chance for appreciation? Why not sell shares in the company to employees instead? Then they at least have some effect on their investment.