SYMS stated that its net rental income reduced SGA by approximately 2% for the most recent fiscal year or approximately 1.5mm dollars (notwithstanding the argument of whether it is even appropriate to account for the rental income by reducing your SGA expenses, especially since the Company considers itself an “off price retailer”).

SYMS reported approximately 2.2mm dollars in operating income for the most recent fiscal year, thus 2 of 3 dollars SYMS generated in operating income last year was attributable to rental income. And if you look at recent years, rental income (assuming the net rental income has been the same for the last few years) has been a significant portion of its total operating income.

Should not the numbers speak for themselves about how SYMS should characterizes its business?

Sincerely,
Andrew L. Sole
Managing Member
Esopus Creek Advisors LLC

Sure, since Syms is not a developer real estate should be viewed in the overall context of the companies operations. However, Syms lackluster earnings record as a retailer should certainly raise some serious questions about resource deployment.

It appeards that, implicit in the Esopus assertions is that Syms was obscuring value so as to cheaply take the company private. One needs to look no further than the plunge in the stock price to single digits upon the de-listing announcement to understand how this is feasible. De-listing is like a kiss-of-death to public, non-control shareholders.

Thanks for your comment. What’s wonky is in the eye of the beholder, I suppose, but in any event this dispute has some unusual aspects and I’ll be following the story with interest. By mentioning the Syms argument that certain information was immaterial, I wasn’t intending to express any view as to which side has this right. The issue of what’s material to investors is, of course, far from simple and lawyers can make a nice income from arguing about it. Since what we do here is read SEC filings, I picked up the Marcy Syms quote because it neatly frames a big picture issue about disclosure. Best, Wendy

The Company recently paid $200 per square foot for air rights next to its lower Manhattan property. This implies , using the Company’s own transaction as a metric, that the undisclosed 175,000-200,000 buildable sq ft is worth no less than 35-40 mm in value. ( In fact market prices in nearby locations imply far larger valuations).

Assuming arguendo that the $200 per sq ft valuation represents the state of the current market, how does 35-40 mm in value relative to a company with a market capitalization of 230mm become an immaterial amount of real estate not worthy of a disclosure?

Furthermore, other than the Company’s disclosure regarding their leasing of a property in Westchester to another retailer, the Company has only now disclosed that it leases out swaths of its undisclosed owned real estate to third party tenants. Try to locate an earlier disclosure, you might be hard pressed.

And using the net rental income to reduce SGA expenses for a company which is a self described “off price retailer” gives an inaccurate portrayal of the true operating margins for the retail operations. No footnotes have ever disclosed the offset.

I would disagree that this is merely a “wonky” dispute.

Sincerely,
Andrew L. Sole
Managing Member
Esopus Creek Advisors LLC