Friday, August 31, 2012

Lessons From Rental Housing: Baptized In The Shit.

Since a lot of readers seem to like my stories about rental housing, I have decided to write a few more. Hopefully, there will be some knowledge gained from my somewhat limited experiences. If any of them can save someone from a bad deal, or give them some input and perspective on a problem that they may be facing, I'll be thrilled.

My first real experience being a landlord came on the third unit that I bought (having only my duplex up to that point). The dwelling was a townhouse that was just a touch under 1,400 square feet, had 3 bedrooms, 1.5 bathrooms, and was in decent shape. It was one of my favorite deals to negotiate, as it was a "for sale by owner" where the previous owner and I negotiated the deal over drinks at a Starbucks. The seller was a lady that reminded me a decent bit of my mom, and even made a comment at closing about how she wouldn't mind being able to call me her son. For the financial info on the property, I paid $35K in cash for a house that would produce an average of $600 a month in rent, less a $72 dollar per month HOA fee. Not too shabby when the HOA covers all exterior maintenance (including the roof) and does grounds keeping. Sure, the area was rough, but rough in Lexington, KY isn't THAT bad. Considering I was going to be able to leverage it up for $45K in just a few months, I was pretty excited about the whole deal... Geeze, I miss the bubble days in real estate!

I did a minimal amount of work to the place; as I recall, I basically just put in some smoke detectors, flushed the hot water heater, changed all the vent registers and oven pans, replaced a bad water shutoff, repaired some cabinets, and painted the place- even though it didn't need most of those items. I justified a lot of this stuff as an easy, quick, and a relatively cheap way of learning how to work on houses as I hadn't done too much of that before.

A few weeks later, I had my first tenants in the unit. They both worked at a Waffle House that was within walking distance and recently welcomed their first child to the world. One of their brothers was to occasionally stay there, as well as one of their mothers. A few days after signing the lease, I got a call that I have since become accustomed to getting: "Hey Jeff, um... we have a problem."

"Hey man, what's up?" I responded. I am sure that my voice was shaking as I had no idea what to expect... that said, I was kind of excited because I knew that I was not only going to learn something new from this, but also fix a problem.

"Well, our toilet is overflowing..." the distressed renter responded in his eastern Kentucky drawl.

"Have you tried plungering it?" I questioned.

Thankfully, he was well ahead of me on that: "Yeah, and it just keeps going. It's the one downstairs and it even overflows when you flush the one upstairs..."

I said "OK. I'll be over in a few minutes" and headed to the door.

When I got there, I quickly smelled that they weren't lying about the overflow. There was a flood  water and pieces of human waste all over the bathroom and the carpet around the room was soaked... About all I could think at the time was "Well, shit..." While totally out of frustration, but was wholly appropriate for the situation at hand.

First things first: I had to get the mess cleaned up so that I could get to work.

I didn't yet own a shop vac or a toilet auger, so I went to Home Depot and bought the biggest wet/dry shop vac I could find; I even learned from one of the guys there about how it's always a good idea to take the filter out when you use it for wet settings. I bought the cheapest toilet auger they had. Honestly that was a mistake, but is a story for a different time. For some reason the price to value I thought I was getting was better with the shop vac. I also bought a bottle of the most potent drain cleaner that  I could find. It had skulls and cross bones all over it which were coupled with a ton of warning labels and even came in a sealed bag; it was marketing at it's finest, because the same stuff that came in a gallon container and sat right next to it lacked the eye catching glitz of death. Reading the label, it had some concentrated lye in it, so, I knew it should be good. As a side note, you should ONLY use that stuff on plastic pipes and NEVER get a good or bad whiff of it- as accidentally I learned, it burns!

About an hour after I left the rental unit, I returned to set up my shop vac and started to clean up. After mopping the floor, I augured both toilets for good measure and found nothing. The tenants said that their kitchen sink was running slow as well, so I dumped the whole bottle of drain cleaner in it, which quickly solved that problem. I knew that due to the run of the pipes, that if there was a clog past what I augured, that the main line cleaner I purchased would likely take care of it. In any case, everything was working fine again, so I figured that everything was cool.

Having just spent a hair more than $100 bucks on tools and fixing my first problem call as a landlord, I felt pretty darned good about myself. I told the tenant that I would be back the next day to steam the carpets, as by that time, it was too late rent a carpet cleaner. Working the next day worked out well for me, as I didn't have school due to convenient scheduling. Plus, I figured that it would set up a good rapport with the tenant as it showed them that I didn't mind doing what was necessary to keep my house in good shape. I went home, probably celebrated by drinking a hands worth of Miller High Life, and eventually fell to sleep.

Early the next morning, I awoke to a frantic phone call... Apparently, the same problem was happening again and was even worse than before. "Shit, shit, shit, shit, SHIT!" I thought as I drove over to re-diagnose the problem. When I walked in the front door, the place reeked and the tenants were wearing looks on their faces that had their own unique scents as well... The carpet was soaked. Water was running in the kitchen from the laundry room where the washing machine's drain had been overflowing... Having just turned 22, I had no clue as to what in the hell I was going to do. I knew one thing though. I sure as hell wasn't going to call my older brother for one micron of input on this one. Historically, I had called him for minor stuff on my own house and was bound and determined to do this one on my own- I had to learn this stuff without having my hand held like some 5' 11'' child. This was vitally important to me to fix on my own.

As such, I decided to turn to my real Big Brother: Google. After about 30 minutes, I was all but sure that there were tree roots in the sewer line. Water Maples are not only all over the place (and now illegal to plant) in Lexington, but are also notorious for growing into sewer lines. I  have since heard a story about the dad of one of my friends (in one of the most hilarious cases of passive aggression I have ever heard) planting a water maple in the front yard of a house that he rented while in school, because his landlord was a jerk. As it turns out, that house is on my street and while it may have taken a few decades, it totally had to have the sewer line replaced as a result.

As best I could tell, I had 2 options. First, I could have a plumber come out, dig up the sewer line, and replace it with a new one. That didn't really appeal to me as I didn't comfortably have the cash to pay a few grand for the repair since I had just tapped most of it in buying the rental unit. I had access to various forms of credit, but any additional debt that I took on I wanted to be for the acquisition of additional income producing properties (I was negotiating and on contract to buy more). Option number 2 was to hope that the tree roots weren't that bad and get an electric eel with blade attachment to cut the roots out. The latter seemed much more appealing.

I called the tool rental shop down the road and found the equipment I needed- an hour, a few miles, and ~$45 later, I was back to the townhome to roll the dice. When I unloaded the eel, it sure was a lot more bulky and heavy than it looked at the rental store (where they also loaded it in my truck for me). I quickly found that it was impossible for one person to get the thing into the crawl space under the house, which was further complicated by having to down some steps that sat in the crawl space from the small and awkward entrance door. At this point, I wasn't even sure if the eel would fit through the hole that I had to work with, as I had never thought to measure anything. Eyeballing it, I thought I could squeeze it in. I had little choice in the matter, because I was worried that an extra 20-30 feet of pipe for the snake to to through (by say, taking up the toilet to run the line down) would render the cutting mechanism useless as you don't want a hole lot of give in the cable. I was again forced to leave, and went to get my room mate and bribe him for help.

Once back the the site, we did basically everything but lube the auger up to fit it through the crawl space door. Once down the steps, we set up the machine and ran a freshly bought extension cord to power it. I then took my band new Husky Pipe wrench in the dimly lit and musty smelling space and started to take off the clean-out to the main line. I could hear every clack of the wrench, every movement of the fitting, and every one of my nervous breaths echo off the plastic vapor barrier and cinder block walls. Every movement I made only delayed the shit storm that I knew was getting ready to happen.

Then, in a way that I don't think anyone has experienced since Moses collapsed the Red Sea on the Pharaoh's army, a flood of wastewater came gushing out of the pipe... My roommate jumped back and cupped his hand over mouth and nose- I couldn't tell if he was laughing or getting ready to puke. I just kind of stood there, as there was no escaping my fate. Ankle deep in shit, I said "Well Joe, this is the life that I have chosen... Let's do this."

We took the auger and ran it down the pipe several times, every once and a while, coming to what I thought was the clog. It took persistence, but eventually we hit it (it takes a little bit to differentiate the "feel" of hitting a clog from a turn or oddly joined union). We turned the eel on and put the cutting attachment to work.

A few minutes later, we pulled the line out and pulled off a fist to softball sized clump of roots. I threw them to the ground and we put the auger back in the pipe. A minute later: the same result. We ran it until there was nothing left. I reassembled the pipe and cleaned up the floor with my shop vac. We then lugged the electric eel back to my truck, I dropped my room mate off back at my duplex, and then went back to the house to clean carpets... at the time, I didn't realize how lucky I was they were such an ugly color of dark brown, otherwise, no matter how clean I got them (they and the padding came out clean enough to eat off of), they would have been stained and in need of replacement. Sometimes, it's better to be lucky than good.

I got home after a trip to Lowe's where I bought some copper sulfate to put in the drain line hoping to kill any roots that I might have missed and to keep them from re-entering the pipe. Later, I found that I liked Root-X a lot better, as it fills the pipe with a coating of foam, rather than just scuttling along the bottom like the crystals of copper sulfate. I called the local dealer of Root-X and they were wanting something obscene, like $50 for a jar of the stuff. After some internet research, I found that Amazon was the place to get it.

That was one of the first times that I can remember thinking about how much money that I had just saved. If I had a plumber come out to look at the job, there is no way that they would have done what I did. I would have been out a few grand. Hell, plumbers generally don't even come out to so much as even look at a job unless you pay them more than I spent on the rental of the electric eel and carpet cleaner. Seeing this, it was evident that if I just had a willingness to do some minimal research, learn something new, and get a little bit (or, a lot) dirty, that I had a huge advantage over everybody else in my line of business. I had essentially just saved $2K, acquired some tools to keep and write off on my taxes, and learned a ton. Despite not getting paid, my time could easily be worth hundreds of dollars per working/researching hour... take that Wall Street!

It's been roughly 5 years since the incident and knock on wood, I have not had a single root related issue since. It probably doesn't hurt that the son of a bitch tree that caused the problem got cut down a few years ago by the HOA as well, per my request.

Regardless, I will never forget what I affectionately refer to, as my "baptism in the shit."




Tuesday, August 28, 2012

Seeing A Show (or a 10K) From A Different Perspective.

One of the great things about the internet is that it allows you to get a ton of information and communicate with people that you normally wouldn't- this blog is a perfect example of that. At what point in history could a lanky kid from the foothills of Appalachia, with a degree in general studies, and a geeky interest in investing so readily get in touch with other investors!? The following post is yet another example of that... read long enough and this does actually get to investment stuff. :)

A few months ago, I was scouring around YouTube for videos of my favorite band: mewithoutYou. I saw that there was a person who had recorded a lot of shows at a venue in Cleveland called The Grog Shop; coincidentally, the user had also recorded one of mewithoutYou's songs at one of the shows that I was at a few years ago in Cleveland. After having a few drinks, I decided to message them through YouTube, asking if they had recorded a song called "C-Minor." One of the reasons I wanted to see it, was that Aaron Weiss (the band's singer) had changed some of the lyrics of the song and I remembered the performance being great.

A few emails and weeks later, the following was posted:


Needless to say, when I saw this, I got pretty excited. One thing that I didn't expect, is that I found it interesting that my own recollection of the song was a bit skewed from what actually happened. I was standing to the far left of the camera and remember the band playing the song a little bit tighter and not going off key at any point in the song (those little imperfections though, truly are some of the great things about live performances)... I also vividly remember Weiss and the crowd both being much more animated after he changed the lyrics of the song by saying "I just found out last night, that she got married this past Saturday." As I recalled, there were a bunch of people that moaned "ooooohhhhh...." as if to say, "Wow man... that's really fucked up... You must be pretty torn up." I was actually one of them- because, when going through a bunch of his lyrics, it seems like the one girl he loved wasn't with him.

I then remembered his response being "I kn-ooo--w!" Exclaimed in the sort of way that was as if he was implying "Yeah, finding out really sucked for me... I feel mournful about it, but, it's funny, because that's just how life is..." all while self deprecatingly taking a laugh at himself.

When watching the video, it became apparent rather quickly that my perception of what went on was exceptionally wrong... In the video, the crowd seemed to be kind of dumbfounded with a delayed response and he, the singer, saying "I know" in a manner that was quite different than I recollect; almost on the verge of just shrugging off some serious depression...

Now, I refer you to this video:



Jeff Tweedy (currently of Wilco and formerly, one of my favorites: Uncle Tupelo) talks at a show about the evils of recording live music- that the videos alter your memory of the show and such. Even hinting at the narcissism that they can entail by "proving" that you were there.

But here is the thing: I and some friends drove over 4 hours to see that mewithoutYou show and I altered the memory on my own! The recording actually got me closer to the truth, and that is the point. Do I really want to have a false perception of what happened in my life or would I rather know the truth? As bad as it can sometimes be, I always hope that I go with truth.

Anyway, I think that this is really valuable for looking at investments in several ways:

*It is really easy to fool yourself into remembering something one way, when it was clearly happening another. I don't know why I wanted to or why I created the memory to be a certain way, but I did. It could be for any variety of reasons; maybe I was thinking about some girl, maybe I was in a different mood because I generally drink when I am at shows and I hadn't had a drink that night, maybe the 4+ hour drive messed with me... Regardless, I was wrong.

*It is really easy to talk to people on the internet and get stuff that makes up the community that is the internet a lot better. This above example of a video of a show is a great example. I messaged "deftonium" on YouTube simply to say something to the effect of "hey, here is this thing that you probably took a video of that I think is great. Please put it up!"

*It might be worthwhile to occasionally re-scan all the 10Ks that you read on a company or re-listent to conference calls to see if there is something that you missed. Personally, I re-read/re-listen to stuff all of the time, just to challenge myself to find something that may alter my thesis.

*From a societal stand point there are a lot of concerns that should probably arise from biases that we create internally- whether intentional or not. When companies get robots to write news stories about financial matters to cater to certain audiences there are problems to come... What if I get a story that appeals to a preconceived bias that I likely have, when all I really wanted was to get something that was factual so that I would have correct information? After all, investing is all about making money, not about confirming incorrect beliefs. Certainly, there should be ethical concerns for the publisher of such catered stories as well- what if people lose money based on an article they read, that they took as fact? The investor should have done more homework, but, there is a certain expectation for factual information from a publisher; after all, that is why all publications will publish retractions and such- it's a trust thing! What if an investor makes money because of something getting confirmed to them, but the facts were actually different, and they think their hypothesis was right? That could be very disastrous in the future for them as well as they might invest based on some sort of variation of the confirmation or survivorship bias.

Forbes and the like aren't the only ones to blame either. Google is doing the same thing whenever they throw ads at us based on our emails, phone calls, apps we download, websites we visit, or blogs that we write/read...

It isn't that I have much of a solution for this observation as I simply feel that it is something that we should all try to stand guard against. Regardless, here's to changing memories.




Lessons Learned From Expecting Different Types Of Failure.

In what I think was one of my better posts, I talked of being contrary to the crowd of contrarians. This hits on a similar theme... part of growing as an investor is learning from the past- this is an example that has hit me recently that I thought appropriate to share.

It has been becoming more of worry to me that I have become so contrary that I immediately go against almost everything that other value investors say. Alone, this isn't bad, however, I feel that at times I am unable to totally make my own judgements on items that other value investors talk about first. Almost anything you hear will bias you. As an investor, it is your responsibility to recognize this and strive to make rational decisions. As part of this process, it has become evident to me that my best investments have been things that virtually no one else was in (or at least, talking about) or stocks where people repeatedly implied that my idea was a bad one due to lack of understanding the situation at hand. This has been both true in stocks and in my own real estate buying. With real estate, my best units on a cash flow basis are the ones that my bank doesn't like to lend on and sticks me with a refinance of 70% of the appraised value (which I thought was a lowball value in the first place) despite great margins and us having a great relationship. At times, I have questioned if I should alter my business model to accomodate what my bankers seem to want. Every time, the answer has implicitly been "no" as I don't want to do anything that makes me worse of a loan risk, even if my bank or their regulators don't get it. While I never really strayed too much with real estate, I did a touch with my stocks...

What sparked this post was my receiving an email from a reader, where in the course of conversation, he spoke of some of the trades that put him into the position of managing other people's money. To my surprise, one of them was a company called Charles & Colvard. I had previously thought that I was about the only person out there that had owned the stock (I previously wrote about not liking their memo/revenue recognition). In the course of emailing about the company and some other matters, I typed "CTHR turned out to be a home run for me. Something like 60 cents to $2.50 in a matter of months... I was WAAAAAY more lucky with that one that I have ever been good."

He responded with what was eerily almost the exact reasoning that I used for buying the stock: "You are the only value investor I've found who was also in CTHR.  I didn't find it until it had risen to $0.47 - but what happened was incredible.  As you know, they had $2.50/share in cash + gems, with basically no debt.  The new CEO came in with the share price around $0.60, and the Nasdaq was going to delist them if the share price stayed below $1.00 for another month.  So, they passed a share repurchase agreement - it was obvious that they were going to repurchase shares to push the price above $1.00 - and they had the cash to do it.  And, you could still buy shares for $0.80 even after the repurchase announcement!  I've still never seen anything like it.  It was almost a guaranteed 25% total return in 3 weeks - with very little risk.  Plus, there was the possibility of a decent business emerging."

A similar situation arose when I twice invested a decent bit of money in a regional airline called Express Jet. The first time, was a bet that was similar to my small but revolving SVU bet and was also an indirect speculation on declining oil prices, which promptly came close to doubling. Needless to say, anyone that is very familiar with how regional airlines generally preform, this bet turned out awful and ended with a huge loss. The second go around however, was based on a very similar premise to CTHR- despite being an airline, XJT was trading for something crazy like 1/10th of tangible book value- a whole lot of which was made up in cash. They were also purchasing back debt and buying stock to get their share price above a dollar due to a delisting notice... And they had more than enough cash to back it up. The first time, I lost a good bit of money- the second when I stuck with what I feel better doing, I made a good bit- actually getting back the money I had lost the first time, plus some.

As I stated at the beginning of this post, part of growing as an investor is learning from the past. If there is anything that I have learned, it is this: my favorite ideas have never been things like Supervalue or my first go around with XJT, where I figured if I made the bet enough times, I would win but fully expected to lose a few times in the process. I seem to do better with things that are super interesting to me due to cheapness and other factors- they often have a few catalysts as well, but that isn't a necessity. After all, it's important to really like your ideas as a contrarian, because you are generally implicitly saying when buying a falling knife "I am one of hundreds of millions, if not billions of people that could own this security... Out of all of them, I see something that makes me right whereas they are all wrong or missing something! Hopefully, I know more than the person who just sold me their fractional ownership of the company..."

A lot of my favorite ideas I have talked about on here; International Baler, Steak n' Shake, Syms, Farmer Brothers (long before the Barron's article), and to a degree, Charles & Colvard (to name a few). Others, I didn't talk about so much, as they were weird share repurchase stuff such as Phoenix Footwear was one of them or odd investments that I didn't think were really good for this blog- examples would be Carmart, Food Technology Services, or the previously mentioned Express Jet. They were all ideas where even if the company failed, I should be left with something or, likely a profit as a holder of the equity- Syms is a prime example of this, whereas is probably not the case if SVU fails.

Thankfully, I have remained diligent and weird speculative bets with a value tinge have been limited to a small percent of my portfolio and have been next to non-existent in the accounts that I manage- generally hovering in the mid to low single digits of the whole. But geeze, they sure seem to make up a larger amount based on the crazy toll they take on my psyche... Hell, it's probably the inversely proportional amount of news that said bets take up relative to my investment from where these bets are often associated with larger companies. There is just too damned much noise! It may be a form of reinforcement, but I honestly think that I "feel" more about Supervalu, whereas I "think" more about Sitestar despite having (literally) gotten part of Sitestar under my fingernails while doing some work on one of the company's houses.

Reading a ton of noisy news and other people's opinions makes you feel about things that are only meant to be rationally thought about.

As a hypothetical example of this, if Sitestar were to trade down by 50% in a day, I wouldn't care as I would probably be one of the people buying it. When SVU actually traded down by a similar amount when I was in Virginia getting ready to meet with Frank Erhartic of Sitestar, I got a weird feeling and was kind of frustrated despite what I was getting ready to do having much greater importance. The difference? SVU was complex in the wrong way, as it is and alway has been nothing more than an odds weighted bet. Sitestar on the other hand is a lot less complex once scuttlebutt is done and a feel for the future of the business is established. Does this mean that SVU is a bad bet at this point? No, I actually still hold on to some of it. Does it mean that Sitestar is a great one? Not necessarily, but I think so. However, it does mean that I know which one I would rather own when it comes to getting better sleep at night. This was also a cheap lesson for me, in that I learned a lot about my psyche without loosing very much money. Additionally, I may actually make some if SVU manages to get sold for a decent price. Regardless, I think I will end up winning in the end.

The bottom line? If I were a reader of this blog, I would expect for my future posts to get even more obscure- readership may dwindle, but I don't care (if I did, I would post about Wal-Mart, Microsoft, and Dell). I won't say that I will go to the lengths of Nate at Oddball Stocks for companies off the beaten track, but I am looking at companies with interesting balance sheets, income statements hide a lot of value, and yes, even some bankruptcies... I am almost sure that I am on a course that the market probably doesn't appreciate and that alone makes me froth at the mouth. Hopefully, it not only makes be better as an investor, makes money, and keeps me a bit saner. The beauty here, is that it also doesn't set me up to fail from day one due to my expectations that are built in to my brief soiree in "continuing bets" such as how I intended to do options and equity in SVU. Does this mean that I am permanently abandoning the idea? I probably won't completely, because I don't want the constraint; however, I will tread on these situations a lot more lightly in the future.

Best,

Jeff

Disclosure/Disclaimer: I own shares of SYMS, UWN, MPAD, SVU (and some options) and SYTE. I also own a fraction of a single share of IBAL that is owned by an investment partnership that I am a member of. I reserve the right to change my positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.


Wednesday, August 22, 2012

A New Board & CEO At Syms? Yes, Please!

Last night, this was filed in the Syms bankruptcy case. Of note, Andrew Sole will be a board member and Lauren Krueger (also of Esopus) will be CEO of the company (scroll down to exhibit 2, or scroll beneath my disclaimer). The hearing in regard to the plan is for the 29th of the month and will be interesting to see the outcome of. I'd imagine that there won't be any sweeping modifications to the plan.

I am really excited at the prospects that the company has. Furthermore, I am very interested in the company again. The rights offering to cash out Marcy Syms was simply genius. The board and managment that the new company will likely have is no doubt, top notch and incentivized to help shareholders more than ever, due to the previously mentioned rights offering.

The potential the the Trinity location has is huge and a great way to bet on real estate. While I, through an investment partnership, own less Syms that I ever have, I am strongly debating buying more as I have always been a fan of oddish real estate bets.

According to the plan, there is still a board vacancy, so get your applications ready. ;)

Disclosure/Disclaimer: I own shares of SYMS and SYTE. I reserve the right to change my positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.




Directors and Officers of Reorganized Debtors


Identity and affiliation of each known individual proposed to serve, after the Effective Date, as a

director or officer or trustee of Reorganized Syms.

(a) Andrew Sole - Mr. Sole shall serve as a director designated by the Equity Committee.
Mr. Sole is a shareholder of Syms Corp. and a Founder and Managing Member of Esopus
Creek Advisors, LLC, the general partner of Esopus. Funds managed by Esopus are
shareholders of Syms, a member of the Equity Committee, and a Backstop Party under
the Equity Commitment Agreement. Mr. Sole serves as a representative of Esopus on the
Equity Committee, and in that capacity, serves as the chair of the Equity Committee.
Prior to the founding of Esopus in August 2005, Mr. Sole was a managing member at two
predecessor funds, Esopus Creek Partners LLC and Esopus Creek Capital LLC, from
March 2003 until July 2005. From 1991- 2002 Mr. Sole was a principal and founding
partner of LSY Associates, a New York based private investment partnership, which
invested primarily in small and mid-capitalization public companies. Mr. Sole has over
twenty years of investment management experience, including investments in distressed
and non-distressed assets. During his tenure at Esopus, Mr. Sole has represented the
Esopus funds in various bankruptcy cases including as a member of the Official Creditors
Committees of Refco Inc., Fedders Inc., and Six Flags, Inc. Mr. Sole also served on the
Official Committee of Equity Holders in the USG Corp. bankruptcy case. Mr. Sole
received his J.D. from the Benjamin N. Cardozo School of Law at Yeshiva University
where he graduated cum laude and was a member of the Order of the Coif honor society.
Mr. Sole received his B.S. in Mathematics from Union College in Schenectady, New
York.

(b) Marina Shevyrtalova - Ms. Shevyrtalova shall serve as a director designated by the
Equity Committee and/or the Backstop Parties under the Equity Commitment Agreement.
Ms. Marina Shevyrtalova is currently the Portfolio Manager and a member of the
Investment Committee at DS Advisors, LLC, which is a shareholder of Syms, a member
of the Equity Committee, and a Backstop Party under the Equity Commitment
Agreement. Ms. Shevyrtalova serves as a representative of DS Advisors on the Equity
Committee. Prior to joining DS Advisors in 2009, Ms. Shevyrtalova was part of the
investment team at Barington Capital Group, an investment firm experienced in taking
active roles in assisting companies in creating and improving shareholder value. Prior to
that, Ms. Shevyrtalova was a Portfolio Manager and Vice President at Lehman Brothers
Equity Capital Management Group where she focused on investing in undervalued
equities, special situations, and turnarounds. Ms. Shevyrtalova started her career in
capital markets as an investment banking professional. Ms. Shevyrtalova graduated with
high honors from New York University with dual degrees in Finance and Statistics and
Operations Research and she received her MBA from Harvard Business School.

(c) Richard “Mick” McGuire - Mr. McGuire shall serve as a director designated by the
Equity Committee and/or the Backstop Parties under the Equity Commitment Agreement.
Mr. McGuire is the Founder and Managing Member of Marcato Capital Management,
which is a shareholder of Syms, a member of the Equity Committee, and a Backstop
Party under the Equity Commitment Agreement. Mr. McGuire serves as a representative
of Marcato on the Equity Committee. As a Managing Member of Marcato, Mr. McGuire
manages a select number of passive and activist investments across all industries with aprimary focus on opportunities in middle-market public equities. Prior to forming
Marcato, Mr. McGuire was with Pershing Square Capital Management. He has spent his
entire career in private and public equity investing and holds an MBA from Harvard
Business School and a Bachelor’s degree in Economics from Princeton University.

(d) Alan Cohen - Mr. Cohen shall serve as the director designated by the Creditors’
Committee. Mr. Cohen is the Chairman and senior member of Abacus Advisors Group
LLC (“Abacus Advisors”). The Creditors’ Committee retained Abacus Advisors as its
real estate and asset liquidation consultants in these Chapter 11 Cases. Mr. Cohen has
more than 30 years of experience working with distressed businesses in all aspects of
their management and operations, serving as a consultant and advisor to numerous
Fortune 500 companies and many leading banks and financial institutions. He has been
an active participant in seminars on turnaround management and has lectured extensively
on restructuring and asset-based lending. Mr. Cohen presently serves as the Chief
Restructuring Officer of Filene’s Basement, Inc. and as the Residual Trustee of both the
KBTI Residual Trust (KB Toys) and the Friedman’s Creditor Trust. He has also served
as the court-appointed chapter 11 operating trustee of numerous companies, including
County Seat Stores and apparel manufacturer Russ Togs, which he operated and
subsequently sold to Liz Claiborne, Inc. Additionally, Mr. Cohen has served in a variety
of senior management capacities, including roles as Management Consultant to apparel
manufacturer and retailer Aileen, Inc., and as CEO of Health-tex, a major children’s wear
manufacturer which he operated for approximately one year and sold to VF Corporation.
Mr. Cohen has a Bachelor’s degree in Accounting from New York University.

(e) Independent Director - the fifth director shall be (A) designated and appointed on the
Effective Date by the mutual agreement of the Equity Committee and the Creditors’
Committee and (B) following the Effective Date, shall be nominated by the EC Directors
with the reasonable consent of the holder of the Series A Preferred Stock and, following
such nomination, shall be elected by the holder of the Series A Preferred Stock, voting as
a separate class to the exclusion of the holders of Common Stock and any other Preferred
Stock (the “Independent Director”), provided that such director shall (I) meet the
requirements of an independent director under the standards of the NASDAQ Stock
Market and (II) not be an Affiliate of (w) any Unsecured Creditor that holds a Claim in
an amount that is greater than $50,000, (x) any holder of two percent or more of the
Corporation’s Common Stock, (y) any Backstop Party or (z) any person or entity
included in the definition of the Redeemed Stockholder. As such, the initial Independent
Director will be a person mutually acceptable to the Equity Committee and the Creditors
Committee.

(f) Chief Executive Officer - Lauren Krueger shall serve as Chief Executive Officer of
Reorganized Syms and will receive a salary of $250,000 per year. Ms. Krueger is a
managing member of and joined Esopus Creek Advisors LLC, the General Partner of
Esopus Creek Value Series Fund LP, in April 2010. Prior to that, Ms. Krueger was a vice
president in the D. E. Shaw Group’s credit-related opportunities unit. She joined the D. E.
Shaw Group in 2003 and became a vice president in 2006. During her tenure at the D. E.
Shaw Group, Ms. Krueger invested in distressed and deep value securities, in both the
public and private markets. She served on the Board of Directors and as the Chief
Restructuring Officer of FAO Schwarz Inc. and on the Board of Directors of The Boyds
Collection, LTD (private equity holdings of the D. E. Shaw Group). From October 2006
until March 2010, Ms. Krueger served on the Board of Directors of Kid Brands, Inc.
(formerly known as Russ Berrie and Company, Inc.), a public company, where she was amember of the executive and compensation committees. While at the D. E. Shaw Group,
she also served on the Board of Directors of The Parent Co., a public company. Prior to
her work at the D. E. Shaw Group, Ms. Krueger was in the restructuring group at Lazard
Frères & Co. LLC, an investment bank, from 2002 to 2003. Currently, Ms. Krueger
serves on the Board of Directors of Eagle Hospitality Properties Trust, Inc. Ms. Krueger
received her MBA from Columbia Business School, where she was a member of the Beta
Gamma Sigma honor society, and holds an A.B. in Economics from Princeton University.
Ms. Krueger is an Adjunct Professor in the Heilbrunn Center for Graham and Dodd
Investing at Columbia Business School.

(g) Other Officers - Under the form of Certificate of Incorporation for Reorganized Syms,
the officers of Reorganized Syms shall be chosen by the directors serving as of the
Effective Date and shall include a president, a treasurer and a secretary. Subject to
decision by the directors serving as of the Effective Date, one or more persons from
Alvarez & Marsal may continue to serve as officers on an interim or transitional basis.

(h) Series A Trustee - The trustee of the Series A Preferred Share Trust shall be selected and
identified by the Official Committee of Unsecured Creditors prior to the Confirmation
Hearing.