Thursday, January 17, 2013

Trinity Place, A Bankrupt Xanadu, and Changing Leadership...

In the ever ongoing saga that is Syms/Trinity Place Holdings, the company recently went through a change in leadership. Since emerging out of bankruptcy, the CEO of the company was Lauren Krueger of Esopus Creek. In December, she notified the company of her resignation and that she would step down on January 11. In the same 8K, it was indicated that she and Esopus Creek were willing to aid in the transition of the company until March 1st.

Even more recently, the day after Ms. Krueger stepped down, the company announced in a single filing that it had elected Mark Ettenger to be the Chairman of the Board and is now basically the Interim CEO. TPHS also announced that the day after, Andrew Sole (of Esopus Creek) resigned, effective immediately... There was no mention of Esopus aiding the company in it's transition, which was noted just a month or so ago.

Given what as stated in the filing, it would seem that Mr. Ettenger has an impressive resume:

"Mr. Ettenger, 56, has been an independent consultant and private investor since 2006. He served from 2004-2006 as President of Mills Corporation (“Mills”), a publicly traded real estate investment trust. In this role, he chaired the Operating Committee of Mills among other responsibilities. Before joining Mills, Mr. Ettenger was a Managing Director in the Real Estate Department of Goldman, Sachs & Co. Mr. Ettenger holds an LLM in tax from New York University School of Law, a Juris Doctor from the University of Virginia School of Law and a Bachelor of Arts degree from Duke University."

What the filing doesn't say, is that when Ettenger went to Mills Corp, that it was the company owning and developing the lavish Xanadu Center in New Jersey (complete with a ski slope). They expected that it would take 2 years to complete, and cost around a touch more than billion dollars... After 2 years, Ettenger, according to news sources was fired from the Mills Corporation. However, the 8K the company released was worded a bit differently:

Effective August 11, 2006, Mark Ettenger’s service as President of The Mills Corporation terminated, but he remains employed by The Mills Corporation and continues to receive salary and benefits as provided in his employment agreement dated as of February 2, 2004. No determination has been made as to any payments or benefits to which Mr. Ettenger may be entitled under the terms of his employment agreement.

Kind of odd wording... This all came after the company terminated all 14 of it's officers. By that point, the company was heading towards bankruptcy and was eventually saved by a buyout. The project, which the WSJ described as "Disney-esque," then had a price tag over ~$2 billion- nearly double what was first thought. Fast forward to today, and the center has gone through a lot- collapsing walls, several owners, and ultimately still has yet to be completed... even with further financing in the hundreds of millions of dollars.

To what role did Ettenger have in the project's ultimate demise? It's hard to say, and often, good and capable people can get caught up in ill-fated projects. However, this is a touch more bothersome because Trinity Places' main asset is a piece of land in a prime area of Manhattan, needs to be developed- and is presently headed by a person with a less than stellar recent history.

Furthermore, given that at the time of the last 13D filing for Trinity, the entity that Ettenger is associated with, which owns over 1/4 of outstanding shares, had this to say:

"...the Reporting Persons currently have no plans or proposals that would relate to or would result in: (a) any extraordinary corporate transaction involving the Issuer; (b) a sale or transfer of a material amount of assets of the Issuer; (c) any change in the present Board of Directors or management of the Issuer; (d) any material change in the present capitalization or dividend policy of the Issuer; (e) any material change in the operating policies or corporate structure of the Issuer; (f) any change in the Issuer's charter or by-laws; (g) the Shares ceasing to be authorized to be quoted in the over-the-counter security markets; or (h) causing a class of equity securities of the Issuer to become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934.
The Reporting Persons reserve the right, at a later date, to effect one or more of such changes or transactions in the number of Shares they may be deemed to beneficially own."

This struck me as odd language to put into a 13D, however may have been added because of the history of the parties involved, due to time served at Goldman Sachs where these items were routine. Still, it seems odd. I think that the following months could potentially be quite telling as to what may unfold for the company.

Having 2 people seeming to end their relationship with a company, who are from the same entity does strike me as odd, especially when looking at the 13D from Marcato, the fact that Ettinger is now CEO, after Krueger resigned... If the company has some sort of re-capitalization or Ettenger doesn't end up stepping down as head of the company, it could be an indication of things to come and frankly, would make this a much harder animal to dissect. This uncertainty generally makes investors a touch skittish. Since emergence from bankruptcy, I have some pauses as well- I would really like to know what is going on with the re-development efforts. When I checked for various permits on NYC Building, I couldn't find anything relating to the property... One item that I think is unfortunate about public companies, is just how un-public many seem to be about what they are doing. Some sort of plan of action to the outsiders of the company, published on Trinity's (lack of a) website, or talked about on a conference call would be a really nice thing.

All this said, the people running the company are heavily incentivized to do well, as they are essentially the majority owners. I just hope that there isn't some sort of moon shot that happens with the companies real estate, which could turn it into the next Xanadu. Trinity Place seems to have a lot of low hanging fruit that it can take advantage of too easily.

As with most things, time will tell.

Disclosure:  I own and represent shares of Trinity Place Holdings, but that amount is a fraction of what it once was. I reserve the right to change the positions at any time. This post is my nothing more than my thoughts/opinion. Always do a ton of your own research before so much as contemplate anything that I say, do, write, or even think about.

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