Jimmy Davis says he feels like he's over a barrel now that Stock Building Supply, which leased some property from him, has entered Chapter 11 bankruptcy protection and is asking the court to reject more than 200 lease agreements with Davis and scores of other people.
A developer and general contractor in Pendleton, S.C., Davis has watched the facility in Anderson, S.C., that he leased to Stock sit empty for several months. But when Davis heard rumblings of Stock's financial woes, he approached the dealer and asked if there would be any issues with the lease.
"I checked with them two months ago and they assured me not to worry," Davis told ProSales. "They said there would not be any problems."
In the meantime, two companies had inquired about the lease since the facility sat empty, going so far as to offer to buy the lease, Davis said. In both instances, he said Stock stood firm and told him the facility would reopen once the market turned around. Davis notes that the dealer continued to pay him "like clockwork."
"But they would not release it, and it wasn't going to cost them a dime to release it," Davis says. "Now they have me over a barrel."
On May 5, Stock's owners, Wolseley Plc of Britain, sold 51% control of the Raleigh, N.C.-based LBM giant to The Gores Group, a private equity firm based in Los Angeles. That deal was conditioned in part on Stock's filing for protection against creditors under Chapter 11 of the federal bankruptcy law. Stock did that on May 6, and one of the biggest requests it is making during its time in Chapter 11 is for the termination of more than 200 leases, most of them involving facilities where it no longer has any operations.
Davis has since contacted a bankruptcy lawyer to see what action he can take, if any.
"I bought the building as an investment and I always liked Stock," Davis said. "They seemed to be a really good company. I guess the economy took them down."
The businessman believes he is fortunate in other regards, however, since about 40 of the other properties he owns are occupied with rents and leases being paid.
"I am going to let my lawyer know they had a chance to get out in the last six months twice but they would not even really talk to me," Davis says. "In fact, they told me the opposite and they would return."