In a shocking turn, the management of The Mall at Lexington Green pulled financial support from the founder of Joseph-Beth Booksellers and outbid him for the bulk of the well-known book chain at its bankruptcy auction Wednesday.
The only two bidders intending to keep Joseph-Beth operating in some capacity were founder Neil Van Uum and a company affiliated with Robert Langley of Lexington Green manager Langley Properties Co. Three liquidators who would sell the inventory and close the stores also bid on the various properties, Van Uum said Wednesday night.
The final bid was not revealed Wednesday night, but a company affiliated with Langley, Van Uum's landlord for more than 15 years, emerged as the likely new owner of the Joseph-Beth locations in Lexington and Cincinnati, as well as a health-themed Joseph-Beth in Cleveland.
"My main concern was making sure the stores wouldn't liquidate," Van Uum said. "I put together enough money to beat the liquidators, but (Langley) kept coming, and I couldn't fight him off any longer."
Langley said Wednesday night that the move was a "business decision."
"I have the utmost respect for Neil Van Uum, and I made a business decision that I thought would be best for Joseph-Beth and Lexington Green," Langley said. "Neil is a good guy; he did a great job starting Joseph-Beth."
Liquidator company Gordon Brothers was the top bidder for the Joseph-Beth store in Fredericksburg, Va., and the chain's Davis-Kidd Booksellers location in Memphis, Van Uum said.
Van Uum said a deal was reached that the Fredericksburg location will be transferred to Books-A-Million, the third-largest bricks-and-mortar book retailer in the country.
The next step in the bankruptcy proceeding will be a hearing seeking approval of the auction results at 9:30 a.m. April 27 at bankruptcy court in Lexington.
'Stunning' decision to bid
Van Uum said he had been counting on Langley's financial support. He said Langley had pledged the support in exchange for Joseph-Beth's signing a long-term lease at Lexington Green.
Van Uum said Langley's decision to bid was "stunning" to him.
Joseph-Beth's Memphis landlord "was also part of my (financing) team and didn't take nicely to what Robert was doing," Van Uum said.
"I can't even begin to explain it," he added. Van Uum said Langley told him the move was to help "safeguard" Lexington Green's future.
Langley said he could not immediately discuss his motivations or his conversation with Van Uum.
The bid was by an entity called Booksellers Enterprises LLC, with which Langley is affiliated. He declined to name others affiliated with the company. The company was created Monday, according to filings with the Kentucky secretary of state. It was organized by Gary W. Barr, who is counsel/partner in Langley Properties Co., according to its Web site.
Langley said the "current management team will continue managing" the Joseph-Beth stores, though he declined to comment on whether he would seek to retain Van Uum.
"We're going to continue to have a great tenant that's done well in the past and will do even better in the future," Langley said.
The results of Wednesday's auctions surprised industry observers.
Al Greco, marketing professor at Fordham University's Gabelli School of Business, said it will be vital for the book chain's future for Langley and his partners to let those experienced in book retail operations run the stores.
"The failure rate is high when people who don't know anything about retailing or book retailing buy an existing bookstore," he said.
He noted, though, that there are plenty of successful examples of companies, including Warren Buffett's Berkshire Hathaway, purchasing businesses and letting knowledgeable management run them.
Greco said the move likely was because of how vital Joseph-Beth is to Lexington Green. The bookseller accounts for about 25 percent of the mall's space.
"It's important for that mall's economic health, short run and long run," Greco said. "He wants to make sure he's preserving the shopping center."
Michael Norris, a senior analyst at publishing research firm Simba Information, said the true test of Wednesday's auction will be how well it survives.
"I would really be interested in tuning in six months or a year from now to see to what degree the store has held on to the consumers in the local community," he said.
Behind the bankruptcy
Joseph-Beth, which Van Uum founded with his ex-wife Mary Beth in 1986, filed for bankruptcy protection in November after the chain had seen declining sales for the past five years, Van Uum said last year.
He traced its troubles to several factors, including the tattered economy and increasing Internet sales for books.
The book-selling industry nationally is struggling. The nation's second-largest bricks-and-mortar book retailer, Borders, is closing more than 200 stores as part of a bankruptcy proceeding. Barnes & Noble Booksellers, the country's largest bricks-and-mortar chain, has struggled for years with declining sales and put itself up for sale in August.
Van Uum had hoped to reach agreement with Joseph-Beth's creditors and emerge intact after closing four poorly performing locations. But an agreement could not be struck, leading to Wednesday's auction.
Since filing for bankruptcy, the company has closed Joseph-Beth stores in Charlotte, N.C.; Pittsburgh; and Cleveland at the Legacy Village shopping center, and a Davis-Kidd store in Nashville.
As for the future of the three stores in Lexington, Cincinnati and Cleveland, Fordham University's Greco said they "can be successful if they've got a nice product line and a nice atmosphere, a place where you want to go and buy a book."
"It'll be a challenge. Obviously, it didn't work for Joseph-Beth," he said. "This is a story that's not yet over. Let's hope it ends in a positive way, as I don't want to see another bookstore go out of business."