A court-appointed bankruptcy trustee overseeing the liquidation of National Lumber & Supply Inc. recommended Tuesday that the company's two operating stores be sold to former company president Melvin Jaffee.
But the landlord of one of the two stores objected to the sale to Jaffee, and a federal bankruptcy judge said he won't rule on the sale until he receives additional financial information from the three bidders for the stores.
The stores in Encinitas and Catherdral City are all that remain of the once vibrant, 21-store home-improvement chain that Jaffee and his father built over 48 years.
U.S. Bankruptcy Judge James N. Barr ordered National Lumber's assets liquidated Aug. 29. The order followed National Lumber's filing for Chapter 11 bankruptcy petition in early April.
At a bankruptcy hearing in Santa Ana on Tuesday, Jaffee bid $2.5 million for the Cathedral City and Encinitas stores. Two competing chains also submitted bids to the court, with terms differing from those offered by Jaffee.
Lumber City bid $1.2 million for the Cathedral City store, with the stipulation that $1.8 million in inventory remain at the store. Builders Emporium bid $700,000 for the lease to the Encinitas store, said Richard Marshack, a Santa Ana lawyer and court-appointed trustee in the liquidation.
Gary Torrell, an attorney for Jaffee, said the owner of the Encinitas store, Mitsui/SBD, has raised objections to the sale to Jaffee, including whether the former National Lumber president has adequate financing for the purchase.
After more than four hours of hearings and negotiations between the bidders Tuesday, Barr postponed any action on the sale until a hearing scheduled for Thursday.
Jaffee said that if he succeeds in buying the two stores, he will keep the National Lumber name but change the concept of the stores. He declined to say what specific changes he plans.
Of the $2.5 million, Jaffee said he would pay $700,000 in cash and borrow $1.5 million. In addition, Marshack said he would credit Jaffee with $300,000 in return for Jaffee forgiving $3.5 million in personal loans he made to National Lumber three months before it went bankrupt.
Marshack said he has been impressed by Jaffee. "He's a good guy," Marshack said. "He put his own money into the company when he could have kept it and used it later--like now--to buy those two stores."
Marshack said National Lumber's chief asset is a $2-million promissory note from the sale of its Ontario store. Other assets include lease-backs at four stores, which are reportedly worth about $1 million each.
Builders Emporium had offered to buy the former National Lumber store in South Gate if the Encinitas store were included, Marshack said.
Jaffee announced his desire to buy the stores in court Tuesday morning. When the other two bidders came forward, Barr ordered the parties to leave the courtroom to negotiate. But the parties were unable to reach an agreement.
National Lumber was started by Jaffee's father, Sol, in 1942 on Woodruff Avenue in Bellflower.