Longtime Princeton residents will find it unbelievable that one of the last family businesses remaining on Nassau Street has put up a bankruptcy sale sign. Two Landau brothers known for their do-gooder sponsorship of community programs and innovative merchandising of woolen products have filed for Chapter 11 and are holding a new merchandise sale to raise cash. Is this one more dagger in the heart of the Nassau Street retail scene? No. Though their wool store’s retail business has diminished in recent years, it was a real estate deal, not retail woes, that triggered this action.
When the Landaus made that deal their retail and mail order business was at its peak. Moving the third generation family business into the fast lane when their parents retired, they invested in advertisements in the New Yorker. Those, plus a glossy luxury catalog produced by Rob Thacker & Associates, made Landau’s a destination store for shoppers around the country. At home, Landau’s had psyched out Princeton shoppers who craved unusual items at not-exorbitant prices. Unusual Icelandic wools, Austrian lodens, washable merino wools the Landau brothers seemed to be able to spin wool into gold.
Then the late 1980s recession left them holding the mortgage on a piece of commercial real estate that got more expensive per lawyer minute.
The deal: In 1988 Robert and Henry Landau partnered with commercial realtor Stephen Segal to buy 25.5 acres on Clarksville Road (adjacent to American Cyanamid) for $700,000. The development was going to be a brother act: Michael Landau’s architectural firm designed 186,000 square feet of warehouse and research space. Landau’s would use half of one of the buildings to expand its mail order business.
Before they could break ground, the bottom dropped out of the real estate market, banks changed hands, money ran out, the note was sold, and now the partnership is dancing to an out-of-state mortgage holder’s tune. On behalf of the partnership attorney Michael Zindler filed for Chapter 11 on August 8. Case number 97-38966 is being heard in Judge William Gindin’s court.
For real estate partnerships, bankruptcy reorganizations have been commonplace. Ever since the stock market fall in 1987 put a pall on the real estate market, some of the most eminent developers in Princeton have had properties going in and out of Chapter 11. But for retailers, especially a third generation one, bankruptcy casts a grimmer shadow. The approvals are now in place, but the finance company could foreclose and buy it back at firesale prices, says Marwan Sadat of Sadat Associates, which, as a limited partner, did the environmental engineering and assisted with legal help. Still, the Landaus insist that a settlement is imminent and that they intend to pay off their creditors in full.
Filing was viewed by us as a stigma, says Robert Landau. The hope is that because we have filed for bankruptcy and have exposed our holdings to our creditor, we can resolve this matter.
Landau’s was founded by grandfather Henry in 1914, then moved from Jersey City to Brooklyn, then moved by parents Ev and David to Princeton in 1955. It occupied 25 Witherspoon before moving to 114 Nassau in 1962. Robert was the third brother of four; Michael and his twin were the oldest and Henry the youngest. Robert majored in marketing at the University of Virginia, Class of 1967, and has a master’s degree in marketing research from the University of Maryland. Henry majored in marketing at Quinnipiac College in Connecticut, Class of 1973. They took over the business officially when their parents retired to Clearbrook in 1976. Henry buys the sweaters and is in charge of bookkeeping; Robert buys the imports and takes charge of the floor. Sharing these duties allows them to have more time with their families than their parents could afford.
They took pride in giving back to the community. They attributed their dramatic success with Icelandic products to the Princeton shoppers who are notoriously free with their suggestions. Redesigned, these products flourished into a major line, so they hosted senior citizen picnics from 1978 to 1995. With our hosiery contributions we were the deep pocket supporter for the senior resource center, and we contributed a scholarship to the high school and the first curb cuts in Princeton at the YMCA. At Christmas, an adopt-a-kitten program in the store window was followed by the adopt-a-neighbor program.
What we were good at was finding things that were new, says Landau. For instance, we were the first to make a big deal about merino extra fine washable wool. To some degree we have had an effect on the world.
Landau says and Segal agrees that a succession of unpredictable disasters led them to this real estate brink:
Delay at the planning board: It was 11 p.m. in 1989 and only five members of West Windsor’s planning board could stay for a vote that required four yeses. The partnership decided not to risk a turn down. We had financing that night, says Landau, but four months later when we went back for approval we had lost the window of being able to start right away.
The 1987 stock market drop: It threw cold water on loans for development of spec buildings.
Bank changes: When Horizon was taken over by Chemical Bank, the loan officers changed. Before PNC, in turn, took over Chemical, a group of nonperforming notes were sold in bulk to Trotter Kent, a financing company in Potomac, Maryland.
American Cyanamid’s sale: When the partnership had trouble meeting its mortgage payments it negotiated with its next door neighbor, American Cyanamid. We were working on a deal which would have gotten us out whole and made some money, says Landau. It was close as a whisker to being terminated when American Cyanamid was taken over by American Home Products.
A glut on the wool market: The Wool Bureau, the marketing arm of the industry trade group, helped sponsor Landau’s very profitable mail order business, which had begun with its New Yorker advertisements. At its peak from 1986 to 1988, Landau’s catalog shipped from 15,000 to 20,000 packages annually. The catalog and the New Yorker advertisements drew people to Princeton from all over the United States, says Landau.
In the late 1980s when the world economy was faltering, wool usage dropped and a surplus accumulated in Australia. The Wool Bureau stopped supporting the catalog, so Landau’s dropped it in 1992.
Suppliers were lost: People who were very important to us started vanishing, says Landau. When the war began in Yugoslavia, Landau’s lost 10 percent of its volume. When the dollar was devalued in Iceland, Icelandic wools were priced out of the Princeton market. Similarly, loden coats could no longer be imported from Austria at an appropriate price point.
Time moves more slowly for attorneys than for retailers, and legal fees have diverted money that should have been paid to suppliers. Never having gone through this process before, we always thought that when there was a deadline there was a deadline, and when there was supposed to be a resolution, there would be a resolution, says Landau.
We have postponed the scenario for longer than recommended because we kept thinking we could resolve it without making an issue of it. Our credit was always outstanding, says Landau. Paying our suppliers was never a problem before, but now we are having trouble; the legal costs are frightening.
Robert Landau is the quintessential optimist. In boyhood summers at the shore, he would spend hours fishing coins out from under the boardwalk. I am 51 years old, and Henry is 47, and we would do the same thing again, he says. Emotionally it is very difficult, but I am a realist and an optimist. I know we have done everything we could do to make it work and settle it. That has helped me. I jokingly say to people that I’m not going to jump out of any window.
Who is taking the hit? The original bank that made the loan undoubtedly took a loss, but the firm that bought the note at an undisclosed discount will probably come out ahead. Robert and Henry Landau are liable (liens have been placed on their store and their houses), but after the reorganization they hope to go ahead with their development plans. Their older brother Michael did not participate in the investment and his firm’s plans are likely to be used.
Stephen Segal, like the Landau brothers, is a general partner and is also optimistic: It was necessary to put the partnership into Chapter 11 to give it the breathing room it needed, but we’re very much alive, says Segal.
I have two healthy kids and a wonderful wife. We’ll get through it, says Henry Landau. No matter how things get financially, if you have your health that’s all that matters.