W. Howard Lester, long-time CEO of San Francisco-based Williams-Sonoma, leased a 2007 Global 5000 owned by an LLC of his ownership, back to Williams-Sonoma for the following terms:
May 16, 2008 - May 15, 2011
$375,000/mo for 36/mo term ($13,500,000.00)
Insurance coverage for term of lease
Salaries of crew for term of lease
Maintenance program for term of lease
Now, what gets me is this:
The company owned a 2003 Global Express and sold it at the time of the lease agreement. In their 8-K filing, the company CFO reported a pre-tax profit of 16M.
Per the termination terms of the lease agreement, should Lester remove himself from management of the company, the lease becomes void. Last month, he announced his retirement from his post as CEO but would remain as Chairman until 2012. Given this extended Chairmanship, I believe his is still considered active management.
While there might be cost savings in selling an owned aircraft (they owned the 03’ Global), at the end of the term in the lease, what position is the company now in in finding a replacement aircraft. Also noted, the aircraft was not previously owned by Lester. The aircraft was given a reg in 04/08 and the lease was entered into in 05/08.
Is this a common practice? I know Lester has a close relationship with the company given that he purchased it from the founders back in the 70s, and he used 3rd party advisors to close the deal, but is this really good business?
While they clearly had a financial advantage in owning their 03’ and then selling it for a profit, are they not going to be in a tighter situation with Mr. Lester retires and they have to go out and purchase a new aircraft?
They currently store this Global 5000 with a Challenger in a TINY hangar in OAK.