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Editor: 

The Postal Service is facing a financial crisis. They are looking anywhere and everywhere trying to cut costs. They incurred a $1.68 billion deficit in fiscal 2001 and this year does not look any better.  

The only answer to this problem has been cut, cut & cut. They have cut enough and service is suffering. It is now time for Postal managers, supervisors and employees to come up with some creative ideas to help save funds. Clearly, with the additional 911 losses, the postal service has to rethink the way they view their assets. 

One of their most overlooked assets is in the form of their real estate holdings. The Postal Service owns thousands of large buildings free and clear. By taking equity out of the buildings and putting it into their core operations they can give this cash strapped organization the infusion of cash it so desperately needs.  

One way to accomplish this is through a sale -leaseback. The Postal Service would sale hundreds of the buildings they occupy and lease them back from the new owner. 

There are three primary advantages. First, the Postal Service keeps the building that fits its needs. Second, the infusion of funds can have a positive effect on the bottom line. Third, they can stabilize the price of stamps for years which would end the constant rate hikes. 

Orchestrating a successful sale-leaseback transaction requires a thorough knowledge of the real estate and investment markets, as well as the ability to evaluate tenant credit worthiness. They can work with workers within the service or this service can be contracted out. 

Look at one example. The Marina Process and Distribution Center sits in a prime location on about 20 acres in Inglewood, California. The 228,000 square foot building could fetch around $100 million dollars. There are dozens of corporations and institutional investors who would love to have an interest in this prime location. The third most profitable Home Depot in America, located across the street, has expressed interest in the land. Many real estate experts feel the acres are under utilized. They utilize about 228,000-sq. feet. They have over 900,000-sq. feet.  

The plan is to take advantage of the real estate situation and better leverage these assets so they can continue to build on their core services. They could sell the building and land for $100 Million.  

Roughly 60% or $60 Million will come up front in net proceeds. The remaining $40 Million balance can be paid at a negotiated date. This move would improve our cash position immediately and help us with our bottom line. Keep in mind that everything in a lease is negotiable. They could negotiate a 10-year $250,000 (top end) month lease with another 10-year option and still come out ahead. They could start the lease at $200,000/month and top out at $250,000 in the final years. Ten years (120/months) at $250,000 every month is only $30 Million. They raised $60 Million up front with the sale. They need funds now! The Postal Service can raise capital by monetizing the value of their real estate assets today. 

There are thousands of properties all over the country owned free and clear that can be sold and leased-back.  

In short, the Postal Service is better off putting their capital to work in their core business rather than tying it up in real estate. There are creative options that can be used to bring in funds today.  

They must remind themselves, if they don’t become creative and use their options today, they may not have a tomorrow. 

Dr. Mickey Frazier Sr.