The LL Flooring brand replaced Lumber Liquidators in 2022. (BizSense file photo)
Bankrupt LL Flooring is a step closer to being sold to its founder and former CEO in a deal that will keep about half of its stores and employees intact.
The Henrico-based retailer on Monday received approval from U.S. Bankruptcy Court Judge Brendan Shannon to move forward with a “going-concern” sale to an affiliate of F9 Investments, a private equity firm run by Thomas Sullivan, who founded LL as Lumber Liquidators 30 years ago.
The deal calls for F9 to retain 219 of LL’s 430 stores, along with the stores’ inventory and that of the company’s massive distribution center in Sandston. F9 also agrees to save the jobs of up to 1,000 LL employees.
In exchange, the LL bankruptcy estate expects to receive cash consideration of $40 million-$43 million from F9, according to court documents.
With the judge’s blessing in hand, it’s now up to the two sides to consummate the deal, which is expected to close by Sept. 30.
Once finalized, LL will be helmed by Jason Delves, president and CEO of F9 affiliate F9 Brands, court records state. Delves has more than two decades in the flooring and retail industry, having served as executive officer of various subsidiaries of F9, including Cabinets To Go, Southwind Building Products, LLC and Gracious Homes.
Also included in the deal is LL’s intellectual property, namely the rights to the original Lumber Liquidators brand, which F9 plans to revive.
“F9 Brands’ focus has been and continues to be restoring Lumber Liquidators as an iconic brand in the flooring industry,” Delves said in a filing with the court.
Sullivan has previously criticized the company’s rebrand from Lumber Liquidators to LL Flooring. It was done after Sullivan’s departure from the company in an effort to leave behind the baggage of bad publicity from a damning “60 Minutes” report in 2015 and subsequent legal issues. However, executives have since admitted that the LL Flooring brand never caught on with consumers.
Judge Shannon on Monday also approved the sale of LL’s most valuable asset: its 1 million-square-foot distribution center in White Oak Technology Park in eastern Henrico.
An entity tied to data center giant QTS is the buyer and has agreed to pay $104 million for the sprawling property and its 97 acres at 6115 Technology Creek Drive.
That sale also is expected to close by Sept. 30. Commercial real estate brokerage JLL represents both sides of the deal.
LL bought the property as raw land from the Henrico Economic Development Authority in 2013 for $4.88 million before building the distribution center. It was most recently assessed by the county at $73 million.
As part of the deal, LL will continue to lease 616,000 square feet in the building for two years. It agrees to pay $334,000 a month in rent for the first year and $345,000 per month in the second year. That amounts to $8.1 million over the course of the lease.
F9 said it eventually plans to move LL out of the Sandston building into a new-construction distribution center it plans to erect on land next door to F9’s existing distribution center in Tennessee.
The company’s massive distribution center in Sandston. (Courtesy JLL)
It’s unclear what the sale to F9 will mean for LL’s Henrico headquarters at 4901 Bakers Mill Lane in the Libbie Mill development. Sullivan has argued the company’s move to that building in 2019 was an unnecessary expense. LL leases the 53,000-square-foot space from Portsmouth-based Waverton Associates, which purchased the building from local developer Gumenick Properties in 2021.
F9 said in court filings that its has been in contact with LL vendors and has met with employees and is “preparing to deliver offer letters to employees, thereby providing employees with certainty during the transition.”
The other 1,000 LL employees who are not being hired by F9 are expected to be laid off. The remaining 211 LL stores that are not being purchased by F9 will be liquidated in closing sales that are ongoing.
The proceeds from those sales, as well as the $104 million from the sale of the Sandston property will go to the LL bankruptcy estate and used to pay off the company’s creditors.
The company’s Chapter 11 bankruptcy process will continue after the closure of the sales, as F9 has created new entities with which to operate the assets it is acquiring.
The sale to F9 would help bring an end to a disjointed Chapter 11 case that saw LL enter bankruptcy protection on Aug. 11. Its initial bankruptcy plan was to find a buyer for the business, only to announce earlier this month a pivot into a full-on liquidation that would put it out of business entirely. Then days later it backtracked, announcing it had reached an 11th hour deal with Sullivan and F9.
The sale would put control of much of the company back into the hands of Sullivan, who founded it as Lumber Liquidators in the mid-1990s in New England. Under Sullivan’s leadership, Lumber Liquidators went public on the New York Stock Exchange in 2007, grew to hundreds of stores and saw its stock price peak at $119 per share.
But the company’s fortunes began to sour in 2015, after the “60 Minutes” exposé revealed claims of unsafe levels of formaldehyde in flooring it had imported from China. It also pleaded guilty in 2015 to federal environmental crimes related to its imports from the Russian Far East. Sullivan left the company a year later in 2016.
Its financial performance and stock price had been on a steady decline ever since, particularly over the last two years as the company turned down several offers from prospective buyers, including F9. Earlier this year it revealed in its earnings statements that its ability to continue to operate was uncertain.
It posted a loss of nearly $29 million in the first quarter of this year, on top of an annual loss of $103 million in 2023, and disclosed that it only had $8 million of cash on hand with which to operate. Those dire figures prompted the bankruptcy filing.
Sullivan and F9 have been trying for nearly two years to purchase LL, only to be rebuffed at every step. F9 remains LL’s largest shareholder, though those shares are now worth nearly nothing in light of the bankruptcy.
Correction: An earlier version of this story incorrectly reported that LL Flooring leases its Libbie Mill headquarters from Gumenick Properties. LL’s landlord is Waverton Associates.
Sounds like the entire company will be leaving greater Richmond (except a store or two) if it makes it through bankruptcy sale and stays afloat. With the warehouse going to TN, I can see the corporate jobs moving either to TN or south FL where F9 has its HQ.
QTS is the big winner in the demise of LL Flooring. This is the second time that they have purchased a property at White Oak for less than the replacement cost. The distribution center will be converted to data center space. The neighborhood will benefit from the disappearance of tractor trailers and be replaced by minimal car traffic, since data centers don’t require many employees. Henrico County, and its residents, will benefit from the increased taxes that it will receive from the data center.
Of course QTS will want to rename that road that’s now “Engineered Wood Way”.
When are people going to have an honest discussion about “data centers”? They are incredible siphons on a community’s electric grid and water supply. All for the underwhelming promise of the other fad: “AI”. The AI available to the consumer that amounts to nothing more than image rendering and text summation. But data center and AI are buzz words and both attract dumb money like the .com bubble of the late 90’s.
When are residents going to have a say on the energy and resource demanding non-green, non-climate friendly invaders? Ask ChatGPT for its standard equivocation