“Even at the corporate level, locals have a desire to ‘overpay’ for RE assets and make strange choices when it comes to parting with cash for RE.”

Mango at financialinsights February 20, 2011 at 1:44 am“Lululemon just paid $65M for a building in Kits. That is 25% of the cash they have on their balance sheet. That [building] would have cost them less than $3 million a year to rent. They have massive growth in earnings per share (EPS), so common sense [should have told them to rather use the money to invest further in their business].  Instead, they bought the building? So even at the corporate level, locals have a desire to “overpay” for RE assets and make strange choices when it comes to parting with cash for RE.”

14 responses to ““Even at the corporate level, locals have a desire to ‘overpay’ for RE assets and make strange choices when it comes to parting with cash for RE.”

  1. The founder is a devout member of the “Landmark Forum” cult, so his decisions probably aren’t that rational even for Vancouver.

    • Bruce I don’t think you can make the argument that the “Landmark Forum” has anything to do with Lulu Lemon buying the building unless of course you are inside information on why they bought the building. On what basis do you make your claim that the two are linked?

      • Because the founder really is right off the deep end in the landmark cult (forces all managers to join), so it’s likely most decisions he make can be linked, and this decision…just has that smell about it. In fact, so does much of the Vancouver RE obsession. There’s a common ideological stench. The crash can’t come too soon.

  2. Lululemon are a bunch of ‘tards. They think it’s perfectly normal women would pay $100 dollars for stretchy pants with a luminous logo… Even though the majority of women now buying their pants insist on stuffing their cellulite- pocked hog shanks in them. Think about it…
    Why wouldn’t these delusion-peddling morons pay $65 million for a building?

  3. Being a man i have no idea why Lulu lemon products are so popular, I would think their sales would be hurt in a recessions because their products are pretty pricey.

    I would assume that they must have a CFO who should have crunched the numbers on a purchase like this i have no idea how they justified such an ROI.

    But maybe they just really wanted a building in Kits more than they wanted 65 million in their bank account.

    • My understanding is that they wanted the location after the COV took over a spot on Broadway and Cambie that LULU were going to move into. From some of the comments I wonder if we (locally) have a bit of that tall poppy syndrome.

  4. Bruce, how many men do you see sporting Lululemming wear?

    I don’t wear muscle shirts for the reason why most women shouldn’t wear Lululemming… It’s called reality vs. delusion. Nothing misogynistic about my argument.

  5. Lemon is just like Mercedes and the 4000 foot Mc Mansion…. “look at me crowd” It makes no difference if your shorts cost 10 bucks or 200, as long as you don’t get caught wearing the 10 dollar ones. Renting is usually not in the vocab of “look at me” no matter how economical the decision, we are LuLuLemons, you can’t expect us to rent/lease…. This will be over soon and the last one to leave Vancouver please turn off the lights.

  6. Wow, what a great businessman lol. Buying right at the frothy peak of the Bubble. Who needs a Microsoft, Google, Coca Cola or Dell in Vancouver. We’ve got Lululemon to anchor our fabulous ecomony.

  7. pricedoutfornow

    I don’t understand the Lululemon craze either. Though really, I should have invested in this company years ago! However, as we can see, consumers have been buying on credit for the past few years (note household debt in Canada), and I highly doubt that this company will continue to prosper. When the credit dries up, people are going to be more concerned about paying for milk and gas than running out and buying some pants for $100.

  8. 4SlicesofCheese

    They got the Oprah bump. Or else it would just be a local fad.
    But you know they have hit critical mass when you see 40 year old moms on the bus wearing 100 dollar hoodies. How long this can last? We will see.

  9. Never thought I’d be defending Lululemon, and not withstanding this real estate purchase, I’d say they are pretty smart considering the wild success of their business model. Not sure how long it’ll last, but they’ve done well so far.
    When I first saw their sign on the building, I thought it was perfect. Below is the “Welcome to Kitsilano” sign and there above glows the lululemon logo. Kits really was the birthplace of the yoga fashion trend, and I’ve seen enough nice bodies wrapped in it to thank Lululemon for starting it.
    Also, their clothes are expensive but pretty high quality. For example, I bought a fleece sweater from Superstore the other day and it shed little blue bits for the first couple weeks and pilled up immediately. In contrast, my wife had a lululemon hoody for five years, with almost daily wear, and only the zipper pull has broken (and lululemon fixed it for free, five years after it was bought). Even though her hoody was 10x the price of my sweater, I think she got a better deal.

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