So Edward Lampert has moved ESL Investments South and looks like he will be a full-time resident of Florida where there is no income tax.
Much hand ringing has followed and there’s the usual talk that taxes drove him out, though an actual explanation has not been forthcoming. In classic hedge fund form, Lampert has not said a word in the press about it, speaking only through PR firm.
And that’s what’s bugging people. The move itself is a statement, although people differ on what that statement is. Why and does it actually matter.
Make no mistake, there is real fall out to this. Edward Deak, a professor of economics points out Lampert’s personal income is believed to be more than $3 billion, so that’s a huge hit to the tax base. Moving his company hurts office suppliers and other firms that were servicing ESL. And Deak said the question is are there others going to follow?
Within the industry, there are differing opinions about why Lampert made his decision.
“Maybe Eddie Lampert is tired of wearing a parka,” one Miami hedge fund expert said, though he was hoping to see more move South for the weather and taxes.
But does this signal the end of Connecticut’s darling hedge fund industry? Probably not.
“I really don’t think anyone cares,” another industry insider a little further North than Miami told The Mines when asked what people are saying about it and whether it means anything to Connecticut’s home grown industry.
As for why Lampert hasn’t said anything there is his Connecticut anchor to consider, which is a concern according to friends of Lampert, as reported by the Greenwich Time’s Neil Vigdor.
For those not familiar with the term, a Connecticut anchor is property, the kind that can’t easily be sold because it’s amazingly expensive and there aren’t that many people who can afford it, or it can’t be sold without a loss.Businesses have them, residents have them.
In Lampert’s case, he has a $25 million one in Greenwich, his home, and so far hasn’t hung a for sale sign on it. Some people believe Lampert wisely has not voiced criticism of the state and its tax or other climate because it would devalue his property when he tries to unload it.
Imagine this conversation.
Lampert: “OK, it’s got plenty of space, room for a swing set out back. Lots of bathrooms, no waiting. I’m asking $25 million for it.”
Buyer: “Why are you selling?”
Lampert: “Connecticut is overtaxing me. It’s just a terribly oppressive place to live and work. I hate it. I moved to Miami.”
Buyer: “I’ll give you a $1 for it. After all, the place is going to hell.”
The idea that Lampert plunked $40 million down on a Florida estate out of spite and anger, well, that’s for him to say and he’s perfectly capable of saying it.
Of course, there’s another reason Lampert might not be criticising the state. Maybe he remembers he made an awful lot of money here and has enjoyed a lot of success. And while the place doesn’t make the man, it does contribute.
In the end, I’m sure lower taxes helped him make the decision, but maybe that guy’s onto something about the parka as the deciding factor. Have you been to Florida in February?
