In the late 1950s, McDonald’s executives discovered that being in the real estate business was more profitable than focusing solely on the food business. McDonald’s founder Ray Kroc had a business partner, Harry J. Sonneborn, who devised a plan to purchase or lease the land on which nearly all McDonald’s restaurants would be located. He then charged franchisees a monthly rental fee for the land, or a percentage of their sales, whichever was greater. The rest, as they say, is entrepreneurial history.
With 33,000 facilities on more than 300 million square feet of land, the U.S Postal Service operates more retail outlets than McDonald’s. The Postal Service owns and leases properties in high-traffic areas, often in a city’s most desirable location. Is there an opportunity for the Postal Service to lease or sublease its vast real estate holdings to other businesses to generate revenue and improve cash flow? Could the Postal Service sell its facilities in desirable locations and lease back a portion of the facility as needed?
For example, the Postal Service partnered in 2007 with a development company to renovate and lease out part of the main Post Office in New York City (James A. Farley building) for retail and other purposes, including a new Amtrak train station and hotel space. While the redevelopment has hit construction delays, it remains a promising model for future plans.
These kinds of opportunities are not necessarily restricted to post offices in large cities. Smaller facilities are likely to be attractive to third parties as well. One example is the Redondo Beach Galleria Station in Redondo CA, a very small retail unit in a shopping mall, currently on the market to be subleased.
Do you think the Postal Service should sell or lease its facilities in prime real-estate locations? Should it have any restrictions on which facilities it can sell or lease or what types of operations can lease a postal facility? Should there be restrictions on how the Postal Service uses the revenues raised from such a sale or lease? Share your thoughts.