the apprehension felt by them in obtaining their anticipated volume figures. Copies of letters covering this meeting are attached as "Exhibit D" along with other correspondence pertaining to the difficulty experienced by the Agent in getting this modification executed within a reasonable length of time.

On March 20, 1948, we were again notified of the desire of the licensee to discuss the renewal of his concession agreement for the period September 1, 1948, to August 31, 1949. Correspondence covering this renewal and the request for the insertion of a new termination clause in lieu of the original one is contained in "Exhibit E."

On April 28, 1949, a Mr. E. L. Hall, representative of the Marx Realty & Improvement Company, Inc., of New York, Darling Stores Real Estate Agent, called on the Agent for the purpose of negotiating a new agreement providing for a lowered percentage of rental. (See copy of memorandum to the files dated April 29, 1949, and attached correspondence listed in chronological order under "Exhibit F.")

From the statements contained in the copies of correspondence, telegrams, and memoranda designated as "Exhibit F," the following logical conclusions in our opinion may be reasonably drawn:

1. At all times during these negotiation proceedings, beginning as early as April 1949, the referenced concessionaire was fully advised of the procedure necessary wherein any reduced rental payment to the Government was involved in any way whatsoever.

2. The fact that anticipated volume was never reached and that each year's operation materially declined in volume was mutually recognized by both interested parties. It was Taylor's contention that this condition was primarily due to their inability to secure "qualified" subleases by reason of their short-term agreement. This same reason was advanced as the cause of their reluctance to promote sales and good will by proper advertising and the installation of such normal department store conveniences as delivery service and charge accounts.

3. In order to overcome these difficulties, the Agent endeavored to renew the expiring agreement under the same rental percentage but containing an acceptable minimum guarantee to the licensor for a period of one year only. This, in our opinion, would permit the concessionaire to continue in operation until such time as the firm leasing program was officially approved. The concessionaire, however, was insistent upon the inclusion of optional renewal privileges covering three full years for the licensee's benefit only. To this action, the Agent was opposed by reason of the performance record of this operation through the preceding three years. (See attached exhibits.)

4. In August of 1949, official approval was received enabling the Agent to execute firm leases under prescribed conditions. The concessionaire's agent was immediately advised of this policy and was offered an extension to his then expiring agreement for a period of six months under exactly the same terms and conditions of rental payment. This offer eliminated any provision for payment of a minimum guarantee or any reference to renewal beyond the extended expiration date. The agent for the concessionaire, after consultation with his client, advised this office that such an extension to January 31, 1950, of their original agreement would be acceptable. The Roane-Anderson Company then executed such a modification with Taylor's Oak Ridge Corporation. (See Exhibit G.)

5. The Roane-Anderson Company advised the concessionaire's agent of its intention to advertise the subject premises publicly for rental under the terms of a lease in lieu of a concession-type agreement and to solicit qualified and recognized department store operators to submit a proposal for entering into such a lease where possible. 6. The basic features to be considered in making a recommendation for awarding the proposed lease were as follows:

a. The general character of the operation proposed, i. e., whether or not it envisioned a true department store operation in the generally accepted sense of the definition, such as Miller's, Inc., S. H. George & Sons, Proffitt's, Loveman's, Inc., Davison Paxon's, etc., who operate the store in its entirety with a few subleased departments, such as shoes, photo shop or fountain, or whether it would consist almost entirely of subleased departments with the lessee directly operating only one phase, such as women's and childrens' ready-to-wear, or whatever it chanced to be.

b. The term of the lease proposed.

c. The percentage offered, the minimum guarantee to be made and the relationship of these factors to reasonable assumptions of potential volume based on the applicant's past performance record.

d. The indication of the applicant's aggressiveness in merchandising, such as, but not limited to, the installation of a charge account and daily delivery service, the installation of proper air conditioning, the willingness to promote good will and volume by extensive advertising, seasonal and promotional sales, etc.

e. The ability to stock, merchandise and compete successfully in the local market in all departments in order to cater properly to the needs of the community as well as produce an acceptable volume of total sales.

f. The assumption by the proposed lessee of all maintenance and alteration costs other than those of a structural nature.

g. The separate payment by the lessee of all utility charges other than heat.

7. These factors were verbally or in writing carefully pointed out to all prospective applicants for the subject location as well as to all representatives of Taylor's Oak Ridge Corporation, including its president, field representatives, local manager, agent, etc., by the representatives of the Roane-Anderson Company. (See Exhibit H.)

8. The statement of "preferential" treatment alleged by Taylor's is entirely untrue. However, unbiased and fair consideration of the remedial measures of operation as well as the proposed rental contained in Taylor's letter of intent was assured and fully given by the Agent in its evaluation of the said letter.

9. Taylor's Oak Ridge Corporation as well as its sublessees were fully aware of the above conditions inasmuch as nearly all had entered into discussions of the matter with the Roane-Anderson Company long before any decision in the matter was reached. A great many, including Taylor's themselves, had expressed great interest in obtaining other premises in Oak Ridge in the event Taylor's were unsuccessful in obtaining a lease.

10. The intimation of negotiations with others after the deadline established for receiving proposals is entirely untrue. Several operations were personally inspected by representatives of this office for the purpose of evaluation only, but no further negotiations of any kind whatsoever were conducted with any of the six applicants.

11. The letter of recommendation was sent to the Atomic Energy Commission's representatives only after the most exhaustive study, analysis, complete review and evaluation of the entire six applications by the Roane Anderson Company's Commercial Realty Division, Project Management and Representatives of the Commission's own Commercial Services Division. The subject letter of recommendation and the concurrence therein by the Commission's Contracting Officer's Representative is attached hereto as Exhibit I.

12. Notification of all applicants as to the decision reached by the RoaneAnderson Company and the Atomic Energy Commission was accomplished by wire on January 10, 1950. These wires with the cover letter to each applicant are contained in Exhibit J. It must be noted that to date no unfavorable comment on its recommendation has been received from any of the other applicants other than the allegations of the particular unsuccessful applicant which are attached hereto as Exhibit K.

The above is a complete and factual statement of the entire transaction to date and represents our best business judgment in the selection of a fully qualified applicant for a department store lease offering the best anticipated return from the subject premises to the Atomic Energy Commission.

Prepared by C. M. WINFREY.

(Attachments: Exhibit I.1)

ROANE-ANDerson Co.

1 All exhibits to this résumé, except exhibit I, are on file at the Office of the Joint Committee on Atomic Energy.

[Copy] EXHIBIT I

JANUARY 4, 1950.

Subject: Recommendation for Department Store.

OFFICE OF COMMUNITY AFFAIRS,

U. S. Atomic Energy Commission,

Box 365, Oak Ridge, Tennessee.

(Attention: Mr. L. Paul McDowell.)

GENTLEMEN: On May 31, 1949, the Agent was notified in writing by the present concessionaire, Taylor's, Inc., a Tennessee corporation, through their real-estate agent, Marx Realty and Improvement Co., Inc., of New York, that the concessionaire, Taylor's, Inc., desired to renew their agreement under a reduced percentage rate of rental. A copy of the referenced notification is attached for your files.

Subsequent meetings were held both in this office and the office of the Marx Realty and Improvement Co. between representatives of the Roane-Anderson Co. and the concessionaire's agent. In these meetings it was fully explained to the concessionaire's agent, by the representatives of this office, that any reduction in rental paid by their client could be accomplished only by obtaining the existing market value of this property through the advertising for and the obtaining of competitive proposals. To this method, they agreed, and the normal expiration date of August 31, 1949, was extended by modification to January 31, 1950, under the terms and conditions of the original agreement. This was done in order that the present concessionaire might be able to enjoy the expected Christmas volume and to provide additional time for the Agent to develop competitive proposals. A dead-line date of December 15, 1949, was established, beyond which no additional proposals were to be received.

Advertising, copies of which are attached, together with intensive solicitation by direct letters, long-distance telephone, and personal interviews produced a total of six bona fide proposals. These proposals are in the form of letters of intent to which are attached the Dun & Bradstreet reports and financial statements, where obtainable, for your review and analysis which are to be returned. to this office after study.

It was clearly indicated in the solicitation results obtained by this office that the subject location held little or no appeal to the nationally recognized operator, i. e., Gimbel's, Macy's, Associated Dry Goods, May Stores, Interstate, Allied, J. C. Penney Co., Sears, or Montgomery Ward. Interest, however, was indicated by some in the new shopping center when built provided sufficient operational square footage space was obtainable. In general, the consensus of opinion indicated that a local operator of sufficient size to service the store out of Knoxville would be the most logical prospect if obtainable. This possibility was exhaustively explored by the Agent with the two leading department store operators in Knoxville but with negative final results. Uncertainty over the possible effects of the proposed new area, coupled with the expense of moving to same, if possible, seemed to be the principal objection together with the problems of competent personnel and their own expansion programs now in progress. We are attaching individual letters covering this subject from the two leading prospective operators in Knoxville; namely, Miller's, Inc., and S. George & Sons, which are self-explanatory.

The attached letters from Gimbel's, Macy's, and Penney's indicate the same effort expended by this office to have the complete picture of the Oak Ridge operations submitted to their respective Boards of Directors for final decision after an on-the-ground appraisal by their real estate and merchandising executives. The complete file on all contacts is also included for your review and is to be returned to this office.

The six proposals received are from one large department store chain, the Mercantile Stores Corporation, whose scope is covered thoroughly in their attached annual report, two from smaller chains, primarily specialty shop type operations with subleased departments where space permits; namely, Sam Shainberg Dry Goods Co. and the Darling Shops, and three independent operators; namely, Loveman's of Chattanooga, Proffitt's of Maryville, and John J. Wender. The latter operates a group of five smaller operations in adjacent towns as well as the major portion of the basement space in the subject location.

It is reasonable to assume that the proposals submitted by Loveman's, Mercantile Stores Corporation, and Proffitt's cover the only department-store operations of appreciable size offered where a background of years of experience in a complete department-store operation is evidenced. Mr. Wender is thoroughly experienced in the mercantile business, however he conducts his business through separate facilities in the same community, such as, a limited department-store operation plus an adjoining furniture store and a variety store. He, likewise, conducts a men's store and baby shop in Oak Ridge in addition to the several departments in the basement location of Taylor's, Inc., covering home appliances, work clothes, boys' shop, furniture and household wares. Mr. Wender has indicated his intention, if permitted to do so and should he be awarded the department-store location, of consolidating his local interests and moving here to supervise and manage personally the one large operation.

Analysis of the report and findings of the survey conducted by the University of Tennessee indicate a large dollar volume is being spent off the area in most trade lines with the exception of food, drug and service items, i. e., gasoline, motor cars, etc., where convenience and local service is an important factor. This condition is fully recognized by the Agent, and, in our opinion, is due primarily to the very close proximity of a large metropolitan shopping area in Knoxville and secondarily to the limitations of the local shopping facilities in both size and number. The primary reason, we believe, is permanent and will continue to exist while the secondary reason can be improved when larger facilities are available in greater numbers to able merchandisers of all types. This, we believe, is particularly true in the fields primarily catering to the woman buyer, i. e., the department store, ladies ready-to-wear, shoe and specialty shops. The bulk of this present off-area buying, aside from the reasons enumerated above, has been stimulated by the enticement of credit buying via the charge account or budget plan offered to the local consumer plus delivery to the door by the established stores of Knoxville when it was unobtainable in the local facilities. An established and well promoted charge account buying habit pattern is difficult to interrupt even by the most experienced and qualified merchandisers. It is, therefore, our considered opinion, based on past experience with a well qualified operator and a population figure exceeding by double the present figure, that a million and a half is about the dollar potential of the present store facility. This could, by diligent promotional effort, conceivably be boosted to a maximum figure of two million but would require the top-flight operation of $70 per square foot while the established national average is around $50.

Assuming your office agrees with the Agent's selection of the two most desirable proposals, which are the proposal submitted by Loveman's and the one offered by John J. Wender and associates, we wish to make the following summary: 1. The proposals of Mercantile Stores Corporation and Proffitt's can be passed over by reason of the low percentage offered and the omission of any minimum guarantee.

2. The Sam Shainberg proposal together with the Darling Shops proposal offer a reasonably good percentage and a fair minimum guarantee but, in our opinion, cannot be truly classified as recognized department store operations in the generally accepted definition. Both are exceptionally well financed operators and are A-1 in their respective fields.

3. The John J. Wender offer is by far the best guaranteed return and offers the highest percentage rate of all volume obtained. He further agrees to completely fixture and air condition the premises, install a budget account system and furnish complete delivery service. The store would be operated as a family partnership, and the lease would be guaranteed by the individual partners. Their finances appear to be ample, and Mr. Wender has an excellent reputation as a businessman.

4. The Moore brothers, operating Loveman's of Chattanooga, conduct a first-line department store in that city doing a volume of approximately six million annually. They are exceeded in volume only by Miller's of that city which has a great deal larger amount of actual selling space and a prime location. This store, as well as the others, has been personally inspected by representatives of this office and is a well-rounded operation in every way. It is well thought of by our local residents as indicated by the number of charge accounts now active in Oak Ridge. In the estimation of Mr. Moore, the president, a volume well exceeding a million dollars annually can be anticipated with a gradual increase as they become established. The sales pro

motions on their part anticipate, as indicated in their letter of intent, a 3% plus appropriation for advertising alone. In the opinion of this office, Loveman's would give a highly creditable department store operation installing charge accounts, delivery service, and probably air conditioning. The volume would be limited only by the physical limitations of the property involved and the support the available population would give to such an institution. Naturally, it can never attain in the subject location a store comparable in selectivity to either their home store or the two major stores in Knoxville.

In analyzing the above summary which selects the two proposals which are, in our opinion, the most desirable of these offered, we have made the following table of rental returns for your information.

From the above rental table, it is apparent that Loveman's must exceed by $333,333 the volume required by Wender of $666,666 annually to meet the minimum guarantee of $40,000. This $666,666 is a little over $200,000 less than the subject store is currently doing in volume. Thus, it would appear that since Wender guarantees the same rental return to the landlord that Loveman's would pay on an assumed $1,000,000 annual volume, his would be the safest anticipated return in view of the present shopping habits of the local population. Assuming Wender could increase the present volume 11% or approximately $100,000, he would pay $60,000 rental, whereas Loveman's would have to increase the present volume $700,000 to equal Wender's payment of $60,000 on the increase of only $100,000.

It is our considered opinion, however, that Loveman's operation would consistently do a million or better annually so the rental can be reasonably anticipated to equal or exceed $40,000 annually. We are also firmly convinced that the percentage figure offered by Loveman's is a top percentage for this type operation as indicated in the proposals submitted by Mercantile, Proffitt and Penney (later withdrawn), and in our contacts with other high-grade department store directors. The introduction of this type operation to Oak Ridge should have a stimulating effect on the other merchants, as, in our opinion, the Moore Brothers will make a strong bid for the local market in advertising, display, and sales effort. This cannot help but have a general over-all beneficial effect. For this reason only, the Agent will recommend for your approval the Loveman proposal if you, as landlord, are willing to accept the possibility of a lower rental in exchange for the probability of a higher-grade operation generally doing an estimated higher dollar volume.

The above recommendation is in no way a reflection on the capabilities of Mr. Wender as a merchant, since, in our opinion, he might conceivably pay a better actual dollar return to the Government than Loveman's. The two types of operation are different in classification and the cost of doing business in the modern department store using every means to acquire volume prohibit the same percentage allocation to occupancy rental as is possible in a smaller type operation. The charge-a-plate, delivery and promotional costs represent a high percentage figure alone not to mention the cost of buying affiliations in the metropolitan markets.

The criticism of the local department store operation with which your office, as well as the Agent, is familiar could probably best be alleviated by the installation of the Loveman type store even though the percentage rate and minimum rental guaranteed is considerably lower than that obtainable from Mr. Wender. It should, likewise, be pointed out that due to the possibility of the new center, the tenancy of the subject premises by Loveman's would probably be shorter than would be the case with Wender for obvious reasons; however, this factor is of importance to the landlord only in the over all plan.