Posted on 11/12/2008 11:26:12 AM PST by 2ndDivisionVet
Circuit City’s bankruptcy filing is causing concern among U.S. shopping center and mall property owners as they face the prospect of every Circuit City store turning into vacant space, Reuters reports (via Retailer Daily).
The No. 2 consumer electronic retailer will continue to operate through the rest of the year, thanks to $1.1 billion of debtor-in-possession financing from existing lenders, led by Bank of America. However, that financing must be brought down to $900 million by Dec. 29, and Circuit City will be forced to use holidays sales proceeds to repay other outstanding loans.
The liquidity will get them through the retail season, but it “remains to be seen” if they will get through the next year, retired bankruptcy judge Frank Conrad was reported as saying.
If Circuit City does end up closing the 566 stores that remain (after the 155-store cut announced last week), its retail landlords will suffer, Bloomberg writes. They first lose rental revenue because under bankruptcy protection a retailer can break a lease with court consent, unlike a regular store closing where rent is still due. Then the landlord is forced to find replacement tenants, which can often be a costly process.
Analysts have suggested that landlords try to renegotiate leases with Circuit City so as not to lose their business completely, but often that ability is blocked by constraints under their own lender agreements or by the new owner of a sold-off “problem” mortgage.
The market reacted harshly to the news: Shares of Developers Diversified Realty, which has 50 Circuit City stores and derives 1.7% of its annual revenue from them, fell 24.6% on Monday. Real estate investment trusts (REIT) Kimco Realty and General Growth Properties also declined 9.6% and 34% respectively. (General Growth dropped another 68% in Tuesday trading.) Simon Property Group and Vornado Realty Corp are among the other REITs that lost value.
“Traffic is down in malls throughout the United States and as a result, the landlords, depending upon how leveraged they are, may have to file bankruptcy themselves,” concluded Conrad.
Circuit City stores leasesBefore Circuit City filed for Chapter 11, retailers had announced about 6,000 store closings so far this year. According to its latest yearly report, most of Circuit City’s leases were set to expire between 2014 and 2023. The chain owns almost none of its stores.
I drove through a shopping center with closing Linens and Things and a Circuit City, and it made me further realize that we are in deep, deep trouble right now.
http://www.freerepublic.com/focus/f-news/2130810/posts
Well, hells bells. Guess we have to go to Walmart and Best Buy to find the chinese made crap.
Doesn’t world’s richest man, Mexican national Carlos Slim, own the majority interest in CC?
If Circuit City is dependent upon Holiday Sales, it’s curtains. Holiday Sales this year may be the most dismal in 40 or 50 years.
Do what Cincinnati might do and turn them into police stations! Great locations for Obama’s new “security forces.”
Police May Take Over Vacant Circuit City Building
http://www.local12.com/news/local/story.aspx?content_id=db2e33d5-df9f-43d0-8ce4-7f0e6ad88867&rss=30
If so, he may not be the world's richest man for very much longer.
Big deal; this happens even if an anchor store moves to a better location in town, which happens quite often in my town. My problem is that it creates blight—the unused building with “acres of free parking” become a magnet for bums and other undesirables and consumes acres of real estate that could be used for better use.
The company that owns several malls in the Orlando area is near bankruptcy..and they have zero Circuit City stores...
The CC bankruptcy will put more shopping center/mall owners under
Must be insiderspeak for "no way in hell."
Bailout for the landlords!.........
Circuit City is curtains anyhow.
In bankruptcy, they really will have a hard time selling the warranty/service plans on their electronics. The warranties are what has the highest margins, not the products themselves.
Nah - biggest holder is HBK Investment in Dallas with 9%. It’s mostly held by mutual funds and Institutional investors, tho’ Mark Wattles, CEO of Ultimate Electronics owns 6.5%. Slim doesn’t show up, but there could be an investment vehicle of his in there.
|
Obama's fault.
These are called “triple net leases” and they are an excellent investment (usually), but you have to be a “big guy” in order to have the funds to do it.
You said — “I drove through a shopping center with closing Linens and Things and a Circuit City, and it made me further realize that we are in deep, deep trouble right now.”
You bet we’re in big trouble. The only good thing about that is that it will serve to put some constraints on the NObama administration, because when the whole country is collapsing because of the financial crisis, NObama will be really tied up in those issues, primarily. This will prevent Congress from going very “wild” with a lot of the kinds of programs that NObama would want, otherwise.
Last year, about this time, I stood in line to get a laptop computer that was on sale, on Thanksgiving Day, at a major electronics retailer. I got the good deal — but — they went out of business within a month from that date, before Christmas even got around.
Now, here we’ve got a bankruptcy going with another major electronics retailer, just a year later, and this is *leading into* the highest selling time of the year for them. If they couldn’t hold out until later, it must be really serious for them.
I would say that the “Great Depression” is going to *hit hard* next year — 2009. Look for it then, after the disappointing result from the Holiday Season comes in. Look for many different companies going into bankruptcies and many jobs being lost.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.