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.
Circuit City is WAY down the list when I’m shopping for electronics etc.
Free markets work.
OH YEAH.
We’re going to be just as polite to 0bama as the left was to us and GW Bush the last 8 years.
Have you seen these bastards calling for unity now? Now that they’re in power, they don’t want divisiveness and dissent, but it was OK when they weren’t in power to criticize and demean everything.
After that, though, Best Buy basically has no nationwide big-box brick-and-mortar competitor.
Fascists always call for unity. It's a defining criterion.
If they make it through bankruptcy, will the store be renamed to "Circuit Village"?
He tried to buy it back in 2003 but was rebuffed.
So, he just ran CompUSA into the ground instead...
Who is going to buy anything expensive at CC, knowing that if there is a problem with their purchase they are hosed? To overcome that, CC will have to sell their current inventory at cost or below. Also, what supplier is going to ship to them?
Tiger Direct purchased about 20 stores and the rest are gone.
I still can't believe that they didn't keep the Honolulu store open. Top grossing store in the chain for a long time.
Companies go out of business in good times too. Both Linens N Things and Circuit City have been grossly mis-run companies for a while. For Linens n Thing the problem was deciding to go toe to toe against Bed Bath and Beyond a company with 10 times the revenue and not doing anything to separate themselves as different, heck even the store layout was the same. And Circuit City’s history of firing senior sales people (ie the people that actually knew what they were doing) has been long analyzed.
Don’t take the failure of two poorly run companies as indications of trouble. CC has definitely been doomed for a long time, they just had enough in the bank to delay it until now.
The mall owners should convert bank holding companies, and get in line for the free govmt cheese.
I had someone the other night say
“I wouldn’t have been that upset if McCain had won”
My response was “McCain winning wouldn’t have been a threat to your very way of life.”
Who really needs another place to buy consumer electronics? There’s Best Buy, Wal-mart, Costco, Sam’s Club, Radio Shack, tons of local/regional centers and internet retailers.
I got some good deals when my local Linens n’ Things closed. It’s a strange mixed feeling, happy saving money with a going out of business sale, but wondering how the employees are going to make ends meet when it’s over.
My local Circuit City is still operating normally. I hope I don’t get to take advantage of another such sale.
Here's the Google Maps view of what's now a shopping plaza anchored by Circuit City.
Bummer.
Circuit City has plenty of Chinese crap.
I know. That’s why I said it. Gonna have to find a new place to make your purchases that support the People’s Liberation Army.
Lots of room for a few homeless shelters.
No, you’re thinking of the already defunct CompUSA.
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