NEWS

• Circuit City Stores, Inc. Announces Store Closing Plan Company Plans to Close 155 Stores, Further Reduce New Store Openings and Renegotiate Certain Leases --  -- Company Announces Ongoing Evaluation of Additional Cost Reduction Initiatives and Is Considering All Options and Alternatives to Restructure its Business --  RICHMOND, Va., Nov 03, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Circuit City Stores, Inc. (NYSE: CC) today provided an update on its liquidity position and its previously announced ongoing comprehensive business review. Due in part to its deteriorating liquidity position and the continued weak macroeconomic environment, the company has decided to take certain restructuring actions immediately, including closing 155 domestic segment stores, reducing future store openings and aggressively renegotiating certain leases. The company also is considering all available options and alternatives to restructure its business.  Business and Liquidity Update  Over the past several weeks, a number of factors have impacted severely the company's liquidity position. These factors include the following:  -- Waning consumer confidence and a significantly weakened retail environment have impacted negatively the company's sales and gross profit margin rate to a greater degree than management had anticipated previously.  -- Following the company's second quarter results announcement, the company's liquidity position and the sharply worsened overall economic environment led some of Circuit City's vendors to take restrictive actions with respect to payment terms and the credit they make available to the company. Additionally, the recent disruption in the financial markets has contributed to certain of the company's vendors experiencing insurmountable challenges with obtaining credit insurance for the company's purchases. As a result of this and other considerations, certain of the company's vendors have set more restrictive payment terms than in previous quarters, including in some cases requiring payment before shipment. Vendors also have limited the credit available to the company for purchases, including in some cases not providing customary increases in credit lines for holiday purchases. While management is working diligently to secure the support of its vendors and believes it has maintained good relationships with these important partners, the current mix of terms and credit availability is becoming unmanageable for the company.  -- To date, the company has been unable to collect an income tax refund of approximately $80 million that the company believes it is owed from the federal government.  -- Due primarily to the weakened economic environment and its potential impact on the timing of sales of the company's inventory and costs and expenses associated with such sales, a recent third-party appraisal conducted for the company's asset-based credit facility resulted in a reduction of the estimated net orderly liquidation value of the company's inventory. This valuation adjustment was made despite the mix of merchandise remaining consistent with the previous appraisal in November 2007. This reduction has led to a lower borrowing base and reduced availability for the current period compared with what the company had expected previously.  James A. Marcum, vice chairman and acting president and chief executive officer of Circuit City Stores, Inc. said, "Since late September, unprecedented events have occurred in the financial and consumer markets causing macroeconomic trends to worsen sharply. The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors. The combination of these trends has strained severely our working capital and liquidity, and so we are making a number of difficult, but necessary, decisions to address the company's financial situation as quickly as possible."  Domestic Segment Real Estate Actions  As a result of the company's ongoing asset productivity assessment and working capital situation, the company has determined to take the following initial actions with respect to its domestic segment real estate portfolio and strategy:  -- Close 155 stores and exit certain markets: Circuit City plans to close 155 stores that are underperforming or are no longer a strategic fit for the company. The stores identified for closure are located in 55 U.S. media markets, of which Circuit City will exit 12 U.S. media markets.  The list of closing stores can be found by visiting the company's investor information home page at http://investor.circuitcity.com and clicking the link regarding today's announcements. The company expects that impacted stores will not open on Tuesday, November 4, and the store closing sales will begin on Wednesday, November 5. The company expects the sales to be completed no later than calendar year end. For fiscal 2008, the stores that are being closed generated in total approximately $1.4 billion in net sales. When results were viewed at the individual comparable store level, the closing stores, as compared to the stores remaining open, on average had lower net sales, a lower close rate and a lower gross profit margin rate. The stores, on average, were also unprofitable when marketing expenses were allocated to the individual store-level results.  Circuit City will continue to honor its customer commitments and serve its guests through 566 stores in 153 U.S. media markets, via its Web site at www.circuitcity.com and via phone at 1-800-THE-CITY (1-800-843-2489). During this transitional period, Circuit City is executing a plan to minimize disruption to the operations of stores that are remaining open. No international segment stores are closing as a result of the real estate plans announced today.  -- Further reduce new store openings: The company has revised its store opening plans for the current fiscal year and will not open at least 10 locations that were previously expected to be opened. The company still expects to open up to two incremental stores during the remainder of fiscal 2009. As previously announced, other than existing commitments, management intends to suspend store openings beginning in fiscal 2010.  -- Renegotiate certain existing leases: Circuit City intends to begin immediately renegotiating certain of its existing leases with the goal of significantly lowering rents. In some cases, the company may choose to negotiate with landlords to exit leases if rents are not reduced. The company also plans to work with landlords to terminate the leases for the stores included in today's closing announcement, as well as leases for a number of inactive locations that were closed previously and for the locations that are no longer being opened.  As a result of the store closures, Circuit City expects to reduce store operating, payroll and marketing expenses. The store closures will result in a reduction of approximately 17 percent of the domestic segment workforce. The company also expects to incur charges in fiscal 2009 associated with the above real estate actions. The company is currently evaluating the benefits and expenses associated with these changes, which are subject to the outcome of negotiations and store closure agreements. Presentation on the financial statements is currently being evaluated for accounting treatment.  "We deeply regret the impact today's announcement will have on our associates, our guests and the communities where these stores are located. We truly are grateful to each of our associates for their many contributions to the company. We are also grateful for the loyalty and support we have received from our guests in the impacted communities. Circuit City will continue to serve guests through 566 stores in 153 U.S. media markets, via its Web site at www.circuitcity.com and via phone at 1-800-THE-CITY (1-800-843-2489)," concluded Marcum.  Evaluating All Options  As a result of unfavorable macroeconomic conditions and the company's deteriorating liquidity position, the company is considering all available options and alternatives for the business. Consistent with this evaluation, the company will continue to take appropriate actions to conserve cash, reduce expenses and improve liquidity. In addition, the company is continuing to evaluate additional near-term cost reduction initiatives that may be necessary to address its financial condition. The company is also in negotiations with its lenders and other third parties regarding various financing alternatives.  The company plans to operate its business without interruption while it engages in discussions with its lenders and works with advisors to determine the most appropriate restructuring alternatives. The company can make no assurance that the discussions will result in any agreements or transactions.

   

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  UPSCALE BOWLING, RESTAURANT, BAR CONCEPT
  PINS DOWN TALLAHASSEE LOCATION
  Lane 7^™ and J Lefty’s^™ To Debut In Early 2009
   
   
  TALLAHASSEE (October 2008) — A high-sensory entertainment destination that takes bowling, classic dining, billiards and interactive video games to a new level of affordable family fun will premiere in early 2009 in Tallahassee.
   
  Lane 7 (lane7bowl.com) will offer a state-of-the-art bowling and entertainment experience, while J Lefty’s Grill & Bar (jleftys.com) will serve up a creative menu of American comfort cuisine and a high-definition bar in a casual yet sophisticated setting. Located in the Northampton shopping center on Kerry Forest Parkway, the 40,000 square-foot complex is the vision of Tallahassee entrepreneur Jake Whitfield.
   
  In addition to 22 bowling lanes, including four private alleys in a separate VIP area, Lane 7 promises to be an attention-grabbing sight-and-sound experience featuring a leading-edge music system and more than 30 HDTVs, including 11 projection screen televisions over the bowling lanes. The visual display will offer guests front-row seats to must-see sporting events and the latest music videos.
   
  The venue will cater to people of all ages who are looking for a unique and engaging way to spend their day or evening.
   
  “The Lane 7 and J Lefty’s experience will bring a new dimension of entertainment to Tallahassee,” said Whitfield. “We have designed a captivating destination with the idea that everyone — families with youngsters or teens, college students, singles and couples — will find something they enjoy here. There’s clearly a need for a wider variety of leisure activities in the Big Bend area, and we strongly believe that this type of bowling and restaurant venue will help fill the gap.”
   
  Whitfield brought in Trifecta Management Group, Inc. (trifecta-mg.com) of Los Angeles to assist in developing and managing the concept. The brainchild of three former GameWorks senior executives, Trifecta was launched in 2005 as a restaurant/entertainment creator and operator and manages 10 venues nationwide. Trifecta has created critically acclaimed concepts, including The Corner Alley^® and Zocalo Mexican Grill and Tequileria in Cleveland, Ohio.
   
  Whitfield expects 75 to 100 employees will be hired to run both operations.
   
  Bowling at Lane 7
   
  In the last few years a number of new VIP bowling concepts with posh comfortable settings, gourmet cuisine and adult beverages have brought about a renaissance in the industry, catering to an influx of social bowlers, led by successful concepts like Lucky Strike and The Corner Alley. Lane 7 takes the experience to the next level by including all bowlers, including families and those who want to share in league play.
   
  “Whole generations grew up bowling, but in musty, dark, smoke-filled alleys with tasteless beer, rotisserie hot dogs and greasy fries as the food staple,” said Whitfield. “But this concept is anything but your grandfather’s bowling alley. The only similarity you’ll notice between the two is the familiar sound of bowling balls striking ten pins.”
   
  The centerpiece of the bowling alley will be the state-of-the-art scoring system and classic lanes designed by Brunswick, the industry’s premier full-line equipment and service provider. Friendly and experienced servers will take food and drink orders at the lanes so that bowlers will not have to leave the action.
   
  Dining at J Lefty’s Grill & Bar
   
  Whitfield is a former southpaw with the Minnesota Twins organization, and thus the name J (for Jake) Lefty’s was born. Look for the interior ambiance to reflect Whitfield’s bias toward lefties, including recognition of famous left-handed artists, athletes and entertainers.
   
  The renowned interior design firm of Design Development of Agoura Hills, CA, has been brought in to give both Lane 7 and J Lefty’s a sleek and comfortable décor. Walls, flooring and furniture in harmonious shades of brown, orange and turquoise will offer a hip and spicy flavor to the 150-seat restaurant, which will have both indoor and outdoor seating.
   
  Contemporary American cuisine will run the gamut from specialty appetizers to handcrafted gourmet pizzas to grilled steaks and seafood.
   
  About Whitfield & Investors
   
  The founder and CEO of 7 Entertainment, LLC, Jake Whitfield also is a founding member of eLayaway.com, a payment processor that offers automated layaway payment plans so customers can pay for a product or service over time and receive their order once it’s paid in full. Whitfield and his wife and three children live in Tallahassee.
   
  Whitfield’s vision for Lane 7 and J Lefty’s was brought to reality by Dr. Richard Thacker, an osteopathic physician specializing in Internal Medicine in Tallahassee. The two created 7 Entertainment, LLC and were able to bring on other partners who shared in their vision.
   
   

• John McNeill represented Little Caesar's Pizza in a lease for 1,284 square feet. Located at 2580 North Monroe Street (Next to Whataburger and Firehouse Subs), Little Caesar's Pizza has been proudly serving delicious products for nearly 50 years and Proctor & Long welcomes them back to the Tallahassee Market. For more information visit www.littlecaesars.com

   

• College Towns: Still a Smart Investment
  Property values in college towns are holding strong and can make a good investment whether you're a parent, an investor, or just looking to relocate
  by Prashant Gopal

  A year ago, Jeff Shea began buying up rental properties around the University of Illinois at Urbana-Champaign, from which he had only recently graduated with a business major. Shea, 23, who lives in Chicago, owns three rental homes near campus, including a four-bedroom house he bought for $138,000 and rents to four students for $1,800 a month.

  "It's the best time ever to buy houses," Shea said. "The rent is inflated because so many people go to school here."

  Shea said he'd be happy if Champaign-Urbana prices took a dive so that he could buy even more. But college towns have remained relatively stable in this slumping real estate cycle. Students, university employees, and faculty keep apartments filled and form a steady stream of home buyers. And retirees and professionals flock to college towns because they're attracted to the lifestyle and cultural activities.

  Recession-Resistant Markets
  Enrollments—especially at large public universities—are growing as more children of baby boomers (so-called echo boomers) graduate from high school. At cash-strapped public universities, dorm beds are limited and students are often forced to find private housing after freshman year, says Michael Zaransky, author of Profit by Investing in Student Housing (Kaplan Publishing 2006) and co-CEO of Northbrook (Ill.)-based Prime Property Investors, which invests in student housing.

  "It's a resilient market and seems to be fairly recession-proof," Zaransky says.

  BusinessWeek.com worked with OnBoard, a local real estate information specialist, to find out how college towns are doing in this slumping housing market. We selected towns with long-established, first-rate colleges and found that 17 of 25 college towns outperformed their respective states in terms of home price appreciation last year. Four towns performed as well, and only four towns underperformed.

  In Palo Alto, Calif., which is home to portions of Stanford University, median home prices increased 15% in 2007 compared with 2006, according to OnBoard. (Overall real estate prices in California dropped 9%.) The area benefits not only from the university but also from its proximity to Silicon Valley. Similarly, Austin, Tex., home of the University of Texas, saw a 6% price increase in 2007, while home prices in the rest of the state remained flat.

  But not all college markets have weathered the housing slump as well. Williamsburg, Va., the home of the College of William & Mary, which has restrictions that limit off-campus rentals, saw a 16% annual home price drop in 2007. Virginia's overall median home prices fell just 3%.

  Not Just for Students
  Zaransky says the houses located just steps from campus are seeing the most appreciation because that's where students typically want to live. But other areas of college towns also benefit from local academic institutions.

  Sandy Wentworth, a Realtor with Jones Group Realtors in Amherst, Mass., says retirees—especially former academics—like the Amherst area, which is home to four liberal arts colleges and the University of Massachusetts Amherst. "They want access to the culture and all the great libraries," Wentworth says.

  Mark Waldhoff, a Realtor with Keller Williams Realty in Champaign, Ill., says the market around campus is stable in part because the university brings buyers and renters to town from more affluent urban communities. "It brings well-paying jobs into the community and brings a lot of diversity," he says. "Professors are often surprised about what the average sales price is here compared to the community they came from. You can buy a single-family home for $155,000 to $160,000."

  For those parents of college students who can afford it, buying a house close to campus often makes good financial sense because their children need a place to live for four years, after which the property can be sold or turned into a rental home. But Zaransky says parents should try to take their children out of the equation when deciding whether to buy. It's generally good to buy in college towns with low-cost real estate, rising enrollments, and a shortage of dorm beds, he says. And it's best to look outside of large, expensive cities where colleges have less influence on the housing market.

  Risks for Investors
  But like any real estate investment, buying in a college town comes with risks, particularly for investors. Think Animal House. Students are known to drink, punch holes through windows, spill beer on carpets, or just not be very responsible. Of course, it's possible to protect your investment by requiring tenants to provide security deposits and parental guarantees.

  And though the pool of tenants in a university town is large, it's harder to find renters after the semester begins; the risk is that an apartment could go empty for a few months—though there's always summer school.

  A larger risk is that the subprime mortgage crisis could spread and the economy could fall into a deep recession. In that situation, home prices in college towns might not drop as much as other places, investors say.

  In Austin, home prices near campus are already so high that investors can't necessarily expect to cover a mortgage with rental income unless they come up with a significant down payment, says Jay Carter, a Realtor with Livinginaustin.com. But buying a home can still make a good investment in terms of appreciation.

  Carter says enrollment is growing, but there's a risk that the credit crunch could spread to the student loan market, pushing up interest rates and making college more expensive. "The area around the University of Texas campus is tighter than ever, and demand will always be there no matter what the economy is doing," he says. "UT students are competing [for apartments] with a large number of non-UT students who just want to live in that area of town. There's a huge urban boom in Austin."

  A Tight Market
  Home prices next to the University of Florida campus in Gainesville have been strong despite Florida's real estate downturn, says Dave Ferro, a Realtor with Bosshardt Realty Services. Foreclosures are more common farther away from campus, he says, but finding a good investment property close to campus is difficult because sellers are few and prices are relatively high.

  "When the market is hot, it's difficult to buy a property that you can break even on in terms of renting," Ferro says. "Things have changed a little bit, but properties around campus are like waterfront."

  If you want to invest in college towns but don't want to get involved with buying real estate, Zaransky suggests buying shares of real estate investment trusts. REITS that invest in student housing include American Campus Communities (ACC), Education Realty Trust (EDR), and GMH Communities (GCT).

  Check out the BusinessWeek.com slide show to see how well the housing markets in 25 U.S. college towns have fared.

  Gopal writes about real estate for BusinessWeek.com in New York .