Rex Stores, the regional brown- and white-goods discount chain, has begun shutting stores and exiting markets in advance of a real estate sale and leasing deal the company announced last month.
In a filing with the Securities and Exchange Commission (SEC), Rex said it will sell 94 current and closed stores to Coventry Real Estate Investments for about $84 million. Under terms of the deal, which is expected to close on April 30, Rex will lease back at least 40 of the locations through 2010, with an option to renew the leases for another 15, years after that.
Either party may terminate leases on as many as 30 stores after the first six months, which would allow Rex to shutter a maximum of 84 locations under the agreement with Coventry.
The chain sold seven stores during its fiscal third quarter last autumn for $6.8 million, ending 2006 with approximately 207 stores in 36 states in largely secondary and tertiary markets in the Midwest and Southeast. The company would not provide a current store count.
Rex said it will use the proceeds from next month's sale to pay off upwards of $19 million in mortgage debt on the stores, and to fund the company's synthetic-fuel projects.
Rex began in a hotel storefront as Rex Radio in 1926. A founding member of the NATM buying group, the four-store Ohio chain was acquired by present chairman/CEO Stuart Rose in 1980. Rose, a mergers and acquisitions broker, built the company into a regional powerhouse by buying the TV & Stereo Town and Kelly & Cohen retail chains in highly leveraged deals.
Rose took the company public in 1984 to help pay down debt and open more stores, setting the stage for a series of retail expansions and retrenchments over the past 20 years.
Rex is scheduled to release its fourth-quarter and full-year earnings for fiscal 2006 on March 28.