RSTO » Topics » ITEM 2. PROPERTIES

This excerpt taken from the RSTO 10-K filed Apr 14, 2005.
ITEM 2.     PROPERTIES

We currently lease approximately 80,000 square feet of space for use as our headquarters, including 29,000 square feet of warehouse space, located in Corte Madera, California. The leases for this space expire between April 2005 and April 2009.

As of January 29, 2005, we leased space in three separate distribution facilities and outsourced the distribution efforts for non-furniture in the direct to customer channel. We lease approximately 160,000 square feet of warehouse space in Hayward, California, which primarily supports our non-furniture distribution for the west coast of the United States. This lease expires in October 2006 with an option to extend for a twelve-month term. In June 2004, we relocated our Tracy, California furniture distribution center to a new facility. The lease for this facility provides for 195,000 square feet of warehouse space and for expansion up to 284,000 square feet and expires in September 2011, with options to renew for one additional five-year term. We also lease approximately 470,000 square feet of warehouse space in Baltimore, Maryland, for use as our east coast distribution center. The lease expires in September 2006, with options to extend for two additional three-year terms.

As of January 29, 2005, we leased approximately 1,178,000 gross square feet for our 102 retail stores and our one outlet store. The initial lease term of our retail stores generally range from 10 to 20 years. Certain leases contain renewal options for up to 15 years. Most leases for our retail stores provide for a minimum rent, typically including escalating rent increases, plus a percentage rent based upon sales after

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certain minimum thresholds are achieved. The leases generally require us to pay insurance, utilities, real estate taxes and repair and maintenance expenses.

In connection with our wholly owned furniture manufacturing subsidiary, The Michaels Furniture Company (“Michaels”), we lease two properties used for the manufacturing and storage of furniture, in Sacramento, California. We lease one of the properties from the previous owner and current president of Michaels. The main property consists of approximately 100,000 square feet of manufacturing space and 7,000 square feet of office space. The lease expires in February 2008, with options to extend the lease for two additional five-year terms. The second property consists of approximately 46,000 square feet of warehouse space, which is used to house finished goods. This lease expires in July 2006.

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