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TOPIC: Lease a Theater ?

Lease a Theater ? 20 Jan 2004 18:48 #7230

  • jacker5
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Hi,

Need help here from my buddies. What type of questions should I ask. This sia theatre in a small town population maybe 9,000, nearest competition is 20 miles.It is for sale as a business, but not the real estate or building. They want $95,000 for the business. There is only one screen (this is an original small town movie...not a cinaplex) with 200 seats. The projectors are old, but functioning, and the sound system is the original. The inside is very clean and comfortable seating. The nearest other movie is a typical cinaplex. The concession stand is small, but the lobby is big enough to expand it. The building and land is not for sale. The business is, and they will give you a long term lease.
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Re: Lease a Theater ? 20 Jan 2004 19:48 #7231

  • trackfood
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Is this theatre currently open or closed? Did you see the books, what kind of $$$ business does the theatre do? Are there any plans for anyone to open a new theatre close by? Seems like a lot of money for not a lot of equipment.
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Re: Lease a Theater ? 20 Jan 2004 20:06 #7232

  • wimovieman
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I ran into the same type of thing a couple years ago--about same price for the "business" (alot of blue sky), but the building was owned by the city and they had a 99 year transferable lease for $400 a month!! and they took care of the expensive building repairs as in roof, heat, ect.

I ended up not doing it as distance from my home/office was too great, but it would of worked--heck--I spend more than $400 a month just on real estate taxes on each of my buildings.
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Re: Lease a Theater ? 20 Jan 2004 23:22 #7233

  • RoxyVaudeville
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If the theatre is closed and the landlord owns the equipment, then the business is worth nothing. The only value to the owner is the rent that can be collected, and he should be satisfied with a rental figure that covers the mortgage if there is one, taxes, insurance, and whatever maintenance he agrees to cover, and a 10% profit margin.

If the theatre is operating by a tenant with a lease and is profitable, then the tenant could expect to recover the value of any equipment he owns, plus up to two years average profits. According to a theatre management book written some years ago: "Regardless of exceptional conditions or favorable lease, no theatre business is worth more than four times the average profit per year, computed on a five year basis." Based on that calculation, the theatre you are interested in would have had to average about $24,000 in annual profits over the past five years. If the current tenant still has x number of years left in the lease the question becomes why does he want out? It could be due to health, retirement, or a number of other reasons, but regardless you need to see the books (both sets) to determine that he isn't just trying to dump a losing venture. If that is the case then the business has no value for him as well except for the value of the equipment that he owns. Acquire box office figures from the distributors as well as from the operator and compare. Find out how many years are left on the lease. You need the present tenant to show you his tax records to prove his profits for recent years.

By the way, who is selling the business... the owner of the real estate or a tenant?

All the theatres that I have leased over the years, I never paid a nickel for the business, only for equipment and that was only at the one in a large mall. At every small town theatre the landlord always owned the equipment, and it was a situation where the lease had run out and the previous tenant had no interest to continue.

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Re: Lease a Theater ? 21 Jan 2004 03:13 #7234

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The theatre is currently operating first run movies but only on Friday, Saturday and Sunday! They want to let go of the business becasue of retirement. The owners of the real estate and land are the same people who own the theatre.
I am awaiting the books and distributor logs!
I am hesitant because if i want to put any tpe of improvement to the theatre it is not mine. I would like to eaither piggyback or add another screeen along side it.
Should i press for the whole deal and not lease?
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Re: Lease a Theater ? 21 Jan 2004 08:27 #7235

  • jimor
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$95,000 seems an awful lot of money for essentially renting something, with no right to install significant improvements and maybe not even be able to put your name on it. You had better like the theatre and its location TREMENDOUSLY. I would let it sit for a while to see if anyone else expresses deep interest, and at those terms, that is not likely. After a year or two on the market with no takers, the terms may become much more reasonable. It's OK to look like Mr. Eager and Enthusiastic, but don't look like Mr. Chump. Best Wishes! Jim P.S. Piggybacking it may not be amenable to the local tastes if there is sentimental regard to the look of the place, so running it as a side-beside may be the only option to keep your clientele. You MUST keep your options open in the very fluid entertainment industry. Down deep, all of us here may love theatres, but we can't sacrifice our financial lives for them. JR
Jim R. (new E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) member: www.HistoricTheatres.org
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Re: Lease a Theater ? 21 Jan 2004 10:51 #7236

  • Ken Layton
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I agree with jimor that the price is too high. If the place has it's original mono sound system it should be replaced with a modern stereo system at the very least.
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Re: Lease a Theater ? 21 Jan 2004 22:24 #7237

  • RoxyVaudeville
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Seeing how the theatre operator is presently the owner of the real estate and wants to keep the building, and I assume the equipment, and sell you the "good will" of the business for $95,000, it appears to me that they want you to finance part of their retirement.

This is an example of where they hope to get you to pay for the place several times. First they collect the $95,000 for which you get nothing, except for the privilege to lease the theatre. You then pay rent for x number of years, and then they finally sell you the property and you pay for it again, but at a higher price as the price may inflate over time.

I agree with Jim. Wait. Don't be in a hurry. I would be surprised to find out that the line at the box office are all people wanting to buy the business at that price.
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Re: Lease a Theater ? 23 Jan 2004 03:28 #7238

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Hi,

I got a nasty reply form the realtor about small town charm and that this is a family oriented place. What does that haveto do with ripping off a interesetd buyer.
Well after all the questions I asked and inquired about they feel I am not the right person to take over the theatre.
But get this if they ever do decided to put the whole package up for sale and not lease they will contact me?
Oh well, that won't stop me from looking elsewere for a good deal on a cinema for sale!
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Re: Lease a Theater ? 23 Jan 2004 10:07 #7239

  • macfan
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Roxy said: Acquire box office figures from the distributors as well as from the operator and compare.

How do you do that exactly? I am interested in a neighborhood theatre and I keep getting mixed reviews - it will either be a money machine or a money pit. Thanks for the help.
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Re: Lease a Theater ? 25 Jan 2004 12:51 #7240

  • trackfood
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Jack-
I'd reply to the realtor that your bank doesn't accept "small town charm" as a deposit...

Walk away for now. The right opportunity will come along.
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Re: Lease a Theater ? 26 Jan 2004 04:09 #7241

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Thanks for the help guys. The lady tha towns the property for the theatre is arounf 100 and stubborn. I told the realtor i am going to look for property to build a twin in the next town over.
That for 150,000 I can build a really nice twin and seve the people qaulity entertainment!

Realtors reply" No reply"!

Your right I have to keep looking, till the right opportunity comes along!
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Re: Lease a Theater ? 26 Jan 2004 11:36 #7242

  • Mike
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However: what if the fixtures and equipment were included in the sale price??

Michael Hurley
Impresario
Michael Hurley
Impresario
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Re: Lease a Theater ? 26 Jan 2004 16:57 #7243

  • jacker5
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Quick question. The total grosses were $125,000. What is teh estimate for profit on that> I know you can't come up with an exact number. My figure is about 30,000 in pocket is that pretty much it.
The gorss was everything concessions and tickets!

Thanks
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Re: Lease a Theater ? 26 Jan 2004 17:50 #7244

  • wimovieman
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That figure seems pretty optomistic---of course it would depend on how much of that was related to concessions versus tickets, if you were opening with high percentage movies, what kid of mark-up is being charged for concession items, then don't forget the great self employment tax along with all the other taxes.

Just the gross alone without having his actual operating costs does not mean much in seeing if it is feasible or not.
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