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TOPIC: Lease or buy

Lease or buy 27 Jul 2005 18:35 #24922

  • RonOne50
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Well we just sold our theater to the owner of the shopping center where it is located. We took quite a loss on the whole deal but it was the best solution to our problems.

We had two locations, one was leased and top of the line theater, all stadium and nice wide isles and I had put the best in booth equipment in the place. It did very well to drawing from up to 65 miles away. It had been a somewhat cooperative design in that I provided the design and the landlord cut it down to suite him.

The lease was high much to high for a 12,500 city and we had 8 screens about 2 more than we really needed. The landlord had been trying for several years to get us to sell to him always at loss and we had resisted.

Our other location is a triple about two hours away and does quite well but not nearly as well in gross dollars as the nicer location. We own the other location and while it isn’t as nice in seating it has the best money can buy on the screen, in the booth and in sound. We had for years taken from its operating capital to make up the short fall in the other operation. We had even looked at selling the one we owned (well us and the bank) to make more cash for the cash flow at the other location.

In the end, the common sense was to take the loss and get out. We will save at lest 825,000 of lease over 5 years, this will also free up some stocks to be sold and I can make the theater we have better.

It hurts to let it go, we are hearing it from our former customers how much they will miss us and the kicker is that it will be closed until at least September. Several things are driving this. The new owner wants to put in a game room and he wants to change the top of the concession and rearrange the coke machines to fit one more line in the way to small an area of the concession stand. He won’t expand the concession or move it where you face it when you walk in the theater, which I feel is a mistake.

Another reason is that he is about to enter corn harvest and his main business is farming.

He has hired some ex-employees of ours to run the theater. He should realize that there are reasons they are ex-employees! It has been a rough three weeks but we have moved to new offices in this town and will now start to look at the other operation and in a year or so we will look for other locations to own! I don’t know that I will ever lease again but maybe all landlords are not the same.

I guess what I am saying is if it comes to leasing or buying you should buy!

RonOne50
Quentin: Of course a woman is going to kill me. I wouldn't have it any other way!
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Re: Lease or buy 15 Aug 2005 17:01 #24923

  • SamCat
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To Lease or buy.
My thoughts are to buy. The reasons why I think is because a cinema always pays less rent than shops and the Landlord is always looking for ways to increase his return and cinema rents is one way to do it. Also when you lease the rents go up every year with C.P.I or a fixed percentage and with a mortgage it is more likely to stay the same. We have three locations and we own on the land on all of them. We are going into one shopping centre now of which we negotiated with the developer to sell us the strata title. Our repayments are more than if we did rent but only by about $1500 per week and it would take about 5 years for the rent to increase to this amount with C.P.I or rent increases. We also have the increase in property value over time and are near other shops which does increase our trade. Also when you rent if you do get a 10 or 20 year lease what's going to happen after that time if you have to renegotiate again and you don't know what the rent will be.
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