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TOPIC: Buying my second theater!

Buying my second theater! 08 Aug 2013 16:43 #40195

  • Tom
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I am in the process of negotiating the purchase of my second theater. It is profitable, but does not come with real estate. (It's in a mall).

Is there a rule of thumb for price? What is the range for multiples based on ebidta? (earnings before interest, depreciation, taxes and amortization)

The theaters ebitda is $200,000...what is a fair price?

Notes;
1. Brand new 20 year lease with options.
2. Absentee owner is a friend and is retiring.
3. All due diligence is complete and there is no deferred maintenance.
4. Already converted to digital.
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Buying my second theater! 09 Aug 2013 14:22 #40201

  • Mike
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It is truly an impossible question. Based on what? How would anyone know? Population? Competition? Screens? Etc. Best thing to do is get a very good accountant.
Michael Hurley
Impresario
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Buying my second theater! 10 Aug 2013 16:22 #40209

  • rufusjack
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Theater with a lease is tricky to value. The power of most commercial leases is with the landlord. There are numerous ways a landlord can get rid of you. I would have an attorney look over the lease with a fine tooth comb for how many ways you as a lessee could lose control of the property.

When you own the building you just need to pay you mortgage and property taxes and you are pretty set in control. The bank does NOT want to take the property back.

Malls can also be dead in a short period of time. How old is the mall? What percent of capacity is it at now? Who is responsible for upkeep of HVAC? Age of the HVAC systems? VPFs? What is the population of the market it serves? Closest chain theater is how far away?

When comparing the value of a leased business vs a property included business (taking out the value of the property of course) I would set the difference at least a 35% discount for the leased.
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