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TOPIC: Cost of Lease

Cost of Lease 31 May 2005 23:33 #28915

  • obyobyo
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Hi everyone,

Glad to see this forum is still going strong. I realized I have not been on in so long I forgot my username


I am well versed in this wacky (and must I say loads of fun) business. I have mainly enjoyed first-run commercial cucces in small towns.

I have been offered a sizable funding base to look at the viability of a multiplex in a competitive downtown city environment. I understand the dynamix in getting films (and the pitfalls).

The only issue I seem to be struggling with is Lease amounts? The area obviosuly has a typical range per sq. ft. Is there any magical theater formula??? I have heard rumors that the major plexes can handle up to 90-100,000 a month in lease for a city environment. Does this seem accurate? I have worked the #s and they are fine...I am just use to smaller #s!!!

Input please regarding lease amounts and what a 8-12plex in a city environment can support. Hope that makes sense.

Let the good times roll...
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Re: Cost of Lease 01 Jun 2005 12:31 #28916

  • RonOne50
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Big City, I guess I read your post in a reverse manner. It is a real terror to do a big city lease. I have worked for several chains in the past and know that lease can be a killer in area of a big city. Consider buying the location rather than a lease it will pay you $ in the long run to do so. I realize the cost could be very great but a lease is for life not just for so many years.
Quentin: Of course a woman is going to kill me. I wouldn't have it any other way!
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Re: Cost of Lease 14 Aug 2005 19:04 #28917

  • SamCat
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I might be able to help you out a little but these are only my thoughts and I don't work for a large chain and I am in in Australia and we work on a $/m2.
My experience is that when a developer wants to put a cinema in a shopping centre he/she is doing it because they want to bring more people through the door and to create a better tenancy mix. Cinemas are entertainment and food goes well with entertainment. So does fashion and anywhere else people would have a social experience.
Rents in a shopping centre may be $1000/m2 where as a cinema might only pay close to office rent around $120-200/m2 plus rates, insurance etc. The reason why it is so much lower is because the developer has to subsidise the cinema rent to bring in more people and that is of benefit to him or her to make a cinema survive.
If you have a catchment area of 100,000 people with no competition you should be able to achieve about 400-500,000 admissions. Work out your average admissions and candy bar and use about 10-20% of this amount on rent. Ask for some rent free to put the money into advertising and fitout. The other way to work it out is to offer the developer 10% of building costs. Anyway these are my thoughts and experience.
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Re: Cost of Lease 17 Aug 2005 15:22 #28918

If anyone read the papers about Cineplex Galaxy's Famous Players takeover, they are selling 34 theatres with capital lease obligations of $36 million.

That's 1.05 million per theatre!
Since 1987
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Re: Cost of Lease 19 Aug 2005 16:25 #28919

  • SamCat
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Hi Andrew

Generally the price paid is three times profit less managers and directors wages on a lease or less if their is a shorter lease term than 6 years left. Alot mof things vary sometimes you might get 5 times net profit if it is in good condition, not alot of maintenance and no prospect for future competition, and the income is growing each year faster than the rent goes up.
Sometimes you might get 1 or two if it is not a good property, has to be modernized and it just pays wages etc for an operator to take it on. With that takeover I haven't seen what the profit of famous players. But these public companies they can just throw money anywhere. With the merger it does leave heaps of oppportunity if you lived in Canada or wanted to open up as they have to sell heaps of sites. Cineplex has agreed to sell theatres in Victoria, Vancouver, Calgary, Edmonton, Lethbridge, Saskatoon, Winnipeg, London, St. Catharines, Kitchener, Hamilton, Kingston, Ottawa, Toronto, Gatineau, Montreal and Quebec City.

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