Movies and malls—a winning combination

Real Estate Weekly, June 25, 2003 by Larry Feldman

The late 1990's and early 2000's were marked by theater closings all. over North America. After a multiplex building frenzy in the mid- to late-90's, many companies declared bankruptcy, allowing exhibitors to shed their older theaters.

A "survival of the fittest" trend has divided most major cinema markets between those theaters that offer stadium seating versus theatres without such seating. Research shows that movie-patrons-will often travel twice the distance to a theater with stadium seating, and in some cases are willing to pay a little more for the benefit of sitting in those high back rocker seats.

In April of 2002, Feldman Equities of Arizona acquired the Foothills Mall in Tucson, a successful and established entertain- ment and discount enclosed mall anchored by well known-national credit tenants; including Barnes & Noble, Linens & Things, Saks Off 5th Aye, Ross Dress for-Less and Nike Factory Store. In addition to the retail anchors,--the mall is home to a 15-theatre Loews Cineplex with sales ranked in the top 10% for the national theatre chain.

During peak weeks, the Loews Theater in Foothills Mall is attended by tens of thousands of patrons. However, approximately 80% of these patrons enter and leave directly Through the parking lot and never enter the mall. As part of an ongoing effort to improve the mall, the ownership recently concluded successful negotiations to-provide Loews with a multi-million dollar renovation allowance which will permit Loews to convert their existing-seating to, modern stadium seating. In exchange for this funding by the landlord, Loews has agreed to seal off its existing parking lot entrance and to redirect their patrons to enter only through the interior of the mail.

The conversion to modern stadium seating and the redirecting of all of Loews patrons- into the interior of the mall is expected to have a dramatic effect on-overall pedestrian traffic, and-as a result, sales in the mall are expected to increase sharply.

This is a classic "win-win" business deal for both parties. With modem stadium seating, Loews is expected to generate substantially -more ticket sales. And a healthier mall will encourage more shoppers to visit the mall, which- in turn will likely result-in more ticket sales.

This unique arrangement with Loews is a part of Feldman Equities' implementation of a major renovation plan and an aggressive leasing campaign to attract new tenancy and retain many existing quality tenants at Foothills Mall.

In just one year, Feldman Equities has attracted a host of new quality tenants and arranged for new construction at five out of six available development pad sites at the property, creating over 60,000 SF of new retail space.

In a year when war threatened and travel seemed risky, when the economy faltered and the stock market stayed on life support, here's what Americans did: They went to the movies. Americans always, it seems, go to the movies. In good times, in bad times--every year it seems like a record of some sort is forged at the box office. And it is; every year for the past decade, the box office total has shattered the record established the previous year.

Last year, Americans went to the movies, and went again, and then went some more. In 2002 the estimated box office total rose by more than- 12%, pushing the American movie-going budget to $9.37 billion, according to Exhibitor Relations. That's an increase of $1 billion. Meanwhile, movie ticket prices rose a relatively modest 3.5%.

The previous year, the box office was up an impressive 8%, the biggest jump in four. years. That was flush enough in the year when Sept. 11 kept left them-nervous about hanging out in public places But even experts-in the entertainment business did not expect a leap as large as 2002's. There were highly promoted blockbusters--Spiderman, Star Wars: Episode II-Attack of the Clones, The Lord of the Rings: The Two Towers and Harry Potter and the Chamber of Secrets. There were hunk-driver action moves--Yin-Diesel in XXX--and romantic chick flicks--starting with Sweet Home Alabama. There were also sleeper hits like My -Big Fat Greek Wedding. No fewer than 22 films broke the $100-million mark at the box office.

While it is true that some of the revenue gain is the result of escalating ticket prices, there was a remarkable increase in the number of tickets sold, as well. The number of people going to the multiplex rose by 8% in 2002, more than double the increase of the previous year, which had reversed a decline in movie attendance from the year before.

This reflects another trend: long-neglected baby boomers are becoming a growing part of the movie audience. The proportion of 50-to-59-year-olds in the movie-going audience has been rising steadily over the past few years, though it remains far below the proportion of young men, cinema's core audience. About 50% of movie-goers are younger than 25, and bout 33% of movie-goers are between 25 and 39.

Despite immense political and economic challenges, 2002 was the strongest year for movie attendance since 1957, with about 1.64 billion tickets sold.