Whether through a judicious development strategy or plain indecision, Pacific Theatres Corp. is one of the few theater chains to avoid the multiplex construction craze of the 1990s a trend that drove many of its industry brethren to bankruptcy court.
“On the theater side, we’ve been very disciplined about trying to choose ‘A’ sites for theaters and, on the real estate side, about finding higher and best uses for our property,” said Neil Haltrecht, executive vice president of Pacific Theatres Realty.
Haltrecht said the realty arm he works for operates independently from the theater-operating arm, and neither arm supports the other. All the same, developing more lucrative retail and industrial projects on Pacific’s old drive-in sites might have kept the theater business out of the financial morass that pushed several theater operators into Chapter 11 bankruptcy, including Carmike Cinemas Inc., United Artists Theatre Co. and Edwards Theatres Circuit Inc.
While Pacific Theatres’ decision not to join in the multiplex building boom may now appear like a brilliant display of restraint, it might simply have been a case of cold feet.
“Pacific Theatres kind of had a hard time making a decision,” said one industry insider. “They kind of just sat there on the sidelines and didn’t step up and just didn’t do it.”
Pacific Theatres officials, who operate more than 400 screens regionally, declined to talk about their business strategy, not surprising for the media-shy private company.
Blessed with a large and widespread portfolio of property around Southern California a precious remnant of its former drive-in movie business Pacific Theatres Realty set about maximizing the value of the properties. Often that meant building retail and industrial developments or selling the properties to other developers.
The real estate arm built retail centers, including Rancho Marketplace in Burbank, Worldport Business Center in San Pedro and Regency Entertainment Center in Long Beach, on land that used to house drive-ins.
Haltrecht said Pacific Theatres Realty determined that one particular property, which the developer had planned to turn into retail space, actually was twice as valuable if sold to a housing developer, so it was.
Anticipating the market
“Pacific Theatres, if you were to review their expansion efforts in the last six years, probably trailed their competitors,” said Chris Wilson of Wilson Commercial Real Estate in West Los Angeles. “I just think they were flat-out smarter than the bulk of their competitors. They saw the writing on the wall, and they didn’t (jump into the multiplex building frenzy).”
Howard Makler, president and CEO of Excess Space Disposition Inc., said the fact that Pacific Theatres is a private company, owned and run by the Forman family since its creation in 1946, surely played a role in its ability to abstain from the multiplex orgy. There was no need to create a buzz with ambitious expansion announcements, he said.
“Clearly, one’s stock price is tied to growth and news,” Makler said. And since Pacific Theatres is privately held, it doesn’t need to impress Wall Street with eye-popping proclamations.
Developer Jerry Snyder, CEO of J.H. Snyder Co., said there’s an even simpler reason why the Forman family has stayed strong.
“They’re rich, that’s why,” Snyder said. “They’re very conservative in their thinking and they have a lot of property.”
That conservative approach is one reason you won’t find a Pacific venue in any of Snyder’s developments.
“They never wanted to pay the rent we wanted, so we never made a deal,” Snyder said.
An industry source said Pacific is in a solid position to benefit from its competitors’ misfortune, if the company desires to “pick up the scraps” of leases and multiplexes that come available through bankruptcy proceedings.
By the same measure, the source said, the reorganized theater chains could return to the market in a stronger financial position. That, coupled with Pacific’s small slice of the market, could be cause for speculation about “whether they will have enough critical mass to compete,” the source said.
He added, however, that Pacific likely will be around for awhile.
The beat surely will go on at Pacific Theatres Realty, albeit under a new name to be announced shortly. The company is currently working on a major overhaul/expansion at the Cinerama Dome Theatre in Hollywood and on retail developments in Anaheim and Pico Rivera. The company also is about to break ground on a 275,000-square-foot retail development in Ventura.
