Entertainment Centers
Entertainment
venues coming to a neighborhood |
 |
Of the dozens of consultants interviewed for this report, the most common recommendation was to perform a feasibility study. Carol Sjolander, director of the International Association of Family Entertainment Centers explains, "It isn’t an easy business, but if you do your homework, you have a chance to succeed. Feasibility studies showing what elements to include and how much it will cost and a list of potential tenants are essential. I have heard of some entertainment not working in shopping centers, because the customer’s don’t shop." The costs for such studies range from $15,000 to $100,000 and the purpose is the get a fix on traffic patterns, demographic overview, understand future and existing competition, ideal entertainment components, existing and potential market consumer expenditures on entertainment, zoning issues, physical structure, drawing radius, projected attendance levels, capital expenditure budget and capital reserves for upgrading in a year to 36 months and marketing/promotion budget, recommendations for an architect, designing a theme for the facility, projections of psf sales and income, financing options, address security and parking issues. The development and day-to-day management of urban and family entertainment centers with multiple tenants is similar to traditional retail centers. In family and urban entertainment centers, as well as location based operations, not all tenant leases are financable and many require substantial tenant improvement allowances. This aspect can be highly speculative for all parties involved. Jay Furman, a principal of RD Management, with a twenty million square feet shopping center portfolio, explains,
"entertainment tenants as hard to finance, there are not that many credit tenants and these projects require a lot of long term reinvestment.’’ I would be very nervous building a $20 million entertainment project without a theater anchor. However, I would question an 18 to 20-screen theater in some shopping centers, because they can’t get first run movies." Ron Shook of LARC explains, "a lot of entertainment centers are never built because of funding. Financing is a huge obstacle. Banks look hard at feasibility studies and master plans, but are receptive if the studies look good and the tenants have credibility." A spokesperson for a company specializing in placing private funding for entertainment venues states "there is not a theater chain operating today that is investment grade." On the contrary, Edward Kashian of Lance-Kashian said, "the statement that theaters are not financable is |
not true. Edwards and Sony’s Magic Johnson Theaters are financable and investment grade." James Purinton of Orix finds "financing has not been an issue, since we self finance our projects. Obtaining zoning has been surprisingly easy, because of the city redevelopment agencies. One of our strategies is to partner with companies that specialize in working with city redevelopment programs." Discussions with numerous experts led to the conclusion that there is no cut and dry scenario to financing entertainment projects. Lenders are getting a first look at variables just not found in a traditional mall or a supermarket-anchored strip center. Who are the players? Wall Street and REITs are opening their doors and inviting entertainment concepts to play in the land of high finance. Entertainmnet Property Trust has $800 million lined up and the Simon Group, through a joint venture, earmarked $1 billion to fuel the growth of entertainment projects. Pension funds, insurance companies and numerous other conduits are getting their feet wet in this new arena too. Governments are helping to finance these projects and new legislation is being proposed across the nation to create billions of dollars to fund revitalization efforts intended to make downtowns, harbors and beachfronts a fun place to visit, work, shop and live. Formidable developers of traditional and super regional malls have long recognized the importance of making their projects exciting. Many owners of older malls are attempting to fill the void with entertainment components and developers of newer projects are incorporating entertainment venues well into the early drawing stages. Land owners new to retail development are jumping into the action. Developers and owners of conventional strip centers and freestanding buildings are too seeing a new type of tenant and draw for the redevelopment of their projects. When looking at the big picture, with consideration to all the potential venues, sources of financing and the demand for space from entertainment-oriented retailers, the development of entertainment projects will continue to create an explosion for years to come. Operating these types of projects will certainly throw us a curve ball every now and again, but the adventure will also create imaginative resolutions that we have yet to even dream about. One common denominator between the developers, retailers and financial sources, is that they are all entering this brave new world with an unprecedented level of sophistication. How the story will end, is anybody’s guess. It will be years before we have the luxury of hindsight. Fulfilling the dreams and fantasies of people, from all walks of life, is no easy task. But as evidenced by our short history, the evolution of entertainment projects has no boundary. These forward-thinkers will stay on top of cutting-edge technology and refine the blending of entertainment, specialty, and traditional retailing. If we continue to push our imagination and embrace the evolution of entertainment projects in our quest, then we will chart a course to unforeseen treasure troves beyond our wildest dreams.
|
