Topic: Inner city multiplex a wise investment??
From: Monterey Park, CA
Registered: Jun 2003
posted July 20, 2004 05:25 PM
Veteran theater operator wants to repeat success he missed
By TOM DAYKIN
Posted: July 10, 2004
Veteran theater operator Jeffrey Lewine was among the skeptics when a competitor opened a 22-screen cinema at a former industrial site just outside Pittsburgh.
Lewine and other Pittsburgh theater operators figured people would never bypass cinemas near their homes and drive to a rundown area devastated by the steel industry's collapse in the 1980s.
But the cinema opened four years ago to rave reviews and is today one of the biggest moneymakers among Pittsburgh theaters. It was one of the first theaters that national operator Loews Cineplex Entertainment Corp. opened in the Pittsburgh area and is among the biggest attractions at The Waterfront, a $300 million development of nightclubs, restaurants, stores and upscale apartments.
"It opened my eyes," said Lewine, who marvels at his rival's success.
The theater's performance convinced Lewine that he should not pass up a similar opportunity when he was approached to develop a cinema at the former Pabst brewery in downtown Milwaukee. The former doubter in Pittsburgh is now the believer in Milwaukee, hoping to make a big splash with what would be downtown's first modern cinema.
Lewine's firm, Jenco Cinemas LP, has announced plans to operate a 16-screen theater within PabstCity, the proposed $395 million conversion of the former brewery into a mixed-use development similar to The Waterfront. Lewine, whose theater would be an anchor tenant at PabstCity, was recruited by the project's developers after local cinema powerhouse Marcus Theatres took a pass.
Lewine respects his counterparts at Marcus, which operates just over two-thirds of the Milwaukee area's movie screens. He recalls his own skepticism when New York-based Loews Cineplex proposed its theater at The Waterfront, and he sees a direct comparison with PabstCity, which would open in late summer 2006 if the developers secure financing.
"Sometimes guys who live there don't see the forest for the trees," Lewine said.
That's why he missed the opportunity in Pittsburgh, and it helps explain why Lewine is eager to invest $12 million on a similar venture in Milwaukee despite the potential pitfalls.
"I just can't imagine that a big, regional project in Milwaukee won't work," said Lewine, who has operated two major regional theater chains - one that was sold for a hefty return and another that ended up in Chapter 11 bankruptcy protection.
Others are less optimistic.
Marcus Theatres President Bruce Olson declined comment on why company executives rebuffed overtures from PabstCity's developers, which include Milwaukee-based Wispark LLC, Atlanta-based TerreMark Partners and Cleveland-based Ferchill Group.
Olson said the company's long-standing policy is to not comment publicly on specific sites that it doesn't control.
Marcus has been considering possible cinema sites downtown for some time, Olson said.
"However, downtown theaters are an extremely risky financial proposition," Olson said in a statement. "There are only a few successful downtown theaters in much larger cities across the country among a couple dozen failures. Obviously, the odds of success are stacked against the majority of downtown theaters."
A concern for Marcus was PabstCity's location near the central city, according to Dan McCarthy, Wispark's director of urban development, and Craig Kaser, TerreMark's president.
The PabstCity theater, overlooking I-43 and W. Winnebago St., will likely draw patrons from the central city, as well as from other areas. McCarthy and Kaser said that audience mix was cited as a concern by representatives of both Marcus and Kansas City-based AMC Entertainment Inc., which operates the 18-screen AMC theater at Mayfair Mall in Wauwatosa.
Olson's statement didn't address that specific issue. It said Marcus has extensive experience with theaters in urban areas, including the eight-screen Northtown Cinemas, 7440 N. 76th St., and three theaters in Chicago's inner city.
Worries tied to disturbances
Some of the concerns about locating a theater near the central city stem from disturbances two years ago at the AMC theater at Mayfair Mall.
When the movie "Barbershop" opened at AMC's Mayfair theater in September 2002, altercations broke out in a crowd of youths. People trying to buy tickets to the sold-out late evening show refused to make way for crowds leaving earlier shows. The disturbance involved up to 1,000 people, and it took police 90 minutes to bring the situation under control.
"Barbershop" starred rapper-actor Ice Cube, and it was a mostly African-American crowd that went to the movie that night. When city officials later considered suspending AMC's theater license, some people charged that they were reacting to unjustified racial fears.
The incident prompted AMC and Mayfair to make changes at the theater, which had seen sporadic problems with fighting since its 1999 opening.
Signs were posted to notify customers of sold-out movies, more orderly ticket lines were created, and movie times were adjusted to keep exiting and entering crowds from trying to squeeze through the same space.
There have been no reported incidents since the changes occurred, and "Barbershop 2: Back in Business," the movie's sequel, opened at Mayfair in February without any trouble.
Heading off problems
An AMC executive couldn't be reached for comment. But Lewine said the types of management changes enacted at the Mayfair theater reflect how his firm would operate the PabstCity cinema. Proper management and security, he said, can prevent most problems.
Lewine said the central city areas close to the Pabst site include neighborhoods with new housing and other improvements.
He also said central city residents - like people living in other neighborhoods - go to movies and typically don't cause problems. Lewine said that the theater would draw customers from throughout the Milwaukee area, given its location near the intersection of I-43 and I-94.
Another marketing draw will be the theater's location within PabstCity, a development that would include a proposed House of Blues nightclub, GameWorks interactive entertainment center and other attractions. PabstCity plans call for 450,000 square feet of restaurants, entertainment venues and shops, 560 condominiums and apartments, and 100,000 square feet of offices.
Theaters are major anchors
Other entertainment and retail developments in cities comparable to Milwaukee have successfully used theaters as major anchor tenants. The list includes Newport on the Levee, which includes restaurants, shops and a 20-screen AMC cinema in Newport, Ky., just across the Ohio River from downtown Cincinnati.
However, the size of the theater operator is a major difference between the cinemas at The Waterfront and Newport on the Levee, and the theater proposed for PabstCity.
Loews Cineplex is the nation's fourth-largest theater chain, with 1,486 screens, and AMC is the nation's second-largest chain, with 3,095 screens, according to Box Office Magazine. Loews shed some unprofitable theaters in a bankruptcy reorganization in 2001-'02.
Lewine's firm, Jenco Cinemas, owns 24 screens in the Pittsburgh area and a 10-screen theater in Anderson, Ind., and has an eight-screen theater under construction in Calumet City, Ill., with other theaters in the planning stages. Lewine also will manage a 10-screen theater near Pittsburgh for another owner that opens in September.
A small theater operator will find it more difficult to obtain financing for a major, downtown cinema complex, Rizzo said.
Lewine said he's in the process of selling a minority stake in Jenco to a new equity partner - a move that will provide additional cash for the firm. He declined to identify the partner because the transaction is not yet final, but he described it as a major financial institution based in Florida.
Has run regional chains
Lewine's resume includes stints at running two regional theater chains - with both firms backed by some well-known investors.
A native New Yorker, Lewine, 49, worked as a theater manager and for various film distributors before leading a 1988 purchase of Pittsburgh-based Cinemette, which was renamed Cinema World. The $19 million acquisition was financed in part by the Bronfman family, which then controlled the liquor conglomerate Seagram Co. and which later invested in the movie industry.
Six years later, Lewine and his partners sold Cinema World's 176 screens in Pennsylvania, Ohio and West Virginia to Columbus, Ga.-based Carmike Cinemas Inc. for $38.1 million.
Lewine then worked in various consulting jobs before returning to the theater business in 1997.
With financial backing from New York-based investment firm Warburg Pincus, Lewine bought Mann Theatres, which operates in California and Colorado, for a reported $162.5 million. The company, based in Encino, Calif., was renamed WestStar Cinemas Inc.
But that investment quickly soured.
By 1999, WestStar was among several major theater chains - including Carmike, Loews Cineplex, United Artists, General Cinemas and Regal Cinemas - that were in deep financial trouble, the result of expanding too quickly. WestStar, saddled with debt from the 1997 purchase, had trouble raising cash to renovate and expand its aging theaters.
Lewine left WestStar after just two years. The 351-screen chain later filed for Chapter 11 bankruptcy protection and was sold in 2000 for $91 million. Lewine in 2002 tried to buy back the Mann chain, but that move fell through, he said, when the two sides were unable to reach a sale agreement.
Lewine returned to Pittsburgh and in 2000 opened a 14-screen theater. He also began working on building the new theaters in Indiana and Illinois, and last October bought a 10-screen theater in the Pittsburgh area.
Lewine said the $12 million needed to develop the Milwaukee theater will include "a couple million dollars" of his own funds. He's confident that PabstCity will fulfill its developers' vision of drawing people who might otherwise go to the Chicago area to shop and have fun.
"I see so many positives in Milwaukee," Lewine
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