05.01.2011 SBRDA No Comments

Regal-Edwards Best Fit For Downtown Movie Theater

Members of the San Bernardino Area Chamber of Commerce Koffee Klatch listen to San Bernardino Economic Development Agency Interim Director Emil Marzullo present the Agency’s reasons for seeking to lease the downtown San Bernardino theater to Regal Entertainment Group. Photo by Carl Dameron

San Bernardino Economic Development Agency Interim Director Emil Marzullo explains to members of the San Bernardino Area Chamber of Commerce Koffee Klatch why he believes Regal Entertainment Group will bring the best economic development to San Bernardino of any theater operator chain from which the Agency received proposals for operating the downtown San Bernardino theater. The Agency staff believes Regal Entertainment Group will attract additional development to the downtown area. Photo by Carl Dameron

The San Bernardino Economic Development Agency is giving a series of presentations to explain why it seeks to lease the downtown San Bernardino theater to Regal Entertainment Group, owner of Edwards Cinemas, Regal Cinemas and United Artist cinemas. The first of these was to the San Bernardino Area Chamber of Commerce Koffee Klatch on Dec. 22, 2010. Photo by Carl Dameron

 

(SAN BERNARDINO, Calif.) The City of San Bernardino Economic Development Agency is holding a series of community presentations to explain why it’s seeking a lease with Regal Entertainment Group, owner of 540 multi-screen theater chains including six Edwards Cinemas with a total of 98 screens in the Inland Empire.

San Bernardino Economic Development Agency Interim Director Emil Marzullo leads these presentations, which have been given to business and community leaders.

The first of these presentations was to the San Bernardino Area Chamber of Commerce Koffee Klatch, at 7:30 a.m. on Dec. 22, 2010.

Marzullo has been with the San Bernardino Economic Development Agency since 2008. When he began working there, it had leased the theater to Cinemastar, a now defunct theater chain that had also operated theaters in other Inland Empire locations.

“When I came to the agency, Cinemastar was in its final meltdown phase, going out of business,” Marzullo said. “They weren’t cleaning the carpets. Their late movie ended before 9 p.m. They were doing all the things they should do if they wanted to go out of business.”

The San Bernardino Economic Development Agency obtained a Housing and Urban Development (HUD) loan to assist in financing a portion of the construction project. This costs the Agency $60,000 a month, but would be paid by a theater operator.

After the theater was built in 1999, the developer was experiencing financial problems, and transferred the theater ownership to the Economic Development Agency.

Cinemastar originally made the payments on the loan. But for two years before the theater closed in 2008, the Economic Development Agency had a forbearance agreement in place with Cinemastar, which allowed them to defer half of the payment.

“When the forbearance agreement ended, Cinemastar closed its doors,” Marzullo said.

A short time later, the San Bernardino City Council approved the theater’s outright sale to Maya Cinemas, which operates theaters in Bakersfield and Salinas.

“Maya Cinemas’ owners said all the right things, like we don’t need your money, we want to do this on our own dime,” Marzullo said. “Eighteen months later, they still couldn’t pull off the deal.”

The Economic Development Agency then marketed the vacant theater building to mid-size and large theater chains, and received proposals from Regal Entertainment Group and seven other theater operators.

Regal Entertainment Group’s proposal was one of four the City of San Bernardino Economic Development Agency selected for further analysis. Two operators, including Regal Entertainment Group, sought to lease the theater and the other two sought to purchase.

The other theater proposals analyzed are from Cinema West, which operates 12 multi-screen theaters in northern California; Brenden Theaters, which has six theaters, four in California and two in Nevada, with a total of 86 screens; and United Entertainment Corporation, which has 15 multi-screen theaters in eight states, including one in Lake Elsinore.

“Regal doesn’t own theaters, they lease them,” Marzullo said.  “But this isn’t a real estate deal. It’s a theater deal with economic development at its core.”

“Since we announced our intent to enter into a lease with Regal Entertainment Group, we have had several inquiries from other nationally known retail companies who are interested in locations in downtown San Bernardino,” Marzullo said.

“We clearly did not want a real estate deal, because that’s what we had with Cinemastar,” Marzullo said. “We had a real estate deal with a low-profile theater chain that could not sustain itself over time.”

“The real question is ‘will they be here 10 years from now?’”  Marzullo said. “If a company can be in place, and not only survive, but thrive, they become a springboard for additional private development.”

“San Bernardino does not have all the money needed to develop downtown,” Marzullo said. “We have to bring in business that will attract other businesses.”

Although the Economic Development Agency staff has formally recommended the Agency enter into a lease with Regal Entertainment Group, theater operator Cinema West is still requesting the Agency give consideration to its proposal to buy the theater.

“We asked Cinema West if they would sign a 10-year operating covenant, and they would not,” Marzullo said. “That tells me they are coming in to buy it at the lowest price, put in a tenant and sell it in three years. Then we would be right where we were with Cinemastar, which was a low-name theater operator that can’t compete in this market. That’s why we propose Regal as the tenant.”

For more information on the Regal/Edwards Cinema project, call Deputy Agency Director Don Gee at (909) 663-1044.

About the San Bernardino Economic Development Agency

The City of San Bernardino Economic Development Agency is a focused, diversified organization whose mission is to enhance the quality of life for the citizens of San Bernardino by creating jobs, eliminating physical and social blight, supporting culture and the arts, developing a balanced mix of quality housing, along with attracting and assisting businesses both independent and through public-private partnerships.

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