The last thing shopping mall owners needed was an anchor tenant shut down as stores closed their doors and took up little space
However, this is exactly the news many have recently received when Regal Cinemas' parent company, Cineworld in the UK, announced it was "temporarily ceasing" operations in Regal theaters.
Also, CNBC recently reported that B&B Theaters, the sixth largest theater chain in the US, could file for bankruptcy in months. The other two leading theater chains, AMC Entertainment Holdings Inc. and Cinemark Holdings Inc., have announced that they will remain open, according to S&P.
Matthew Weinstein, leader of the real estate leasing restructuring group at law firm Cozen O’Connor, tells S&P Market Global Intelligence that the move does not guarantee an imminent bankruptcy filing. EFR Properties, whose rent is 16.7% from Regal, and RPT Realty and Realty Income Corp., whose rent is 3.0% and 2.9% from the theater chain, are most at risk, according to S&P.
Large theater chains like Regal usually occupy regional or individual Pad locations. If these theaters are located in malls, their demise could trigger co-ownership agreements that would allow other tenants to cancel their leases or pay a percentage of their rent, according to S&P.
Some malls have put theaters outside in the parking lot in the summer, but that's probably not a long-term solution.
Mason Asset Management, which is buying distressed shopping malls in partnership with Namdar Realty Group, is open to exploration turn the parking lots into cinemas Elliot Nassim, president of the company, told GlobeSt in a previous interview.
"We have a whole special leasing team that now only focuses on the parking space and the extra income," said Nassim in an earlier interview with GlobeSt. "If you have good real estate, you have the potential to do so much with it, and we're excited about new, non-traditional ways to keep adding value to our properties."
Another option is new uses for theater. If they were to stay closed, Weinstein told S&P that their square footage was roughly the same as grocery stores. In addition, their own parking lot would meet the need for food.
The pandemic has left grocers and other major retailers such as pharmacies, have paid almost 100% of the rental payments.
Another option for shopping centers could be Add online fulfillment services, according to JLL in “Can Online Shopping Help Save Malls? How landlords are making shopping centers part of the supply chain. "
"Retailers are increasingly looking for micro-fulfillment centers and logistics hubs that can be located right behind the stores," said JLL. "With the model, click-and-collect purchases in the store and the fulfillment of online and pick-up orders can be done in one place close to where you live."