San Bernardino Eyes Leasing Downtown Theater to Regal Cinemas
(SAN BERNARDINO, Calif.) On January 10, 2011 the City of San Bernardino Economic Development Agency will give a progress report on a proposed lease of its downtown movie theater to the Regal Entertainment Group.
Regal Entertainment Group operates Edwards Cinemas, United Artists, and Regal Cinemas. It is negotiating with the city to open a 14-screen theater at 450 North E Street.
“The San Bernardino Economic Development Agency, current owner of the theater property, seeks to enter into this lease because the caliber of theaters operated by Regal Entertainment Group will likely attract additional development to the downtown area. Once this development occurs, it is the Agency’s intent to sell the theater property at a higher price than it now could,” said San Bernardino Mayor Patrick Morris.
“Our residents deserve a quality downtown theater where they can go enjoy dinner and a movie,” Interim Economic Development Agency Executive Director Emil Marzullo said. “Our businesses need this too, because with a flourishing downtown, we will be better able to strengthen our local economy and bring more people to spend money with businesses already here.”
The Economic Development Agency’s plan is not without critics. Proposed alternatives are to sell the theater property immediately to another company, which then may or may not reopen the theater or attract other development to the downtown area.
As Marzullo sees it, allowing a quality theater to open and bring in additional development far outweighs the benefits of a quick sale.
“If San Bernardino is to reopen the downtown movie theater, the only measure of success should be whether the reopening of the movie theater spurs additional private investment and business in downtown restaurants, shops, and entertainment,” Marzullo said.
“Merely reopening the movie theater and hoping it stays open would not be a success. That would simply repeat the failures of the past.”
“Historically, public investment in downtown San Bernardino, though intended to create economic growth, has often failed to produce results, Marzullo said. “Past public investments have been made with insufficient plans to ensure they encouraged private investment.”
Marzullo cited the original development of this movie theater and the Inland Empire 66ers baseball stadium built during the mid-1990s as examples.
“Neither public investment was tied to plans for additional private investment,” Marzullo explained. “As a result, both have sat for 15 years in isolation doing very little to spur private investment and economic growth.”
“Let’s make sure this time around our efforts result in spurring other economic development around the theater,” Marzullo said.
Previously, to ensure this project’s success, the Economic Development Agency retained several expert consultants to evaluate eight proposals it has received for the theater property. These consultants determined that Regal Entertainment Group not only created the greatest return on investment of the public dollars, but also had the greatest chance of attracting additional private investment and business in and around the movie theater complex.
“In fact, once it became known the Agency was negotiating with Regal Entertainment Group, development groups and businesses began contacting us regarding the opportunities adjacent to the Regal-operated movie theater, Besides, what city would not want a Regal/Edwards theater in their community?” Marzullo said.
One of the expert consultants is The Fransen Company, Inc. of Newport Beach, which has helped cities in the United States, Canada, Mexico and the Caribbean to analyze and plan projects that brought economic growth. In California, these projects include Third Street Promenade in Santa Monica and the Olympic Training Center in San Diego.
“In my opinion, the Regal/Edwards lease proposal will produce the best economic returns for San Bernardino, compared to the other proposals received,” said Fransen Company, Inc. President John Fransen. “Once the lease with Regal is completed, it will fill an empty cinema building with a best-of-kind theater operator. The building can then be sold with a credible tenant in place versus selling an empty building at a discount to a low bidder.”
Fransen noted that Regal Entertainment Company operates 6,705 screens in 37 states and Washington, D.C. Almost 100 of these screens are at six Edwards Cinemas located in the Inland Empire. Other proposals were from much smaller theater companies that do not have any theaters in the San Bernardino area.
“Regal Entertainment Group has the marketing power, the market share and the economic strength to support the new cinema in downtown San Bernardino,” Fransen said. “The risk associated with a smaller cinema operator trying to enter this competitive market is a major consideration.”
“Regal/Edwards Cinemas is a known commodity that other investors trust,” Marzullo said. “Since Regal Entertainment Group believes there is a good market in downtown San Bernardino, and is willing to stake its national brand name, goodwill and money, this encourages other businesses to make their own investment.”
Marzullo compared Regal/Edwards Cinemas to an “anchor tenant” in a shopping center. “The type of anchor tenant largely dictates what secondary tenants sign leases,” he said. “If you attract a strong anchor, you attract strong secondary tenants.”
“Other theater operators could certainly operate the cinema,” Marzullo said. “Merely reopening the movie theater is absolutely the wrong measure of success. Success will only be achieved by movie theaters that attract additional private investment and business into downtown. These are basic principles of commercial real estate and economic development.”
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.