Movie Theater Industry Faces Obsolescence,
Falling Property Values: The Appraisal Journal
CHICAGO (June 18, 2013) – The movie theater business is in troubled times, facing competition from many viewing alternatives, decreasing attendance and falling values for some properties, according to an article published this week in The Appraisal Journal.
The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.
“The Business of Show Business Act II: Appraising the Movie Theater,” by Arthur E. Gimmy, MAI, and William Condon, examines movie theater trends related to theater venues, box office revenue and attendance. The authors highlight factors leading to obsolescence in theaters, including the overdevelopment of megaplexes and the decline of discount or second-run movie houses due to the high costs to convert from analog film to digital projection.
According to the authors, the sale prices of movie theaters are based on the present value of future rent and revenue as a going concern. The article discusses how movie theater industry demand – and consequently value – is affected by competition from many viewing and access alternatives. The authors emphasize that this competition is a major consideration for investment in movie theaters.
The authors present a case study example of a market analysis for a multiplex theater and an approach to income analysis. The article also outlines for appraisers the project development factors to include in a highest and best use analysis when developing an opinion of value for a movie theater. The article concludes that the exhibition business and development of megaplex theaters has surpassed its stage of maturity. Adaptive reuse, such as conversion into residences, office or retail spaces, likely will be an opportunity in the near future for out-of-service movie theater venues.
Gimmy is the president of AGI Valuations in Petaluma, Calif., and Newport Beach, Calif. He has published more than 50 articles and has authored eight books published by the Appraisal Institute and its predecessor organization, the American Institute of Real Estate Appraisers.
Condon is a graduate of the University of California, Santa Barbara. He interned at AGI Valuations and developed an interest in the entertainment business, particularly the workings of the movie theater industry.
Read “The Business of Show Business Act II: Appraising the Movie Theater” in the Spring 2013 issue of The Appraisal Journal.
Also in The Appraisal Journal’s Spring 2013 issue:
“A National Profile of the Real Estate Industry and the Appraisal Profession,” by J. Reid Cummings and Donald R. Epley, Ph.D., MAI, SRA, provides a cross-sectional view of employment in the U.S. real estate industry during 2001–11, with special attention given to employment in the valuation profession.
“Tax Abatement Issues that Impact Limited-Market and Special-Purpose Properties,” by John M. Crafts, MAI, summarizes appeals cases in New Hampshire to explore why taxpayers have had little success in abatement hearings.
“The Trouble with Rates in the Subdivision Development Method to Land Valuation,” by Brian J. Curry, MAI, SRA, illustrates the pitfalls of adhering to a discount rate from published studies and calls into question the applicability of discounted cash flows for analysis of short-term developments.
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The Appraisal Institute is a global professional association of real estate appraisers, with nearly 23,000 professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations. Learn more at www.appraisalinstitute.org.