“Nowhere special. I’ve always wanted to go, “said the Gene Wilder character in Mel Brooks’ 1979 parody,” Blazing Saddles, “an NPR movie credited with setting the” gold standard “for Friends comedy. interracial racism and Hollywood.
As more Americans venture out of lockdowns – and those in the West seek to escape the extreme heat – the lure of going anywhere, even “nowhere special,” is intensified. But ending up in a movie theater with strangers? Investors in commercial real estate bonds weren’t always happy with the large square configuration of these buildings even before the pandemic struck.
“We didn’t like cinemas, in general, even before COVID,” said Dave Goodson, head of securitized investments at Voya Investment Management, adding that upkeep can be expensive, even before thinking about any renovations that might be needed. to attract another type of tenant if a cinema chain goes bankrupt.
“The uncertainty around space, which has accelerated with COVID,” Goodson told MarketWatch. “It forces us to be more careful.
About $ 34 billion in home loans have a theater operator among the top five tenants, according to data provider Trepp, looking at the broader market for $ 600 billion U.S. commercial mortgage bonds.
Trepp felt that AMC Entertainment Holdings Inc. besieged AMC,
a popular meme stock, had the largest real estate footprint of 20 industry operators at 37%, followed by Regal Cinemas at 22% and Cinemark Holdings Inc. CNK,
“At AMC, we were within months or weeks of running out of money on five occasions between April 2020 and January 2021,” CEO Adam Aron said during the company’s first quarter earnings call on May 6. , while noting that AMC’s outlook has “dramatically improved” since then, including as more theaters reopened during the pandemic.
The money-burning AMC said it raised about $ 2.95 billion in new capital through equity or debt offers, as part of the results report, and received about $ 1.2 billion in concessions from owners or creditors.
AMC shares were up 2.5% on Friday and nearly 3,000 for the year, while the S&P 500 SPX index,
traded around 0.8% lower for the session, but up 9.2% so far in 2021. DJIA US Stock Indices,
most were expected to record weekly declines after the Federal Reserve offered a slightly more hawkish policy update on Wednesday, which also sent Treasury benchmark yields TMUBMUSD10Y,
AMC did not immediately respond to a request for comment for this article.
AMC boss Aron took to Twitter TWTR,
this week to urge shareholders to vote to approve the sale of 25 million new shares, in about six months.
Aron has cultivated a splashing social media following with the memes crowd, but as the former Managing Director of Starwood Hotels & Resorts, he also has extensive experience in real estate and commercial real estate finance.
Wall Street has been a key financier for owners of shopping malls, hotels, office buildings, and other types of commercial property since the late 1990s, when the speed of lending bundled into bond transactions took off. .
A typical commercial mortgage bond contract can be up to $ 1 billion and include loans on roughly 70 buildings of different types of properties coast to coast, in theory, a feature that can help protect investors from downturns. that hit a specific region or asset class.
For bondholders, it also means that movie theaters, while big tenants, are often just part of the tenant mix in most properties, including the $ 34 billion in mortgage debt tied to AMC and to similar chains, which could be a saving grace.
“It’s not necessarily tied specifically to movie theaters,” said Jen Ripper, mortgage bond investment specialist at Penn Mutual Asset Management. “In any [bond] okay, a theater would tend to be quite small overall for a diverse conduit chord.
Even so, Ripper said movie theaters are worth “keeping an eye on,” especially since it’s unclear what, or how long, it will take to fill movie theater seats to levels. 2019, or if it’s even possible.
“There is a lot of competition with streaming services,” she said. “But I think people like to go to the movies to experience it. Star Wars fanatics will likely go to the theater.
And while empty malls pose their own problems for investors, Goodson sees additional risk in owning real estate debt from malls that have movie theaters in the mix.
“We have to recognize that the consumer is always in the midst of a change in the way we consume, whether it is services, goods or clothing,” he said. “We generally expect a weaker recovery if the mall has a theater.”
See also: The streaming wars have a winner – in this real estate industry