Some points of CDL/CRG/RDGE clarification that you seem to have missed but appreciate debate.
1) contingent assets are just that assets that we don't give value to but nice when the lottery comes around and blesses us. The point on cinerama/technicolor was that Cotter is a proven litigation bulldog that may give greater likelyhood to the contingent asset creating value. Incorporation in NV from DE served more as a cost savings measure (one of his first of many needed cost savings here). Cotter has real dough in here to the point he owns over 50%. So where's the issue whether cos are in NV vs delaware but for the cost savings? Don't understand your point or you didn't understand mine.
2) You are very mistaken has to how 'easy' it was for him or anyone else to enter. He entered area 5 years ago and many investors and he had expected his property purchases to be developed into theaters w/n 2-3 years. oligopoly in cahoots with shopping center owners/landlords got zoning limits put in place in some areas that limited exhibitors from being anywhere but in the shopping centers or 'entertainment zones' (need I say how close they couldn't be to shopping center). His first big purchase a 50 acre property in heart of melbourne was one of the 'down-zoned' properties. That property has appreciated in value and will be developed but never will be a theater. I hope at least I have clarified that barriers to entry in this region were enormous to overcome and now serve somewhat to protect his now #3 position.
3) By the way, one thing can be certain with all the bankruptcy filed companies. They won't be doing much expansion and cap ex for some time. In fact, there may be a manhattan location or two that is synergistic for CDL-city cinemas that he may be able to cherry pick from dispositions from the bankrupt entities.
4) Angelika in nyc is NOT marginal by any stretch and has provided nice returns. Outside of NYC, I think you should give more credit to the fact that Cotter and his Forman family partners are experienced enough to have backed off from a large nation-wide expansion plan from its experience in its pilot theater in Houston BEFORE sinking hundreds of millions down a rat hole like the rest of the industry.
5) PR (absent damage award from lawsuit) will end up being loser of less value than most domestic properties. As the 2nd largest chain on thee island, it still has some value, despite total writeoff (I think to maximize treble damages of lawsuit).A successful lawsuit/settlement would actually make PR a winner in a geography full of big losses.
6) The point of owning ground underneath is that, unlike all the big bankruptcy boys in the industry that have nothing but a total writeoff of their investment, walk and then hope the landlord shuts the theatre off so their nearby megaplex may thrive, CRG/CDL/RDGE ownership of land present alternative value. case in point- some city cinemas locations in manahattan have air rights and if next door property is bought, that makes for an interesting alternative use for the real estate doesn't it (can you say office tower w/ retail storefront?) BTW- The indiviual locations opening up are not a cash sink but do flow. The issue is to move more of the property under development that is not flowing yet into operations such that the individual location cash flow becomes larger than corp/infrstructure - (not unlike any other expanding retail chain business model).
7) I understand your point but don't agree.
a) exhibitors aren't going to be dropping ticket prices in Manahattan (where CDL's theaters are). In fact, the area is due for another jump. There are not going to be any more new boxes going up in Manhattan and the ones that did go in took traffic from older cinemas for 3 weeks and then everyone went back to their neighborhood theater. Thats the manhattan market. The aussie/new zealand market is underscreened. They have far less screens per/person there and people go to movies more often. Moderate climate, no crime, literate english language population, strong film production industry of their own and nothing else to do at night.
b) Movie runs have come down due to excess capacity. Bankruptcy will flush out locations (but not as fast as foolish investors in these bankrupt companies that still don't own but instead lease retained properties think) and eventually extend runs which results in higher margins as exhibitor/production split becomes more favorable in out weeks. Again, no more boxes going into manhattan.
Note also, in manhattan, as it is a 'buzz capital', production cos have desire for strong exhibition so the splits in manhattan are more favorable than anywhere else in US. Higher splits mean that exhibitor gets more on balance from gate so instead of giving away seats to sell popcorn, there is actually higher incentive for higher ticket prices in NYC.
8) you seem to forget cotter owns 50% of the enterprise. So his 'sale' was only partially to 'others'. CDL has the 10 year OPTION to buy the City cinemas properties. In addition, Cotter took stock for the playhouses. Thus one might ask. If stock at $3 was good enough for cotter, maybe it ought to be good enough for others especially BELOW $3 where it is now trading.
IMO, things are getting better yet cheaper. |
