Can someone explain how Regency AMC sold for triple its value?

Started by Jax Friend, May 27, 2015, 09:04:58 AM

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Jax Friend

May 27, 2015, 09:04:58 AM
The Daily Record is reporting today that the Regency AMC sold for triple its property value and double the purchase amount of the entire Regency Square Mall. The Record does not really give a good explanation as to why this might be. Is this a sign of strength or a fluke?

Daily Records article:
http://jaxdailyrecord.com/showstory.php?Story_id=545515 

Spitfire

#1
May 27, 2015, 10:00:22 AM
Friends of mine went for a movie there, recently, and they said that the place was completely revamped. They have one or two theatres in the building now with recliners where you have to reserve your seat prior to getting there.


This is from the Daily Record last Sept: https://www.jaxdailyrecord.com/showstory.php?Story_id=543956

wanderson91

#2
May 27, 2015, 10:21:12 AM
The renovations have made AMC a place people want to go. Recliners in every theater, revamped lobby and concession area, and a full service bar, all without ticket prices increasing drastically. It no longer feels or looks like a rundown theater.

Tacachale

#3
May 27, 2015, 10:25:27 AM
Yeah, apparently the appraised value was considerably lower than what these people were willing to pay. The theater appears to perform pretty strongly and as others said, it's been revamped. This is the same company that just purchased the mall, so they may have been willing to pay more than usual for a still-valuable property nearby.
Do you believe that when the blue jay or another bird sings and the body is trembling, that is a signal that people are coming or something important is about to happen?

Jax Friend

#4
May 27, 2015, 11:23:18 AM
That makes sense, I guess it was just hard to believe that a revamped increased the value that much. Good for Arlington.

chipwich

#5
May 27, 2015, 11:49:42 AM
The theater was purchased by a REIT ( Real Estate Investment Trust).  The price it sold for has almost nothing to do with the physical value of the property.  It is based on the investment value of the lease in place.

The Tenant (AMC Theaters in this case) at this point, definitely has a lease on the property. AMC Corporate is fully responsible for the performance of the said lease.  Thus, this REIT purchased this property based on AMC's credit rating and the strength of the lease.

AMC's credit strength assigns them a capitalization rate (rate of return to the Landlord).  I imagine in this scenario, that cap rate is probably 5.5%-6.5%.  Based on a $26.2 million dollar purchase price, then AMC probably pays around $1.5 million a year in rent.

IrvAdams

#7
May 27, 2015, 12:39:12 PM
chipwich, thanks for the clear explanation. I learned something today!
"He who controls others may be powerful, but he who has mastered himself is mightier still"
- Lao Tzu

river4340

#8
May 27, 2015, 04:54:52 PM
Quote from: Apache on May 27, 2015, 03:42:05 PM
Quote from: Tacachale on May 27, 2015, 10:25:27 AM
Yeah, apparently the appraised value was considerably lower than what these people were willing to pay. The theater appears to perform pretty strongly and as others said, it's been revamped. This is the same company that just purchased the mall, so they may have been willing to pay more than usual for a still-valuable property nearby.

The jacksonville.com coverage makes it sound like it's a different company. To me it reads like one company bought the whole mall including the theatre for $13mm, then spent $3mm to renovate the theatre, then sold just the theatre for $26+mm. Also sounds like they have only one half of the mall open but occupancy on that one side is up by almost double.

If thats accurate, someone should get a raise somewhere along the line...that was a great transaction.

That's the way I understand it. So, yes, the company that bought the mall is already ahead.

http://jacksonville.com/business/2015-05-27/story/regency-movie-theater-sells-262-million
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