The Real Deal New York

Cinema crunch

As the number of movie screens declines in NYC’s pricey real estate market, niche theaters replace multiplexes
By Catherine Curan | March 01, 2012 07:00AM

Chelsea Clearview Cinemas

When a movie theater dies in New York City, fans don’t let it go easily. Witness the rise of Washington Heights Arts & Movies. The 600-person volunteer movement is dedicated to convincing owner Lloyd Goldman of BLDG Management to reopen the Coliseum Cinemas in Washington Heights, which closed at the end of 2011.

“We see the Coliseum’s potential to become an economically viable, world-class cinema,” said Jeff Hoppa, a Washington Heights resident and cinephile who kicked off the movement with a “Save the Coliseum!” Facebook page late last year. The group is working on a proposal to present to BLDG Management, which did not respond to a request for comment.

There’s a reason New Yorkers like Hoppa fight so hard for their movie theaters: NYC lost 22 percent of its cinemas between 2001 and 2010, according to the U.S. Bureau of Labor Statistics. Manhattan was hit especially hard, losing 11 of its 41 theaters — a 27 percent decline. The movie business is suffering nationwide, but New York City’s drop is far steeper than the average decline of about 10 percent nationally in the same time period, according to the bureau’s data.

These days, theater operators are getting squeezed from all sides — by distributors, by competition from streaming video on computers and mobile devices, and by a lingering recession that’s crimping consumer spending. And New York City theaters are especially vulnerable, because pricey real estate here tempts owners to sell and developers to convert cinemas to more profitable uses.

At the landmarked RKO Keith’s Theater in Flushing, Queens, for example, developer Patrick Thompson recently received city approvals to turn the 83-year-old property — which closed in the ’80s — into a 17-story, 357-unit residential rental building. (Development plans by a prior owner, Shaya Boymelgreen, fell through.)

And in January, Long Island developer the Parkoff Organization bought the Chelsea Clearview Cinemas building on West 23rd Street for $35 million, according to public records. Parkoff hasn’t yet said what it plans to do with the building, though the theater is continuing to operate for now.

Meanwhile, there hasn’t been a high-profile deal for a new large multiplex in Manhattan since Magic Johnson Theaters brought stadium seating — and nine screens for first-run movies — to Harlem’s 125th Street in 2000. The theater, which is now part of AMC Theaters, anchors the $66 million, 275,000-square-foot Harlem USA retail complex that also houses retailers Old Navy, Nine West and Modell’s.

“It’s not like nobody’s tried,” said David Firestein, managing partner of the New York division of Atlanta-based retail brokerage Shopping Center Group, who helped bring AMC to Times Square with a 25-screen multiplex in 2000. “A bunch of deals have gotten close, but in 10-plus years, they haven’t gotten one done.”

The lack of new multiplexes speaks to the unique challenges for movie theaters in New York City, where’s it’s difficult to find a large-enough space at a rent low enough to turn a profit. Theaters also have the extra challenge of requiring column-free spaces to provide unobstructed screen views.

But there has been activity across the city in recent months, centering on somewhat smaller neighborhood theaters like the seven-screen, 22,000-square-foot Williamsburg Cinemas now under construction at Driggs Avenue and Grand Streets. Other new ventures provide more than just movies, like Nitehawk, a new 8,000-square-foot, three-screen theater in Williamsburg. The cinema, which opened in June, serves dinner to patrons while they watch films.

These days, “it’s very hard for movie theaters to make money [simply] showing films,” explained Chris Havens, CEO of Creative Real Estate Group, a Brooklyn real estate brokerage. When they do splurge on a movie, New Yorkers are seeking a truly first-rate experience, he said, either with the latest, cutting-edge digital technology, or higher-quality food than the standard popcorn and nachos.

“The future is entertainment where you get better concessions, beer and food,” added Havens.

Sources said other, smaller entrants into the market — including an independent movie theater operator from Italy, another watch-and-dine concept, and a specialized 3-D theater where patrons would not have to wear 3-D glasses — have been scouting Manhattan and Brooklyn.

Manhattan may also get a new movie theater at Riverside Center, the southernmost portion of Extell’s Riverside South development, which is slated to include entertainment, shopping and a landscaped plaza. Extell has obtained approval for a theater, but a company spokesperson could not confirm whether a theater will be part of final plans for the site, at 59th Street and West End Avenue.

A rendering of Williamsburg Cinemas

Some local theaters are trying to hang on in the current tough marketplace by renovating. Ben Kasash, the president of Pavilion Theater on Prospect Park West in Brooklyn, has spent $1.8 million upgrading concession stands and seats since April 2011, when he took over. The Pavilion, which opened in 1928, is a neighborhood staple that’s been in desperate need of a face-lift. Kasash is a veteran movie house operator, with other theaters in New Jersey, Connecticut and Rhode Island.

The theater, though, still draws a steady stream of gripes in online reviews. Kasash said he’s addressed problems, including a torn screen, and will pour another $1 million into additional improvements.

Whether the owner is renovating or building from scratch, the movie theater business requires tremendous capital. Firestein said stadium seats — which customers have come to expect — can jack up the price of a build-out by 50 percent.

Theaters typically like 40-to-50-foot ceiling heights and 50,000 square feet or more of space, said Robin Abrams, executive vice president at the real estate firm Lansco Corp., who’s searched for a Manhattan location for a major theater chain without success for several years. While rents vary based on location, Abrams said, theaters look to pay $20 to $30 per square foot for lower-level spaces.

While Abrams noted that cinemas might go up to $40 or even $50 a foot if projected revenues are high enough to support that rent, movie theaters are facing new competitors for their historically desired spaces. In the past, a movie theater was considered a valuable tenant for a lower-level space, as well as an anchor that could bring traffic to restaurants in a retail complex. But over the last five to 10 years, big-box and fashion tenants have inked deals for large multi-level spaces.

These users, Abrams noted, can pay higher rents than theaters, and don’t require 50-foot ceilings or column-free space.

In the past “there weren’t a lot of takers” for multi-level spaces, said Abrams. “They now can do two floors of retail where they would have done one floor of theaters, based on ceiling heights.”

Nitehawk, a new cinema that opened in Williamsburg in June.

Abrams said that, for her current theater client, she looked at spaces on 86th Street, and at 57th and Second Avenue, where Whole Foods opened. Her client, she found, could not compete with other players.

The requirements for a cinema location are so specific, and suitable space so scarce, Abrams said she has even looked at offbeat ideas such as enclosing a rooftop in a bubble to add a theater.

But with such complex build-outs, “a landlord really has to be motivated to do a theater,” she said.

Luckily, these ironclad requirements are loosening a bit as technology changes from projected film to digital, allowing for smaller spaces with lower ceilings, brokers said.

Another option, of course, is that movie theaters can build their own facilities. Harvey Elgart, who runs Brooklyn’s Cobble Hill Cinemas, which is housed in a 100-year-old building, is teaming up with developer Blue Zees to create Williamsburg Cinemas. A three-story, seven-screen theater with some 1,000 stadium seats, the facility cost $10 million for land and construction, and is set to open in June. Elgart said he feels he can make money because there is very little competition in the neighborhood.

“There hasn’t been a true movie theater in Williamsburg in about 10 years,” he said.

Nitehawk owner Matthew Viragh declined to provide detailed numbers, but said his theater’s food offerings — including a street-level cafe with cocktails and gourmet concessions, as well as table-side food and beverage service during each film — helps bring in more money per person than a typical theater would. In fact, he said, business is so strong that he’d like to expand throughout the five boroughs.

“Hopefully we can do a few more around the city,” he said. “It really is the future of how people want to experience movies.”