Urban Cowboys Bankroll New Theater Chain, Putting Up $19.5 Mil

W.P. Carey, known for its diverse mix of real estate holdings, has purchased three megaplex theaters, one of which is under construction in Hickory Creek, a county town located 33 miles north of Dallas. The acquisition is in line with the financial firm's sale-leaseback strategy, putting Rave Reviews Cinemas LLC, a new theater operator, in the tenant's seat instead of the theater owner's.

W.P. Carey's Corporate Property Associates Inc. 12 and 14, publicly held, non-traded REITs, are putting up the $19.5 million investment. Each megaplex is being leased to a wholly owned subsidiary of Rave under a 20-year, bond-type net lease guaranteed by Rave Reviews, which has received its venture capital from Boston Ventures Management LP.

The stadium-seat, build-to-suits total about 55,000 sf each. Port. St. Lucie, FL will be getting a 14-plex theater on 13 acres and Pensacola, FL a 16-plex on 10 acres.

Hickory Creek's theater is a 16-plex, 3,085-seat theater positioned on 11 acres near Denton County's Lewisville. It is expected to open by month's end. Marisa S. Mackey, W.P. Carey acquisitions assistant, tells GlobeSt.com the town is ideally suited to Rave Reviews strategy to bring stadium-seat theaters to secondary markets primarily in southwestern and southeastern US markets.

Hickory Creek will have an immediate audience with its proximity to a university, but more importantly and key to the decision is there's no competition in town. The company's strategy is to steer clear of metropolises where theater overbuilding has been a problem in recent years. The startup will have sole access to all of the films released by distributors due to its positioning as the dominant theater owner in each market--a strategy pushing a 20-theater building program for the next five years. Mackey says it's uncertain if W.P. Carey will buy the other theaters. "It's something we will consider," she says, "but it's a startup. We want to establish an operator history. We like the concept right now, but we want to be sure it proves itself."

In September 1999, W.P. Carey bought its first theater, a Consolidated Theaters holding in Richmond, VA. Gordon F. DuGan, W.P. Carey's president and chief acquisitions officer, says the 27-year-old firm views the deal as a way to expand the portfolio "by capitalizing on opportunities in niche industries such as entertainment." W.P. Carey is one of the largest lessors of net leased corporate real estate in the nation and owns more than 42 million sf in the US and Europe.