Theater's BK Kills Giant Mall Sale

LOS ANGELES-Newhall Land & Farming Co. says a deal it announced last week to sell 800,000 sf of retail space in its master-planned community of Valencia has fallen out of escrow, the latest—and biggest—casualty of last Wednesday’s bankruptcy filing by Edwards Theatres Circuit Inc.

The Santa Clarita-based development company said last week that it had agreed to sell its 675,000-sf Valencia Towne Center mall and 125,000-sf Valencia Entertainment Center in northern LA County. Though Newhall Land wouldn’t disclose the buyer, GlobeSt.com learned from other brokers than it was Chicago-based investment and advisory giant RREEF.

But now, Newhall Land says the deal has fallen apart because of Edwards Theatres’ Chapter 11 bankruptcy filing. Newhall Land says the 800,000-sf portfolio that it had agreed to sell includes two Edwards theaters with 21 screens plus a giant IMAX complex, which accounted for a combined 16% of the portfolio’s total income in the first six months of the year.

With Edwards’ ability to continue paying rent at the development uncertain, “the prospective buyer has terminated its due diligence work” and the sale has been cancelled, a new statement by Newhall Land says.

“We are disappointed that the sale of this property has been affected by the recent bankruptcy filing by Edwards Theaters,” Newhall Land Chairman and CEO Thomas L. Lee says in the same statement. “We will actively continue to pursue interested buyers; however, the likelihood of closing a sale by year-end now is doubtful.”

Newhall Land is one of the nation’s few publicly traded partnerships, and units in the partnership are traded on the New York Stock Exchange under the symbol NHL. The cancellation of the shopping-center transaction will delay Newhall Land’s previously announced plan to sell about $200 million worth of its property and use the proceeds to buy back 20% of its partnership units, Lee says.

Edwards Theatres, one of Southern California’s biggest movie-house chains, said in its bankruptcy filing that it lost $40 million last year after spending $140 million to build new screens. It has closed several of its Southland theaters over the past several days and is looking to sell many others.