The Exhibitor (1966)

THEATRE CONSTRUCTION PICTURE HAZY Present Plans Not Affected By Tight Money; Answers For Future Seen Coming In 1967 Tight money, labor shortages, tax consid¬ erations, and continually rising costs have forced construction postponement in many areas of the country. How, the current eco¬ nomic problems facing the nation will affect new theatre construction is not clear at the present time, but indications point to a slow¬ down in new theatre construction plans. A leading eastern realty company that in¬ vests heavily in shopping center construction, a prime location for new theatres, is quite hesitant about announcing further expansion. A representative of the company, who re¬ quested that he not be named, stated that until Congress reconvenes and takes some kind of stand on future tax and money plans, his company will go very slowly in their plans for new construction. “There is no panic,” the spokesman said, “I want to emphasize that point. But you can’t build without money, and frankly we are in as much of a pickle as the banks and other big lenders. More than ever before, we are investing heavily in studies to determine the absolutely best locations for our shopping centers. We are making plans with one eye on the economy and the other on Washington. Any other tack today would be irresponsible.” Another man whose thoughts coincided with the realty company’s spokesman was a bank¬ ing executive. While admittedly not an expert on theatre construction or finance, he had had extensive experience with all types of com¬ mercial and residential transactions. “I am not too optimistic about future con¬ struction possibilities. Now mind you, I’m not talking about those things that have been ‘in the bush,’ that is, construction going on and planned that was arranged before the current tight money situation. I mean that the outlook for developers and builders seeking funds now is pretty bleak.” The banker explained that two prime sources of money have always been the insurance com¬ panies and the banks. “Today, with interest rates rising, more and more people — the aver¬ age working man — is borrowing on his insur¬ ance. This money must be paid out by the insurance companies, so that they are under¬ standably reluctant to make large loans that might put them in a bad position. Banks are in much the same position. We have no idea what the future will bring. We also have to adopt a cautious attitude.” The main problem, he said, is with perma¬ nent financing. Who is going to take the long term mortgage needed for high cost financing of theatre construction seems to be the im¬ portant question. “Bank deposits, for the most part, are subject to demand. These deposits must be protected. I will say this: probably the best avenue open to a theatre owner today is not in building new theatres, but in remodel¬ ing the ones he has. Improvement loans are for much shorter periods, usually, than those PHYSICAL THEATRE Vol. 21, No. II November 16, 1966 issued for new construction.” Continuing, he remarked that it does not take as much money to rehabilitate an existing structure as it does to build a new one. In this instance, the risk for the bank and the bor¬ rowers is much more realistic. Not only the big chains and developers will feel the squeeze. Investigation shows that an individual hoping to open his own theatre faces an even greater problem. The federal govern¬ ment’s Small Business Administration tries to keep its loans down to a 10 year maximum and in most cases can not offer the funds needed to build a modern motion picture theatre. While it is evident that caution is the by¬ word, theatre projects already approved will go on as planned for the next six or nine months, and the mortgage situation can change in that time. As recently as two weeks ago, an official of the American Bankers Association meeting in a natoinal conclave indicated a possible upturn of the mortgage market in 1967, although it is not expected to equal the good years of the past five years. The pressures that created the boom in new theatre construction the past five years are still evident; suburban development, babies born during post war boom now at marriageable age, and the necessity to catch up on theatre construction and remodeling that lagged so far behind during the 1950’s. Many of the questions will, in all likelihood, be answered after the elections and when Con¬ gress again convenes in Washington. The con¬ sensus is the yellow flag is up and the decision as to its next color— red or green— has to be made. November 16, 1966 PHYSICAL THEATRE • EXTRA PROFITS DEPARTMENT of MOTION PICTURE EXHIBITOR PE-5