Movie theatre developer looks next at Auckland

By Chris Hutching

Friday 19th July 2002

STATE OF THE ART CINEMAS: Reading International vice-president Brett Marsh (left), checks out the $50 million development work at The Palms with Auckland architect Peter Zillman

When Reading International was building its new $55 million multiplex cinema in Courtenay Pl in Wellington earlier this year, some of the locals were still saying it wouldn't survive six months in the cutthroat movie theatre industry.

But a couple of months down the track and US-based Reading vice-president Brett Marsh says 32,000 moviegoers have gone through the doors, prompting rival Hoyts to offer half-price discounts at its theatres.

If admissions to Courtenay Central's 2500-seat 10-screen theatre continue at current levels of 20% above forecast, the theatre will attract about one million admissions this year.

Reading is already considering possible expansion on two hectares it owns between Courtenay and Wakefield Sts.

The company is now talking with the developers of the Botany Downs shopping centre in Auckland and has ambitions to develop a complex at Sylvia Park in Mt Wellington, Auckland.

As well as its Courtenay Central development, Reading is spending $3.5 million on its latest project - a 1700-seat development at The Palms shopping centre in Christchurch due for completion in March 2003.

The eight-screen, state-of-the-art multiplex will open next year and will be the star attraction of an entertainment precinct that includes restaurants, cafes, bookstores and music shops.

Unlike Courtenay Central, the ownership of the land will remain with The Palms developers.

Reading's theatres offer a new standard in movie theatres, with armchair seating, and are usually associated with a food court and complementary retailers such as cafe-bars and bookshops.

Mr Marsh is based in Los Angeles and regularly travels to Australia and New Zealand where Reading has about 40% of its $US170 million assets in 15 theatres.

In New Zealand, Reading also has a 50% stake in Auckland movie operator Berkeley Theatres, which specialises in community theatres.

Reading is both a property developer, depending on available opportunities, and an operator of movie theatres.

KPMG is usually commissioned to carry out market surveys and demographic studies within a 5km radius of a proposed theatre to see if the numbers indicate good prospects for the future and what an appropriate level of rents and running costs should be from the company's point of view.

"The important things for us are the neighbouring tenant mix and ease of parking," Mr Marsh said.

Reading employs a retail consultant whose expertise is made available to neighbouring tenants, most of whom generally accept the offer.

It took an Australian court challenge from Reading to break the monopolistic film distribution arrangements that were a barrier to new entrants.

But now the film distributors will supply movies to an operator who can demonstrate ability to build the market.

The New Zealand Commerce Commission had taken the same view, Mr Marsh said.

Some analysts have questioned whether the explosion in availability of home videos and DVDs would affect movie theatre admissions but Mr Marsh said market research indicated people still wanted to get out of the house for an entertainment experience and that they enjoyed the additional services of a cafe bar, restaurants and bookshops.

But the super theatres are becoming more expensive to build and Mr Marsh expects they will only be built in future within shopping developments of at least 50,000sq m (most New Zealand centres are around 35,000sq m).

Digital-format movies are still some way off given the expense for movie companies that operate hundreds or even thousands of screens in the US.

Reading is a small company by US standards and one of the reasons it came to Australasia was because its executives identified more opportunities than in the highly competitive and more mature market in the US.

The company was formed in the 1830s as a railroad-owning company carrying coal in the Philadelphia region but it evolved over time and in 1996 was restructured away from transport.

In 1999 it set up as a cinema and real estate company, with the consolidation of two other companies into the fold - Craig Corporation & Citadel Holding Corporation.

The company is listed on the Nasdaq and, according to the 2001 annual report, has total assets of $US170 million, and gross revenues of $US70 million.

In the US it operates 63 screens in 12 complexes, operating under the Angelika Film Centre & Cafe brand.

Its New York theatre is the highest-grossing theatre per seat in the US and is often chosen by independent film distributors for first releases.

The company also owns seven live theatres.

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