These two theaters are both in the type of town that is relatively small compared to most metros, but are somewhat large compared to all the surrounding towns. Two movie theaters, including real estate for sale. There was a line around the block to buy them before COVID, which obviously sank that. But now it seems like there is a good amount returning to the theaters. I am going to be getting more details in the next week under an NDA, and have my accountant go over the books. Supposedly net cashflow is in the 400-600k range. Price is 4mill, a large part of which will just be taking over an existing loan.
Opinions, does anyone think going into this industry in this day and age is just too risky given to combination of coming out of the Covid era plus fact that we are now in the era of streaming?
It’s a declining market, which isn’t very appealing from an investment perspective - but one that’s unlikely to ever fully vanish.
A key question to find out is: why are they selling? If it’s because the current owner is retiring, that’s not an issue. If it’s because they no longer have confidence that it’s viable business in the long run, that’s a big red flag. And you should also be asking why the big chains haven’t swooped in and bought up these two theatres. What do they know that you don’t?
You also need to look very closely at that loan - not just the the terms and obligations, but also the reasons behind it. Was that a big investment in the business that added real value? Was it to keep the business afloat? How much has the previous owner taken out since that loan was made (i.e, have they loaded up the business with debt, taken a load out in dividends, and are now trying to sell the remnants on to you)?