Thursday, November 12, 2009

US Theatre Chain Negotiating $135 Million Sale Leaseback of 19 Movie Theatres - November 12, 2009

Entertainment Properties Trust is negotiating a letter of intent with what it describes as “a prominent theatre operator” for a $135-million sale-leaseback, according to a filing with the Securities and Exchange Commission this week. In addition, the locally-based REIT, which trades under the ticker EPR, is in discussions with a tenant regarding the purchase of several more charter school properties and is raising new equity for what its C suite has termed “growth transactions.”

The contemplated theatre deal involves 19 properties with 291 screens, 67,000 seats and 1.56 million square feet of space combined, according to the Nov. 10 filing. If the transaction is closed, EPR expects the properties to be leased to the theatre operator under one master lease, structured as a triple-net lease with an initial 20-year term and an initial base rent equal to the purchase price multiplied by 12%, plus rent escalators every five years. “The theatre operator is currently negotiating with a third party for the purchase of the theatres,” the filing states. “It is anticipated that [EPR] would acquire the theatre properties directly from the third party and lease them to the theatre operator.”

Meanwhile, the same filing discloses that EPR is discussing an option to buy as many as five charter schools from Imagine Schools Inc. The purchases as well as plans to invest in the expansion of a charter school the REIT already owns, is estimated to total $50 million.

During the company’s third quarter earnings conference call last week, EPR executives alluded to possible transactions in the theatre and charter school property markets, saying they have been spending a lot of time looking at deals in the 11% to 12% cap rate range. The deals are generally coming from “distressed sellers, not necessarily distressed properties, but distressed sellers,” president and chief executive officer David Brain said during the call. Sphere: Related Content

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