Regal Cinemas is set to close 39 locations nationwide, including its 87,000-square-foot theater at the Sherman Oaks Galleria.
The closures, first reported by Business Insider, come after parent company Cineworld’s filing for bankruptcy last September. The company, which is trading at around 12 cents a share, will reject its leases beginning Feb. 15. According to the latest bankruptcy filing, monthly rent per theater increased nearly 30% from 2019 to 2022 during the domestic box office declines fueled by the Covid-19 pandemic.
The Sherman Oaks theater is the only Los Angeles-area theater that will close as part of the mass shuttering. Regal took over the space from theater chain ArcLight in June 2021. That same year, ArcLight parent company Decurion Corp. announced it would permanently close its 300 Pacific Theatres and ArcLight screens in California, including the Sherman Oaks Galleria location.
When Regal first assumed the lease, it spent millions of dollars on tenant improvements before reopening the theater, adding 4DX and premium large-format screens.
It is not shocking that theaters are downsizing, said Matthew May, founder of Sherman Oaks-based May Realty Advisors.
He added that uncertainty about the extent of the pandemic’s rippling impact on movie theater attendance persists and pointed to other closures, such as ones made recently by Laemmle Theatres, an array of arthouse movie theaters in the Los Angeles area.
The Regal closure will certainly impact Sherman Oaks moviegoers. The closest alternative theaters are Cinemark North Hollywood and Regal North Hollywood, the latter of which may have been pulling numbers away from the Regal Sherman Oaks location, according to May, who said a higher number of visitor attractions may have made the North Hollywood location more appealing.
“The question now becomes, ‘what do you do with that space?’ How do you repurpose more than 80,000 square feet of space?” May said. “I guess you can convert it into office space, because on a retail basis there’s big sports warehouses you can implement, but it’s not functionally sound. You’ve got to walk up the escalator or steps. It’s not designed for the convenience for retail shopping.”
Currently, there is no indication of what will happen to the theater space or if a tenant plans to occupy it.
“They had a huge debt load coming into this theater,” May said. “You can do some research and you’ll see billions of dollars in debt they took on through acquisitions and so on, and that was really brought up during the thick of the Covid period. I’m sure the rent wasn’t cheap, either.”
Cineworld reported $8.9 billion in debt at the end of 2021.