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Exhib trust firm falters

Chapter 11 filings cause stock slide

It’s not a good time to specialize in movie-theater property, to say the least, and that’s spelling trouble for a real estate investment trust launched with much fanfare amid an exhibition building boom three years ago.

Shares in Entertainment Properties Trust have plunged in just a couple of months from a 52-week high to near-daily new lows as the stock is socked with fallout from exhibitors’ debt woes. On Friday, the stock closed off 19¢ at $11.50 after trading of more than twice the normal volume.

Kansas City, Mo.-based Entertainment Properties was formed in 1997 by execs of cross-town exhibitor AMC Entertainment. But as a stand-alone, publicly traded concern, the company’s $500 million portfolio of theater and related properties also includes those of circuits such as Loews Cineplex, Edwards Theaters, Muvico Entertainment and Consolidated Theaters.

Execs at Entertainment Properties have emphasized that its properties involve profitable megaplexes –boasting 14 or more screens — and are unlikely candidates for closure.

Of 26 megaplexes in its portfolio, 17 are operated by AMC, whose chairman Peter Brown is also chair of Entertainment Properties.

“Our properties are all modern, megaplex theaters, and they are all currently profitable for our operators,” said Fred Kennon, VP and treasurer of Entertainment Properties.

In the company’s initial public offering, managed by blue-chip investment bank Goldman, Sachs, shares were priced at $20 amid industrywide enthusiasm for expansion among the nation’s movie circuits.

But that expansion binge turned ugly when box-office revenue failed to keep pace with debt-service needs at many companies and worry spread on Wall Street about overcapacity among movie circuits.

Still, even earlier this year, analysts remained bullish on prospects for Entertainment Properties, whose stock set a 52-week closing high of $15 on June 27.

Now, with a succession of Chapter 11 filings by Edwards Theaters, Carmike Cinemas and others — and more expected — investors are punishing Entertainment Properties over gathering expectations of mass theater shutdowns and a resulting markdown on its real estate.

The sliding stock hasn’t marked even a fractional closing gain in over two weeks. But analyst Arthur Rockwell of Rockwell Capital Management in Los Angeles said Entertainment Properties should be able to weather the storm eventually.

“Obviously the near-term outlook is rather bleak, and presumably there has to be a downward evaluation of assets and projected cash flow,” Rockwell said. “But I don’t think there’s any question of survival for Entertainment Properties.”

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