The Miami-based CMX movie theater emerges from bankruptcy in an unusual way
For a while last April, after the COVID pandemic forced all non-essential businesses to cease operations, it looked like Cinemex Holdings USA Inc. — the parent company of CMX Cinemas, owner of 41 movie theaters around the country, including seven in Miami-Dade — had screened its last picture show.
But this is one story that gets a happy ending.
When moviegoers are ready to return to theaters, the CMX cinemas will still be in business — thanks to a complex, six-month negotiation with creditors following the company’s Chapter 11 bankruptcy filing in April. CMX is now back in business, with its signature dine-in theaters (including Brickell City Centre, Downtown Doral and Dolphin Mall) once again welcoming guests with luxury recliner seating, fine food and state-of-the-art projection and sound.
In an unusual arrangement, landlords have agreed to modified leases paid through revenue-sharing. A portion of every movie ticket, popcorn box and dine-in meal will go to the landlords.
The terms of each lease vary, depending in part on when moviegoers return to theaters. But the overall arrangement indicates a belief from landlords and creditors that people will come back to the cinema eventually.
“All parties needed to strike a balance of dealing with an unprecedented economic climate caused by the pandemic,” said Glenn Moses, a shareholder attorney with the Miami-based firm Genovese, Joblove & Battista P.A. “The landlords and tenants needed to come up with a creative solution to move forward during these challenging times and they figured out a way to make it work.
Before the Chapter 11 filing, the company said it was spending over 30% of its revenues on lease-related expenses while film studios took 60% of every ticket sold.
Revenue-share leases aren’t unusual in the retail field, but most of those leases call for a base payment plus a percentage of sales. Under this new arrangement, CMX does not have to make a base payment in rent until things return to normal.
Moses said most landlords were eager to strike a deal with CMX, because the size and space of cinemas is too large to rent out easily, particularly during the pandemic, and are already built out for the single purpose of showing movies.
According to Javier Ezquerro, Chief Operating Officer of CMX Cinemas, the company’s debt when it filed for Chapter 11 protection was more than $100 million. Ezquero declined to comment on what the company’s outstanding debt is now, citing confidentiality agreements with its creditors.
“We were able to reach a mutually beneficial agreement with our creditors that allows us to keep the theaters open,” Ezquerro said. “The agreement was especially important to mall locations, because movie theaters tend to serve as anchor tenants in large shopping centers.”
Unlike most Chapter 11 cases, where the debtor is allowed to continue to operate and remain solvent, Ezquerro said CMX Cinemas went from having a constant source of income to zero when the theaters were closed.
CMX’s parent company, the Mexico City-based Grupo Cinemex, stepped in to pay attorney’s fees, court costs and other expenses during the Chapter 11 negotiations, which were expensive due to the complex nature of the case, which involved more than 50 attorneys. Some landlords also agreed to forgive unpaid rent during the closures.
Grupo Cinemex was founded in 1993 and is now the sixth-largest movie theater operator in the world. It owns cinemas all over Mexico, which are currently open, adhering to COVID safety protocols.
A complicated resolution
Ezquerro said the agreements reached with CMX’s creditors, including landlords, varied from location to location. The company shed 10 of its under-performing locations during the negotiation (including the CMX Grand 18 in Hialeah) and now has 31 locations around the U.S., including deluxe dine-in theaters at Brickell City Centre and two CMX CinéBistros at Cityplace Doral and Dolphin Mall. The other two locations in Miami-Dade are multiplexes: The Miami Lakes 17 and the Dolphin 19 at Dolphin Mall.
Most of the company’s 31 theaters in the U.S. have reopened except for the Dolphin Mall CinéBistro and four locations in Illinois and Minnesota, which remain closed due to COVID restrictions. CMX also has two new theaters under construction, in Naples FL and McLean, VA.
“One of the many benefits of a Chapter 11 filing is the ability of the debtor to accept or reject contracts,” said Jeffrey P. Bast, founder and managing partner of the Miami-based BastAmron law firm, which specializes in insolvency litigation. “CMX could revisit the terms of all its locations. At the places where the terms were unfavorable or didn’t make economic sense to continue to operate there, we were able to reject the terms and vacate the property.”
Expansion into the U.S.
CMX Cinemas entered the U.S. market in 2016 with a 10-screen, ultra-luxury dine-in theater at 701 S. Miami Ave. inside the Brickell City Centre. At the time, the theater was the only moviegoing option in the downtown/Brickell area. (In 2017, Silverspot Cinemas opened a 16-screen theater at 300 SE Third Ave.)
In December 2017, CMX acquired all 19 Cobb Cinemas locations across seven states, including the popular Cinebistro dine-in theaters in Downtown Doral and Dolphin Mall, and rebranded them under the company’s CMX name.
At the time of the Chapter 11 filing in April, CMX issued a statement, which read “We are in a state of complete uncertainty as to when we can re-open our theaters and when our customers will feel safe and secure in returning to them given that there is presently no vaccine against the virus. We cannot forecast when — if ever — customer numbers will return to pre-crisis levels.”
Ezquerro said that since the reopenings in September, the company is only doing 20-25% of its usual business, due to virus fears and lack of new movies. The company, which previously employed 3,500, is down to a current 640 employees.
An industry in crisis
CMX isn’t the only movie theater chain that’s been left reeling by the pandemic. Regal Cinemas, the second-largest chain in the U.S., shuttered all of its 536 locations indefinitely on October 8, a little over a month after reopening on Aug. 20. The closure was a response to the news that distributor MGM announced it was postponing the release of the latest James Bond picture “No Time To Die” to April 2, 2021. The movie was originally scheduled to open this past April.
On Nov. 23, the British-based Cineworld, which owns Regal Cinemas and operates 120 cinemas in the U.K., secured a $450 million loan and renegotiated terms with its lenders in order to survive until its planned reopening date of “no later than May 2021,” according to the Wall Street Journal.
AMC Entertainment, which operates the largest movie theater chain in the world, reopened many of its locations on Aug. 20 using limited seating, no concession stands and mandatory masks. But virus-wary audiences were reluctant to venture back to the multiplex, even for blockbuster event movies (Director Christopher Nolan’s spy thriller “Tenet,” which opened on Labor Day, earned a measly $57 million in the U.S.)
The drop in patronage resulted in a third quarter loss for AMC of $905 million against revenue of $119.5 million, a 91% drop year over year, according to the Los Angeles Times.
Adding to the company’s crisis, all AMC Theaters in the two highest-grossing markets in the country, New York and Los Angeles, remain closed due to local COVID restrictions. The company has also shut down some locations permanently, most recently the AMC Lennox Town Center 24 in Columbus, OH.
The streaming situation
AMC has warned investors it could run out of cash by early 2021 due to the lack of big blockbusters such as “Wonder Woman 1984” and Pixar’s “Soul,” which are either skipping theaters altogether or premiering day and date on streaming services.
On Thursday, Warner Bros. announced its entire slate of 2021 movies — including “Dune,” “The Matrix 4” and “The Suicide Squad” — will stream on HBO MAX for a 30-day window on the same date the films open in theaters.
But Ezquerro remains optimistic, especially since most of the blockbuster titles delayed from 2020 are now set to open throughout 2021, with almost every weekend bringing a major movie: Steven Spielberg’s “West Side Story” remake, Denis Villeneuve’s adaptation of “Dune,” “Top Gun: Maverick,” the Marvel Comics horror picture “Morbius,” the giant monster mash “Godzilla vs. King Kong,” the “Ghostbusters: Afterlife” sequel and “Black Widow” starring Scarlett Johansson.
“We’re actually very excited about next year,” Ezquerro said. “I’ve never seen a calendar year like 2021. “It’s stunning. Of course there are a lot of things that have to happen before moviegoing will get back to normal. But movie fans still value the theater experience. Just because you’re streaming movies doesn’t mean you will never go back to the theater.”
This story was originally published December 3, 2020 at 1:16 PM.
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