LNR Partners Hints There Might Be a Future in Movies at Arlington Theater

Miami-based LNR Partners spokesperson, Bud Perrone of Rubenstein Communications has hinted a future a possible future for a new movie theater at the site in Arlington Town Square. The agent of the commercial mortgage-backed securities (CMBS) apparently knows the importance of a theater in supporting the rest of its interest in Arlington Town Square.

“While we regret that we were not able to come to terms with the previous operator of the Arlington Theaters, LNR Partners is working with the Arlington Heights village officials to ensure that the cinema is maintained as the anchor of the shopping district and as a central gathering place for residents of the local community.”

“We are currently in active discussions with multiple theater operators, all of which are willing and able to invest in the upgrades necessary to ensure the theater’s long-term success, and anticipate the theater’s re-opening in the near future.”

“LNR Partners was brought in to serve as the agent of the CMBS trust that holds the debt on Arlington Town Square when the developers of property were unable to live up to the terms of its loan. Edgemark was then retained to serve as the manager and leasing agent for the center. Our legal obligation is to act in the best interests of the bondholders of that trust, which include public and private pension funds, individuals and institutional investors.”

Loan servicer LNR Partners Inc. took title to Arlington Town Square in early October 2010 after a foreclosure suit (not including the 13-story residential high rise) seeking $19.8 million was filed in March 2010 (Subsidiary WBCMT 2000-C33 Evergreen Avenue LLC vs. 29 investment firms Arlington Town Square LLCs consisting of companies, family trusts and individuals).

Oak Brook-based Edgemark Asset Management LLC manages Arlington Town Square — the shopping center that houses the theater — for LNR Partners, a real estate firm and special loan servicer for the holder of the mortgage on the property. Arlington Town Square’s nearly 137,300-square-foot commercial space was owned by a group of 30 individual investors put together in 2007 by the former DBSI Inc. of Boise, Idaho. The DBSI investment group, which operated under the name of Spectrus Real Estate, bought the project from Chicago-based developer Joseph Freed & Associates LLC for $36.6 million, but DBSI later file for bankruptcy and was accused of fraud by the State of Idaho in 2009.

Bankruptcy proceedings of the DBSI companies began in November 2008, and DBSI presented a liquidation plan to bankruptcy court in July 2010.

DBSI specialized in tenant-in-common (TIC) arrangements, but suffered from the crash in commercial real estate that eventually exposed improper uses of corporate cash. TICs initially were popular because the IRS (after a 2002 ruling) allowed owners (landlords) with fractional shares in a property to delay payment of capital gain taxes. TICs became less popular because of worries about the possibility of an increase in future capital gain taxes under a Democratic administration. Also, when the economy took a downturn, new TIC real estate deals declined, and the supply of money to fund the old TIC deals shrunk.

Before the redevelopment of the Arlington Town Square site marked by the block of Sigwalt Street, Arlington Heights Road, the Union Pacific railroad parallel to Northwest Highway, and Evergreen Avenue, businesses generated $65,000 annually in property taxes. After development, which was completed in 1999, the property tax revenue around 2010 was over $1.6 million per year. Arlington Theaters was the first commercial tenant in 1999.

For a small, independent theater, the new investment in digital projectors carries a hefty price. The new projectors range in price of $50,000 to $100,000 and are not expected to last as long as old-fashioned film projectors. The resolution is better than your High Definition (HD) television at home, but not quite as good as cinema film. The advantage to moviegoers is that there is no longer the film degradation that occurs after the mechanical wear and tear of multiple showings. The digital projector displays digital data from a hard drive, but we all know hard drives eventually crash.

The advantage to Hollywood and film distribution is that the movie data can be sent electronically to the theater, instead of by the hand delivery of film. By fourth quarter 2013 all movies from Hollywood studios are expected to be fully digital and will require digital projectors and other equipment to display new release movies.

LNR Property LLC is a diversified real estate investment, finance, management and development company. LNR Partners claims to be the world’s largest commercial mortgage special servicer and a leader in CMBS and commercial real estate debt investing, and special servicing of real estate-related assets and securities.

Commercial mortgage-backed securities (CMBS) are a type of mortgage-backed security backed by mortgages on commercial rather than residential real estate.

See also …

Edgemark Commercial Real Estate Services

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