Ix in the Miami area) struck a deal with creditors to continue to operate.
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 leaserelated 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.”
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. Glenn Moses, a shareholder attorney with the Miami-based firm Genovese, Joblove & Battista P. A.
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