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COMMERCIAL REAL ESTATE

Drive-Ins, the Sequel: Land Turns to Gold : Pacific Theatres Develops Rare Large Parcels

September 29, 1998|JESUS SANCHEZ | TIMES STAFF WRITER

When William Forman began his chain of drive-in movie theaters more than 50 years ago, he bought chunks of land at bargain prices on what were then the outskirts of cities and small towns across Southern California.

But those cities expanded and, as a result, many of Forman's once remote drive-ins--which often covered up to 30 acres--are now valuable pieces of close-in, suburban real estate that the company is busy developing. As a result, Forman's company, Los Angeles-based Pacific Theatres Corp., ranks as one of Southern California's most active developers as well as major movie house operators.

"My grandfather was in the drive-in theater business and happened to acquire a lot of good real estate," said Christopher Forman, chief executive of Pacific Theatres.

The privately owned, Los Angeles-based company started to explore ways to squeeze more value out of its drive-ins during the 1960s by operating swap meets at many of the sites. In the early 1980s, the firm built two self-storage warehouses at drive-in locations and eventually converted some properties into shopping centers. After putting many conversions on hold during the recession and real estate bust of the early 1990s, Pacific Theatres is now making up for lost time.

Currently, the company is working on about 2 million square feet of development at eight sites, ranging from shopping centers in Long Beach and Westminster to warehouse and industrial space in Santa Fe Springs. In Buena Park, a former Pacific Theatres drive-in was sold off and is being converted into more than 200 homes.

In addition to its drive-in locations, the company last year unveiled controversial plans to build a $50-million retail and entertainment complex on the parking lots surrounding its landmark Cinerama Dome in Hollywood.

"Here are infill pieces that are 25 or 30 acres," said Neil Haltrecht, vice president of real estate for Pacific Theatres. "It's a great development portfolio."

Drive-in sites are coveted by residential as well as commercial developers, said Avi Brosh of Braemar Urban Ventures, which will build more than 50 homes and a school on the site of the former Studio Drive-In in Culver City. (The Studio Drive-In was not owned by Pacific Theatres.)

"Drive-ins represent some of the best development opportunities because they are typically large sites," Brosh said. "These are rare jewels of 10 acres or more where you can go in and really build something that is special. It allows you to create a development that has a sense of community and a sense of place."

Because it has owned the drive-in sites for decades, Pacific Theatres has an advantage over other developers that might have to pay huge sums for the same piece of property.

"Their cost basis is very low and they can make the economics work where other people couldn't," said developer Rick Caruso. "They are smart in what they are doing."

Haltrecht heads a team of about 14 people at Pacific Theatres dedicated to developing and managing the company's non-theater properties. A separate department oversees the development of movie theaters, which have been expanding recently. Pacific Theatres stands out because it operates as a real estate developer and movie house chain under one corporate roof, said Cliff Goldstein, a partner at J.H. Snyder Co., a Los Angeles-based real estate firm.

"They are very proactively developing their property and very actively pursuing new theaters on properties that they don't own," Goldstein said. "They are very capable developers."

When a drive-in site comes up for development, Pacific Theatres sizes up the market to see whether it makes sense to build a multiplex cinema or shopping center.

Despite strong historical and emotional ties to the movie business, the decision to convert a drive-in to an indoor cineplex or a supermarket is based purely on economics, said Forman, whose company has about a dozen remaining drive-in sites.

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