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Edwards in Disputes Over Theater Closings

Entertainment: Three landlords sue after movie house chain shuts aging sites and stops rent.

May 25, 2000|GREG HERNANDEZ | TIMES STAFF WRITER

Edwards Theatres Circuit Inc., Orange County's largest movie house operator, has become embroiled in legal disputes with three landlords as it moves to unload about 25 aging theaters, raising questions about the chain's financial stability.

In a suit filed recently in Orange County Superior Court, the owners of a shopping center in Rancho Cucamonga claim that they were told by Edwards' attorneys that the chain is experiencing "cash flow and net worth difficulties," raising the possibility of bankruptcy.

This and two other lawsuits allege that Edwards closed theaters in Rancho Cucamonga, San Juan Capistrano and Riverside and stopped paying thousands of dollars a month in rent to property owners, who hold long-term leases.

Edwards attorney Lawrence H. Davidson acknowledged that the Newport Beach-based theater operator had stopped paying rent on the closed complexes, but said it is continuing to negotiate with the property owners.

Although those theaters were losing money, bankruptcy "isn't on our agenda at this time," said Davidson, executive vice president and general counsel.

Edwards is saddled with dozens of aging movie houses, many with long-term leases, that are being overshadowed by flashier, more comfortable mega-plexes. In March, Edwards hired Beverly Hills law firm Stutman Treister & Glatt to help it revise or discontinue leases for some of the outdated theaters, which were built in the 1960s and 1970s.

Although the high-profile law firm specializes in bankruptcies, Edwards insisted at the time that it was not in financial distress and had no plans to file for Chapter 11 bankruptcy protection to get out of the leases. The theater chain said the law firm was hired because of its expertise in leasing.

Edwards is closing 16 theaters with 76 screens in Orange County, as well as some theaters in Riverside and San Bernardino counties.

"We have settled and closed several theater locations since the beginning of the year, generally the older theaters that have seen their attendance drop dramatically due to the mega-plexes built by others as well as ourselves," Davidson said.

Last year, Edwards embarked on an ambitious expansion effort aimed at boosting its total movie screens by 25% over three years. The chain lined up $250 million in financing for the projects.

Edwards plans to add more than 200 screens in California and 39 in Idaho, bringing its total screen count to about 1,000.

The move reflects an industrywide trend toward the multiscreen theaters at a time when the industry has experienced record business at the box office during the last two years.

"The mega-plexes are a sign of health in the industry," said Jim Kozak, communications director for the National Assn. of Theater Owners. "There were more tickets sold in 1998 and 1999 than there were since the 1950s. People are going to the movies in numbers we haven't seen in four decades."

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