Guiding Lines: Building Sites for Movie Theaters

The first new generation theaters launched in Moscow, featuring Dolby Digital systems, gigantic convex-concave screens and designer interiors were Kodak Kinomir on Tverskaya Street, Pyat Zvyozd near Paveletskaya metro station, Rolan at Chistyye Ponds, Kinotsentr at Krasnopresnenskaya metro station and MDM Kino on Frunzenskaya.

In the early 2000s cinema chains Formula Kino and Karo Film redeveloped several older theaters, which had remained derelict throughout the 1990s. After a decade of stagnation in the domestic film industry in the early 2000s the sector began to show first signs of revival. In Moscow alone, cinema operators raised so many theaters that already in 2004 property analysts said the sector would soon face a glut. But in 2006, and then in 2007 the industry majors continued to announce new plans for construction and refurbishment, new leases and acquisitions. The number of non-mall cinemas is growing. Chain brands, who moved from the very beginning to occupy detached properties for their theaters, continue to pursue the same strategy launching their halls across the city, independently from shopping malls or mixed-use complexes. For example, the cinema chain Pyat Zvyozd that operates a theater near the Paveletskaya metro station has recently launched a new hall in Biryulyovo.

In December 2006 the U.S. firm Rising Star Media that runs the chain Kinostar De Lux, announced plans to launch four new halls before 2008 across Russia. Two of those properties are to be launched in Moscow. Two more halls will open in St. Petersburg. To that end the chain plans to take out an loan at the International Finance Corporation . The project is estimated to be worth $68 million, according to IFC. Incidentally, another chain, Cinema Park, has already received a $20 million from IFC.

Karo Film has recently acquired several new cinema developments in Moscow from other chains or companies not involved in the film industry. In particular, Karo secured a title to the building of the cinema hall Mechta on Kashirskoye Shosse [motorway]; in early 2007, the company acquired the centrally-located Pushkinsky from Moscow's city hall, for nearly $30 million. Earlier Karo was renting 2,500sqm at Pushkinsky. By law the city could not transfer the entire building to Karo. The theater building was put up for sale at a tender, with a starting price fixed at 767 million rubles. Karo Film’s 1 million ruble bid won the tender.

In February 2007 the St. Petersburg-based operator Kronverk Cinema said it rented space at MDM Kino in Moscow. The company is set to refurbish the property; the project is estimated to be worth $6 million to $8.5 million. In the future the chain plans to open five more cinemas across the capital. On the whole, Kronverk Cinema is likely to spend $13 million on its Moscow projects. MDM Kino was closed for reconstruction on March 1; once it reopens one of its halls will be complete with a digital film projector. The first stage of the project is estimated at $500,000, to be spent chiefly on acquisition of cinema equipment. For example, the digital projector will cost 150,000 euros. The company plans to increase the size of the cinema itself after neighboring units are vacated by other tenants. By the end of the year Kronverk will launch a 7-screen multiplex in Moscow’s southern suburb Orekhovo-Borisovo and a 5-screen facility on Altufievskoye Shosse. Afterwards, the company is set to tap into Ukraine's market and launch its theaters in Kiev. Cinema Park, too, has recently announced plans to open new theaters in Moscow and Ukraine.

Kronverk's plans to establish presence in Moscow could be attributed to the task of introducing digital projectors in the capital. After all, such services are still rare in the capital. But if the sector had already been saturated, it would have been more difficult for the company to launch its facilities in the capital, with or without top end equipment.

Needless to say that raising cash for reconstruction of older properties – especially on such a grand scale – would have been an even greater challenge. Judging by the plans nurtured by all other cinema chains in the city the cinema property sector in Moscow is still far from saturation. The demand for non-mall theaters is still high. Expansion of cinema chains may also be explained by the ongoing restructuring of the property market. In other words, older buildings grow obsolete and give way to new constructions that meet the standards of the years 2006-2008. The same is happening in retail real estate. In particular, when speaking of the imminent saturation back in 2004 Colliers International's analyst and some chain operators referred namely to the restructuring of the market.

Expansion of cinema chains stimulates the audience. Several surveys conducted recently have revealed that after a decade of virtually no movies to go to the Russian public was yearning for new films and flooded the theaters as soon as new production hit the screens. The audience is still eager to go to the movies. New films help Russians to forget about austere reality of their lives. Last year box office proceeds at Russian theaters grew 30% to $412 million. In 2005, the industry grew approximately at the same rate, according to the magazine Kinobiznes Segodnya (Cinema Business Today). In the period of Dec. 2004 through Nov. 2005 Russian cinemas played 320 films, but the proceeds stood at $317 million.