“I am sure that we are all deeply concerned to see the reports in the media regarding the possible collapse of the Cineworld Cinema Group.
This raises a number of urgent questions for this Council:
· What contingency plans does this Council have in place should Cineworld cease trading and / or are unable to continue operating the cinema in Hinckley, to attract a replacement operator or tenant to that particular unit?
· What are the implications to this Council on a monthly / annual basis in terms of lost rent, business rates liability and any other potential insurance or utilities liabilities?
· Will the Council undertake to commission a current open market valuation of this Council’s interest in the Crescent block C, for presentation and discussion at the first available Scrutiny Commission meeting after completion of such a report?”
Response from Councillor Lynch
“Members will be well aware that the cinema complex run by Cineworld in the Crescent was the number one priority voiced by residents of the borough during the consultation on the bus station redevelopment.
The first thing to note in respect of the recent news is that Cineworld is not declaring bankruptcy in the UK, but Chaper 11 Bankruptcy in America. This is a specific piece of law in America and is a chapter of the US Bankruptcy Code which generally provides for reorganisation. The debtor (Cineworld) usually proposes a plan of reorganisation to keep its business alive and pay creditors over time. Therefore, it is very premature to assume at this stage the business is going to close due to this consideration. Indeed, Cineworld are publicly reporting they are seeking to restructure their finances to continue operating.
Cineworld also owns the Picturehouse chain in the UK and has insisted its cinemas “remain open for business” and that there would be “no significant impact” on jobs.
This provides some level of assurance, which needs to be kept in mind when considering the questions posed. At this stage it would seem premature to be considering Cineworld is in danger of closing in the immediate future. Further steps would need to be taken before this happens. Turning to the specific questions:
1. What contingency plans does this Council have in place should Cineworld cease trading and / or are unable to continue operating the cinema in Hinckley, to attract a replacement operator or tenant to that particular unit?
HBBC has a lease in place with Cineworld for a 25-year terms which was completed in 2016.
Within the terms of the lease there are two routes of action HBBC can take depending upon the circumstances, should they arise. Firstly, it can seek to negotiate surrender of the licence with Cineworld or secondly, serve them with a forfeiture notice. The precise process and detail of either action will be determined once an understanding of Cineworld’s actual intentions are fully understood. HBBC will then need to take further legal advice once facts are known.
Officers of the council have already sought legal advice on the implications within the lease agreement should Cineworld declare bankruptcy in the UK. We have also instructed local agents to look into what potential interest there may be from other cinema operators or, as a backstop, alternative uses for this commercial town centre unit.
2. What are the implications to this Council on a monthly / annual basis in terms of lost rent, business rates liability and any other potential insurance or utilities liabilities?
The rent is £125,234.00 for 2022/23 with a service charge of £25,273.12. The business rates are £48,640.00 of which 40% is retained by HBBC. If the premises were to become vacant, after an initial period of property relief the charge would fall on the council if Cineworld vacated.
Insurance impact would be minimal, maybe a few hundreds of pounds.
3. Will the Council undertake to commission a current open market valuation of this Council’s interest in the Crescent block C, for presentation and discussion at the first available Scrutiny Commission meeting after completion of such a report?
The value we have for the accounts for the Crescent Block C is £3,520,700 (land = £1,232,245; building = £2,288,455), which the valuers have stated as “we are of the view that in this instance existing use value is reflective of current market value”.
This is not the same as a market valuation for disposal, and if Cineworld was not there it would most likely be much less. We would have to commission such a valuation as and when needed.
The last time such a valuation was carried out 19 July 2017 our property valuers gave a fair value for Block C of £4,630,300.”
Minutes:
“I am sure that we are all deeply concerned to see the reports in the media regarding the possible collapse of the Cineworld Cinema Group.
This raises a number of urgent questions for this Council:
· What contingency plans does this Council have in place should Cineworld cease trading and / or are unable to continue operating the cinema in Hinckley, to attract a replacement operator or tenant to that particular unit?
· What are the implications to this Council on a monthly / annual basis in terms of lost rent, business rates liability and any other potential insurance or utilities liabilities?
· Will the Council undertake to commission a current open market valuation of this Council’s interest in the Crescent block C, for presentation and discussion at the first available Scrutiny Commission meeting after completion of such a report?”
The Executive member for Finance, Councillor Lynch, provided the following response:
“Members will be well aware that the cinema complex run by Cineworld in the Crescent was the number one priority voiced by residents of the borough during the consultation on the bus station redevelopment.
The first thing to note in respect of the recent news is that Cineworld is not declaring bankruptcy in the UK, but Chaper 11 Bankruptcy in America. This is a specific piece of law in America and is a chapter of the US Bankruptcy Code which generally provides for reorganisation. The debtor (Cineworld) usually proposes a plan of reorganisation to keep its business alive and pay creditors over time. Therefore, it is very premature to assume at this stage the business is going to close due to this consideration. Indeed, Cineworld are publicly reporting they are seeking to restructure their finances to continue operating.
Cineworld also owns the Picturehouse chain in the UK and has insisted its cinemas “remain open for business” and that there would be “no significant impact” on jobs.
This provides some level of assurance, which needs to be kept in mind when considering the questions posed. At this stage it would seem premature to be considering Cineworld is in danger of closing in the immediate future. Further steps would need to be taken before this happens. Turning to the specific questions:
1. What contingency plans does this Council have in place should Cineworld cease trading and / or are unable to continue operating the cinema in Hinckley, to attract a replacement operator or tenant to that particular unit?
HBBC has a lease in place with Cineworld for a 25-year terms which was completed in 2016.
Within the terms of the lease there are two routes of action HBBC can take depending upon the circumstances, should they arise. Firstly, it can seek to negotiate surrender of the licence with Cineworld or secondly, serve them with a forfeiture notice. The precise process and detail of either action will be determined once an understanding of Cineworld’s actual intentions are fully understood. HBBC will then need to take further legal advice once facts are known.
Officers of the council have already sought legal advice on the implications within the lease agreement should Cineworld declare bankruptcy in the UK. We have also instructed local agents to look into what potential interest there may be from other cinema operators or, as a backstop, alternative uses for this commercial town centre unit.
2. What are the implications to this Council on a monthly / annual basis in terms of lost rent, business rates liability and any other potential insurance or utilities liabilities?
The rent is £125,234.00 for 2022/23 with a service charge of £25,273.12. The business rates are £48,640.00 of which 40% is retained by HBBC. If the premises were to become vacant, after an initial period of property relief the charge would fall on the council if Cineworld vacated.
Insurance impact would be minimal, maybe a few hundreds of pounds.
3. Will the Council undertake to commission a current open market valuation of this Council’s interest in the Crescent block C, for presentation and discussion at the first available Scrutiny Commission meeting after completion of such a report?
The value we have for the accounts for the Crescent Block C is £3,520,700 (land = £1,232,245; building = £2,288,455), which the valuers have stated as “we are of the view that in this instance existing use value is reflective of current market value”.
This is not the same as a market valuation for disposal, and if Cineworld was not there it would most likely be much less. We would have to commission such a valuation as and when needed.
The last time such a valuation was carried out 19 July 2017 our property valuers gave a fair value for Block C of £4,630,300.”