Downtown Cineplex Team

1
Cineplex Project Research and Analysis
Prepared for The State College Downtown
Improvement District
Prepared By Penn State Smeal College of
Business Students
Date 25 April 2004
Downtown Cineplex Team
2
Demographic Analysis
Downtown Cineplex Team
3

• State College Highlights
• State College was ranked No. 1 as the lowest
  stress city in the United States by Psychology
  Today
  
• State College was rated by Places rated Almanac
  as the seventh safest city
  
• In Money magazine, State College was rated fifth
  as best place to live among northeast small
  cities
  
• Performance Magazine named the Bryce Jordan
  Center the nation's top-grossing venue of its
  size for the first half of 1996
  
• The region has laid claim to the lowest
  unemployment rate in the state throughout the
  past two years
  

Downtown Cineplex Team
4

• State College Highlights
• Penn State ranks among the nations top research
  universities, in terms of research funding. It is
  second only to M.I.T.
  
• Out of 67 Pennsylvania counties, Centre County
  ranks 21st Out of 67 Pennsylvania counties,
  Centre County ranks 21st in gross receipts from
  agricultural products. There is a 50 million
  yield every year from agribusiness. There are
  about 140,000 acres of farmland in the county,
  where corn is the biggest crop. More than 31,000
  acres are devoted to corn. However, dairy
  farming, with 280 farms and 14,000 dairy cows, is
  the major focus of agribusiness here

Downtown Cineplex Team
5

• State College Highlights
• Retail businesses increased by 13 between 1990
  and 1994, but the past two years have seen
  unprecedented growth in this sector. The greatest
  increases have come in general merchandise, food
  stores, and apparel and accessory stores
• Many national merchandisers, hotel and restaurant
  chains have "discovered" State College in the
  past two years, including Sam's Club, Ruby
  Tuesday's, Courtyard by Marriott, Eddie Bauer and
  Chili's. Office Depot, Wal-Mart, K-Mart, Hills,
  Sears, JC Penney, T.J. Maxx, and Barnes and Noble
  Bookstore
• In the past five years, the service sector has
  grown by 20, with a 143 increase in education
  and training businesses
  

Downtown Cineplex Team
6

• Centre County At a Glance (2000 Year Estimates)
• Total Population 135,758
• Area in Square Miles 1,047
• Male 69,322
• Female 66,436
• with at least a bachelors degree 36.3
• Median Household Income 36,165
• Median Family Income 50,557
• Median Age 28.7
• Median Home Value 115,549

Downtown Cineplex Team
7

• Geographic area Centre County, Pennsylvania
• 0-14 years 20,319 14.9
• 15 - 19 years 13,615 10
• 20 - 24 years 26,924 19.8
• 25 - 34 years 18,139 13.4
• 35 - 54 years 32,860 24.2
• 55 - 64 years 9,824 7.2
• 65 - 85 years (and over) 13,077 10.4

Downtown Cineplex Team
8

• Geographic area State College Borough, Centre
  County
  
• 0 - 14 years 1,835 4.715
• 19 years 7,056 18.4
• 20 - 24 years 18,503 48.2
• 25 - 34 years 4,337 11.3
• 35 - 54 years 3,447 9.0
• 55 - 64 years 995 2.6
• 65 - 85 years (and over) 2,247 5.8

Downtown Cineplex Team
9

• Employment and Income
• Area residents are employed primarily in the
  sectors of Management, professional, and related
  occupations according to the Countys economic
  profile
• Almost 42 of the population in Centre County
  (26,907 workers) is employed in such occupations,
  with a median household income of 36,165
  
• In the Borough of State College and surrounding
  townships, the percentage of young professionals
  and management occupations jumps to around 48 of
  the work force, but the median household income
  drops to about 21,186
• This drop in income is due to a much more even
  split of possible occupations across Centre
  County vs. State College where the population
  base is primarily students (making little to no
  income) and young professionals comprising most
  of the work force

Downtown Cineplex Team
10

• Business
• County business and industries generate about 400
  new jobs per year
  
• The countys location is within a days drive of
  40 of all major North American markets, making
  it ideal for companies who want access to the
  East Cost, the Midwest, and the ports of
  Philadelphia, Pittsburgh, and Baltimore
• Centre County has a diverse base of commerce,
  with strong agricultural, retail, service,
  education, high technology, construction, and
  manufacturing sectors

Downtown Cineplex Team
11
Major Employers

• Penn State University plays a key role in
  attracting high-tech companies to State College,
  as well as spinning off new technology companies
  from ongoing research activities. Penn State
  Research Park, for example, is expected to
  generate 5,000 new jobs when completed.
• CorpTech, an independent economic auditor based
  in Woburn, Massachusetts, has identified Centre
  County as a national leader in the creation of
  high technology jobs. Yearly sales of
  chromatographic equipment and supplies by local
  firms surpass 70 million. The companies dealing
  in chromatography have created more than 600 area
  jobs, and the industry grows at a very healthy
  10 to 15 per annum.
• Restek is located in Penn Eagle Industrial Park,
  also operated by the CBICC. Restek recently
  dedicated a beautiful new addition to its
  physical plant. The award-winning company has
  been recognized as one of the nation's fastest
  growing companies.
• Raytheon develops, integrates and supports
  real-time information collection, processing and
  management systems.
  
• Murata Electronics North America is a
  manufacturer of ceramic capacitors and electronic
  components

Downtown Cineplex Team
12

• 2001 Impact of Tourists
• Transportation - 90,250,000
• Retail Trade - 44,810,000
• Restaurants - 90,030,000
• Hotels/Lodging - 53,440,000
• Entertainment Services - 35,090,000
• Other Services - 14, 210,000
• Total Direct Impact - 327,830,000
• 2001 Indirect Impact of Tourists - 11,453
• 2001 Induced Impact - 211,246

Downtown Cineplex Team
13

• Domestic and International Traveler Spending for
  2000 and 2001 (Total Pennsylvania Figures)
  
• Domestic Travelers
• 2000 20.5 billion
• 2001 - 19.2 billion
• International Travelers
• 2000 - 1.55 billion
• 2001 - 1.25 billion

Downtown Cineplex Team
14

• Breakdown
• The direct impact reflects the sales made by
  travelers in Pennsylvania, the jobs generated,
  and the compensation paid to employees and owners
  as a result of traveler spending
• The indirect impact is based on the
  inter-industry purchases made in response to the
  direct sales to travelers
  
• The induced impact takes into account the
  household spending of employees and owners of all
  of the firms that benefit from both direct and
  indirect sales
• Domestic travelers are defined as U.S. residents
  traveling at least 50 miles in one direction,
  excluding commuting to and from work
  
• International travelers are foreign residents
  visiting Pennsylvania as either their main
  destination or as a part of their trip to the U.S.

Downtown Cineplex Team
15

• Breakdown for Domestic Traveler Spending in 2001
• Transportation - 5.2 billion
• Lodging - 3.1 billion
• Restaurants - 4.8 billion
• Other (including Entertainment and Shopping) -
  7.4 billion

Downtown Cineplex Team
16

• Top Tourist Activities in Centre County
• Fishing
• Scuba Diving
• White Water Boating
• Canoeing/Kayaking
• Water-skiing
• Wildlife/Bird Watching

Downtown Cineplex Team
17

• Sportspersons in the area are a major boost to
  our local economy. By spending money, these
  people will boost Centre Countys economy by
  
• Staying in hotels
• Utilizing the turnpike system
• Dining in the restaurants
• Patronizing the shops and shopping centers
• Buying equipment for the outdoor activities
• Attending local events and/or festivals during
  their stays
  
• Returning to continue to engage in the activities
  and spend more money

Downtown Cineplex Team
18

• Economic Impact of Beaver Stadium and the Bryce
  Jordan Center
  
• Visitors expenditures are new injections of
  resources in the local economy, whereas locals
  expenditures are often replacing other kinds of
  local expenditures, and therefore do not
  constitute a net new economic impact
• The Economic Impact is composed of three parts
• 1) visitor expenditure at the facility itself
• 2) expenditure within State College, but not at
  the facility
  
• 3) the indirect impact of local re-spending of
  this visitors
  
• expenditure, thus
  re-circulating the money into the economy
  

Downtown Cineplex Team
19

• Economic Impact of Beaver Stadium and the Bryce
  Jordan Center
  
• The typical football game in 1999 created almost
  5 million in total expenditure, and over the
  season nearly 30 million was injected into the
  local economy. Using the multiplier of 1.99
  calculates that expenditures brought over 59
  million into the local economy
• A study predicted that each football game for
  2001 brought in 5,970,000 in direct expenditure,
  and over the course of a six-game season the
  direct expenditure would be 35,822,000. Using
  the multiplier, total expenditures of 71,287,000
  were calculated
• According to an article in the Daily Collegian,
  the football team brought in about 38.7 million
  in direct expenditures in the 2002 season. The
  indirect impact (after factoring in the
  multiplier), would then come out to be 77.013
  million

Downtown Cineplex Team
20

• Economic Impact of Beaver Stadium and the Bryce
  Jordan Center
  
• The Bryce Jordan Center holds two types of events
  (roughly speaking) PSU-sponsored events (often
  basketball games), and externally sponsored
  events (often concerts)
• The university (as proprietor of the BJC),
  receives revenue directly form the use of the
  facility and its services
  
• In the case of PSU-sponsored events the revenue
  is direct, as the university charges admission to
  its basketball games and receives the flow of the
  revenue along with the concessions and other
  expenditures at the games
• In the case of non-sponsored PSU events
  (entertainment events), Penn State rents the
  facility and a number of associated services
  (such as labor, equipment, rental, etc.) to the
  promoter of the event and also receives a share
  of the ticket and concession revenue
• The second type of economic impact is the
  incremental expenditure within the community
  associated with the events held at the BJC (the
  indirect expenditures)

Downtown Cineplex Team
21

• Economic Impact of Beaver Stadium and the Bryce
  Jordan Center
  
• During the 1997-1998 basketball season,
  approximately 1.46 million in revenue was
  generated at the BJC
  
• Of this revenue, 1.05 million came from season
  ticket sales to non-students
  
• Ticket office zip code records indicate that
  approximately 50 of these tickets were purchased
  by fans from outside the State College area, so
  its sensible to assume that half of the season
  ticket revenue also comes from outside of the
  area
• Concession revenue was 160,000 for mens games
  and 73,000 for womens games
  
• The revenue obtained from event parking at Mens
  Basketball totals approximately 58,000 and from
  Womens approximates about 23,000

Downtown Cineplex Team
22

• Economic Impact of Beaver Stadium and the Bryce
  Jordan Center
  
• During the 1997-1998 fiscal year, there were 28
  entertainment events at the BJC which yielded a
  total attendance of 242,000
  
• Revenue is generated from the promoter rent, box
  office and merchandise shares, concession sales,
  and charges to the promoter for catering,
  parking, advertising, equipment, and labor
• This totaled 1.93 million from promoter payments
  and 400,000 in concession over the fiscal year
  
• It is assumed that 57 of the ticket revenue
  comes from outside the area

Downtown Cineplex Team
23

• According to the 1997-1998 year, the economic
  impacts of football games and events at the Bryce
  Jordan Center were estimated to total more than
  60 million per year, and are considered to be a
  substantial contributor to the economy of State
  College

Downtown Cineplex Team
24

• Factors That Were Important to Individuals
  Decisions to Visit Centre County
  
• Friends and/or Relatives - 14.3
• Business (relating to work) - 2.7
• A Sporting Event - 11.9
• Penn State - 18.1
• Convention or Meeting - 2.7
• Scenery - 16.9
• Event at Bryce Jordan Center - 5.3
• Shopping - 9.1
• Personal Business (weddings, reunions, etc.) -
  5.1
  
• Outdoor Activity - 8.5
• A Festival/Special Sport - 9.3
• Attractions - 6.8
• Other Factors - 6.8

Downtown Cineplex Team
25

• Student Demographic Information
• Currently, 13,391 students reside on campus
• 4,016 live in east
• 753 live in Nittany apartments
• 906 live in north
• 2,617 live in Pollock
• 2,818 live in south
• 1,698 live in west
• the location of 583 is unknown
• Of those 13,391 students, 12,762 are from the
  U.S., and 8800 are from Pennsylvania (the next
  greatest number is 1,160 students from New
  Jersey)

Downtown Cineplex Team
26

• Student Demographic Information
• There are currently 41,795 students total at
  University Park
  
• 35,002 are undergraduates
• 6,793 are graduates
• Of the total count, 26,202 undergraduates and
  2,397 graduates come from Pennsylvania, while
  8,800 undergraduates and 4,396 graduates come
  from areas other than Pennsylvania

Downtown Cineplex Team
27
Demographics by ZIP code (Centre Daily Times)
Downtown Cineplex Team
28

• Ethnic Breakdown
• 1,687 African American
• 2,117 Asian American
• 1,270 Hispanic American
• 65 Native American
• 3,233 International
• 33,423 White
• Enrollment by gender is 19,52 females (46.9) and
  22,213 males (53.2)

Downtown Cineplex Team
29

• Student Expense Information as Provided from the
  Office of Student Aid
  
• Tuition and fees are 10,743 for Native
  Pennsylvanians and 20 for Non-Natives
  
• Its estimated that books will cost 1,100 per
  academic year, meal and room expenses will total
  6,200, and travel and personal supplies will
  range from 1,200 to 2,400 a year

Downtown Cineplex Team
30

• Student Financing
• Currently 77 of undergraduates receive financial
  aid
  
• The total aid awarded for Penn State students
  total 551,762,214
  
• The average loan debt of graduates is 18,194
• Part time jobs are a source of aid for students,
  and income is based on hours worked and pay
  rates. The classifieds of the Collegian usually
  advertise jobs for students with pay ranging from
  6-12 per hour and 5-20 hours per week

Downtown Cineplex Team
31
Retail Market Analysis
Downtown Cineplex Team
32
Lease Track Analysis

• Identify 6 major retail outlets
• Music/video sales
• Restaurant with liquor
• Family restaurant
• Pharmacy
• Banking
• Mens/Womens apparel

Downtown Cineplex Team
33
Retail Analysis - Music/Video

• Mikes Video
• Blockbuster
• Borders Books and Music
• Sam Goody Music
• Coconuts
• Record Town

Downtown Cineplex Team
34
Retail Analysis - Restaurant w/ Liquor

• Hard Rock Café
• Cheesecake Factory
• Max Ermas
• The Melting Pot
• TGI Fridays

Downtown Cineplex Team
35
Retail Analysis - Family Restaurant

• Old Country Buffet
• Pizza Hut
• Dunkin Donuts/Krispy Kreme

Downtown Cineplex Team
36
Retail Analysis - Pharmacy

• Eckerd
• Rite Aid
• CVS

Downtown Cineplex Team
37
Retail Analysis - Banking

• M T
• First Commonwealth Bank
• Penn National

Downtown Cineplex Team
38
Retail Analysis - Mens/Womens Apparel

• Old Navy
• American Eagle Outfitters
• J. Crew
• Banana Republic
• Finish Line

Downtown Cineplex Team
39
Survey Description

• Administered April 4, 2004 to downtown St.
  College citizens by Alpha Pi Omega service
  sorority
  
• Respondent profile

Downtown Cineplex Team
40
Demand for Cineplex Development

• Existing psychographics for frequency in cinema
  patronage
  

• 51 of respondents say they would frequent a
  downtown cineplex over the current NIttany Mall
  location
  
• Of those respondents, 53 prefer a cineplex in
  walking distance of downtown St. College
  

Downtown Cineplex Team
41
Survey Results

• Music/Video
• 70 would prefer a music/video store close to the
  new cineplex
  
• 20 would like to see a Borders Books and Music

Downtown Cineplex Team
42
Survey Results

• Restaurant with liquor
• 61 of respondents expressed interest in going to
  a restaurant located inside of a cineplex
  
• 30 of respondents over 21yrs. said restaurant
  WITH a bar is important
  
• 48 would like a Hard Rock Cafe
• 31 interested in Cheesecake Factory
• 22 interested in Max Ermas

Downtown Cineplex Team
43
Survey Results

• Family Restaurant
• 70 of respondents over 21 yrs. said a bar is NOT
  important in their restaurant selection
  
• Pharmacy
• 15 expressed interest in seeing a pharmacy
  outlet
  
• Banking
• 15 expressed interest in banking/financial
  services
  

Downtown Cineplex Team
44
Survey Results

• Mens/Womens Apparel
• 28 interested in Old Navy
• 19 interested in an American Eagle Outfitters
• 12 interested in J. Crew
• 12 interested in Banana Republic
• 9 interested in Finish Line

Downtown Cineplex Team
45
Theater Research Results

• Narrowed field of all theater operators to
  those with geographic and demographic preference
  
• Gathered research from three interested theater
  operators
  
• Received interest from
• Lowes Cineplexes requested more information
• Marcus Theaters requested more information
• Carmike Theaters current downtown competitor
• Next steps Give thorough details of project to
  the aforementioned firms
  

Downtown Cineplex Team
46
Financial Analysis
Downtown Cineplex Team
47
Financial Analysis

• Financial Analysis Assumes the Following
• Conventional financing based upon GW terms
• Zero (0) local debt assistance
• Project cost of 18MM
• Project consists of
• One (1) cinema theater with six (6) screens
  requiring 80,000 sq.ft.
  
• One (1) anchor tenant, preferred brand name
  restaurant, requiring 10,000 sq.ft.
  
• Three (3) premier tenants, requiring 30,000
  sq.ft. between all three

Downtown Cineplex Team
48
Financial Analysis

• Five (5) year renewable, triple net lease
  arrangements
  
• Twenty-five (25) year time horizon
• Property will remain under GW ownership
• One-time in-lieu of parking fee of 7,000 per
  square foot
  
• Depreciable life 27.5 years

Downtown Cineplex Team
49
Financial Analysis
Downtown Cineplex Team
All s in 000s