By Meghan Morris
Naperville moviegoers can still catch the latest blockbuster with a meal at Hollywood Palms, now under a new operator.
The eight-screen movie theater and restaurant, open since 2009, changed ownership twice in the last month after Chapter 11 bankruptcy proceedings. The building’s landlord, New York-based Brixmor Property Group Inc., bought the enterprise for about $2 million on April 11. Brixmor then sold the theater business April 29 to Star Cinema Grill, a dine-in movie theater company based in Texas. The new owner declined to name the purchase price.
Yet behind the smooth operation of the theater during these changeovers, there is legal and financial tumult playing out in various courts, with problems for both the business and its former owner.
The changes come at a tough time for independent movie theaters nationally, as consumers choose streaming video at home and technology changes necessitate expensive upgrades. The number of indoor movie theaters nationally declined 7 percent between 2003 and 2013, the most recent year of data from the National Association of Theatre Owners.
The dine-in theater concept, however, is a bright spot for the movie industry, which enjoys better profit margins on selling full meals and alcohol, in addition to traditional popcorn, candy and soda.
Star Cinema Grill is taking advantage of the suburban appetite for movies and a meal with this acquisition. The company operates a dine-in theater in Arlington Heights, its only location outside the Lone Star State before it purchased the Naperville theater.
“The Naperville Hollywood Palms provides a different movie watching experience – it’s like you’re stepping into the movie,” said Gustavo Vazquez, Star Cinema Grill’s vice president of operations. “The community definitely loves going there.”
Movie patrons on Yelp praise the theater’s low ticket prices — $8 for a Friday night adult ticket to “Avengers: Age of Ultron,” compared with $11 at the local AMC theater – and the themed décor.
With new ownership, Hollywood Palms has already expanded its hours and hiring. The theater is opening earlier on weeknights, and eventually, Vazquez said the theater will open at 11 a.m. every day. To keep up with more screenings, he said, the company has already added two full-time managers to the current roster of between 125 and 140 employees.
Star Cinema Grill also plans upgrades for the theater, including luxury leather movie seats, better sound equipment and some remodeling.
“We’re always going to maintain the Hollywood Palms feel,” Vazquez said. “It was already a successful theater; it had a great staff and a great location. When the offer came up, we took it.”
This new ownership comes after months of financial trouble for both the theater and its founder, Edward “Ted” Bulthaup, who was charged in December with evading $1.3 million in state taxes. His business filed for Chapter 11 bankruptcy in February with a list of creditors that ran between 100 and 199 with total liabilities of $8.3 million, according to court documents.
Hollywood Palms’ bottom line had suffered in recent years, according to the documents, with gross profit down almost 30 percent between 2012 and 2013, to about $1.5 million in 2013. And the founder has faced his own legal troubles: Bulthaup was arrested in December on more than 100 charges of fraud, felony tax evasion and failing to file tax returns on income from Hollywood Palms and another theater business he previously owned.
At a hearing in December, he told a judge, “I never committed fraud.”
Bulthaup could not be reached for comment.
History of bankrupt theaters
This is far from Bulthaup’s first experience with courts and theaters. He closed his first theater in Indianapolis in 2006 after 15 years of operation following public battles with government officials.
His feuds didn’t end with individuals. In local press, Bulthaup blamed the Indiana Pacers’ basketball stadium for taking parking spaces away from his theatre. After his business closed, he successfully filed for a five-figure disaster relief settlement with the Internal Revenue Service, citing damages from the arena.
In Chicago, Bulthaup pinned bad business on access issues, too, telling the Daily Herald in November that road construction caused a 20 percent drop in business at his Naperville movie operation.
Bulthaup also sought protection from creditors by filing a bankruptcy petition in 2013 for his other suburban dine-in theater, the 10-screen Hollywood Boulevard Cinema. The Woodridge theater, open since 2003, was purchased by Hobson Financial Group of Illinois Inc. for $2.9 million in a bankruptcy auction last year, according to court documents.
Hollywood Palms’ turnaround timeline
Schaumburg-based turnaround firm Moglia Advisors, led by Alex Moglia, took over management of Hollywood Palms in December.
“We followed the marketing process for the theater as an operating business and we successfully sold the theater to Brixmor,” Moglia said.
Brixmor, which has owned the space since 2007, negotiated with several theater operators, according to Kristen Moore, Brixmor’s vice president of marketing.
This new theater might not be the end of Star Cinema Grill’s growth outside Texas. Vazquez, the vice president of operations, said the company continues to look for expansion opportunities in the Chicago area.
“The Chicago market was and still is very underserved,” Vazquez said. “I can’t say enough about how happy we are to have our second location in Chicago.”