Renovate or Build New?
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Category: Theater Administration
Forum Name: Money Talk
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URL: http://www.communitytheater.org/forum/forum_posts.asp?TID=2389
Printed Date: 11/22/24 at 12:33am
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Topic: Renovate or Build New?
Posted By: doublezero420
Subject: Renovate or Build New?
Date Posted: 5/03/07 at 3:08am
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Quandry:
My CT is in the (enviable?) position of deciding whether to renovate a theater in our small downtown or to buy land and build a theater.
Particulars:
Currently the only theater in our community is the High School Performing Arts Center. While this facility is (mostly) adequate to our needs, the fees we pay are bleeding us dry. Also, it's nothing for the fees to change wildly from show to show. One show we paid 2 1/2 times the amount we did for another show the same season, and both shows had the same scheduling.
 Recently we started talks with the owner of the old movie theater which has been closed for close to 20 years. We have looked at the building and it would suit our needs *very* well, but needs an almost total renovation (We would be paying for it). It is also in the "historic district" of the town and we have it on good authority that if we go with this, the building will go on the "Endangered Historic Properties" list. The downside to this deal is that we would have no legal ownership in the property and it's possible (highly unlikely, but possible) that we would put all the work and money into teh renovation, use it for a couple years and get "kicked out."
Our other option is to purchase land and build a new theater from the ground up.
We have a little money to get one of these projects started, but will need some pretty hefty grants and donations to bring either of them to fruition.
So my question is this - Since the decision will be mainly based on finances available, which would be an easier project to get funding for?
one other thing, the local ECDC tried to get something like this off the ground a few years ago with teh old Movie theater (it fell through), but they have done the feasablilty studies and have had plans for a renovated theater drawn up. We have been told that all of this is available to us should we go forward with renovating the old theater.
Thanks!
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Replies:
Posted By: biggertigger
Date Posted: 5/03/07 at 1:25pm
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Oh, such a quandary? At this point I would make a list of the pros and cons of the situation. You may want to do a feasability study for the other new constructed theater and compare the two studies. This could help with the decision making. What are the talks with the old movie theater owner? Is he interested in selling, can you have him sign the right to first refusal? (That is a contract that if he decides to sell the theater you have the right to purchase the place before he can except any other offer.) Can you purchase it on land contract? You may want to find out what other rights you may have and or request if you do update the movie theater. He may have to reimburse the difference of all up grades if he sells.
The best I would suggest is do a complete study, contact attorneys, and see what support you can recieve. ------------- The two greatest days in a theater persons life, the day you start a new show and the day the damn thing closes. |
Posted By: doublezero420
Date Posted: 5/04/07 at 12:23am
| The old theater is owned by a Lodge (their meeting space is upstairs) and their Grand Lodge will not allow them to sell the building. If we go this route, we will attempt to put a clause in the contract that states we have full use of the theater in perpetuity (sp?). |
Posted By: biggertigger
Date Posted: 5/04/07 at 8:27am
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Interesting that their Grand Lodge wont let them sell the building. We have a few lodges around here (one with a really nice theater) selling their buildings because they can't afford them like they could in Lodge hay days.
That does toss a monkey wrench into the works.
Again, I would compare the two feasability studies to see which one makes more sense. It's best to have everything out on the table because you don't want to come back after you've built a new theater to find out that people are not interested in driving out to the country to see a show or that remodeling an existing theater gets haulted because of historical guidelines.
Good luck. ------------- The two greatest days in a theater persons life, the day you start a new show and the day the damn thing closes. |
Posted By: bbpchick
Date Posted: 7/27/07 at 12:15am
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Buy the property and build from the ground up. If you can own the theater free and clear thats what you want to do. Our theater is owned by the county, and we are in negotiations now to renew our lease and it has been a pain. There was a HUGE fight as to wether we owned the building or not in the first place and it caused major issues. It's a long story, and it was not a fun problem to inherit when I joined the board. Take it from me, you want to own it free and clear. Less headaches. ------------- Kendra http://www.murphysblackbartplayer.com - www.murphysblackbartplayers.com You are NEVER too old to dress up! |
Posted By: biggertigger
Date Posted: 8/02/07 at 6:58pm
It is nice to be able to do this, however "If you build it they will come" does not always happen. There are many factors that go into owning a business (and yes theater is a business). They need to look at every avenue and then see what is best for them.
But if you want to do a feasibility study yourselves go to your local Samll Business Development and they can guide you through the steps.
http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html - http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html ------------- The two greatest days in a theater persons life, the day you start a new show and the day the damn thing closes. |
Posted By: ticketjunior
Date Posted: 8/04/07 at 1:13am
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I've been involved in a dozen or more building/renovation projects and its always cheaper to renovate than build from the ground up. I've see this both in projects under $100,000 and well into the millions of dollars. Sure its always nice to have everything brand new but there is also a price tag for brand new.
Not consider the cost of building VS remodeling I would think that as a theater group you really don't want the monthly liability of owning a building. I would estimate that your monthly overhead for a building that seats 200 - 400 people would run about $4000 - $8000 including utilities and insurance. I would think that leasing a space would be far cheaper on a monthly basis as well. Probably in the ball park of $3000 - $6000. Depending on your revenue per show and number of shows you do each year having a fixed expense of $36,000 - $72,000 a year may even be a bigger killer than the high school charging you random fees per show.
My recommendation would be this. Negotiate exclusive rights for the movie theater for 5 years. Renovate the theater is 2 phase. The first phase do basically the bare minimum to open the theater and get as many volunteers and business sponsors as possible. You'll probably still need to spend $30,000 - $60,000 depending on how many systems issues you have. (Electrical, AC/heating, plumbing, etc) The second phase I would start in year 3. Finish what you didn't / couldn't do the first time. Probably spending another $50,000.
As far as the monthly lease goes on the space I would try to negotiate that for 5 years you would only cover the utilities, insurance and that you would split the cost of building maintenance. Most likely the building is paid for at this point and is completed owned by the Lodge group. That's why that can't sell the building. Their monthly debt service on the building is probably $500 or less and getting another meeting area for their group would cost them much more. There's probably other factors as to why they're not willing to sell also but I'm sure the low cost of ownership at this point is a good reason not to sell.
The reason they should let you get away with only paying for the utilities, insurance and some building maintenance cost is because you've increase the value of their building by at least the cost of your renovation if not triple the cost.
Concerning getting the money for renovations. Assuming that you keep good accurate accounting records of how much you make each year you should be able to get a loan for $50k pretty easily.
The net of this is that assuming you negotiate correctly and spend your money wisely I would estimate your cost to be about $1,800 per month for 5 years. ($21,600 per year) To cover the lease expense, other show related expense and staff (assuming you have some paid staff people) you probably need to be making some where between $60,000 and $150,000 per year.
To make $150,000 per year you would need to have 75 performances, with 100 people per performance and selling tickets at $20. The other way to make $150K is a combination of performing yourself and renting the theater. Because you have exclusive rights to the theater (and a newly renovated theater) and the high school is your only competitor you should really be in a great position to beat your competition hands down on renting your facility.
At the end of the day the game is to keep your monthly fixed expense as LOW as possible and your monthly cash income as HIGH as possible.
All my numbers are of course just estimates but I think they'll hold together pretty well. ------------- -James P. Walters Phone: 404-272-4778 http://www.ticketjunior.com - www.ticketjunior.com "We're the little guy in the ticketing business." |
Posted By: Gaafa
Date Posted: 8/04/07 at 9:28pm
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Very good advice there James. I was connected with a now very sucessful group once. Who went to the bank & got a deal, where by the bank loaned them the gold bricks to buy an existing building, that was up for auction. They were only obliged to pay the yearly interest of the loan to the bank. A number of years latter the group who had built up a lot of savings & worked hard refurbishing the building. Paid out the principal sum & took ownership of the building free & clear. The value of the property had increased so much, along with the value of the lmoney decreasing over the years. Tthey bought it virtualy for a song. Now the theatre group is ensconced in a multi million dollar property, that only cost 100 thousand dollrs orginaly. ------------- Joe Western Gondawandaland turn right @ Perth. Hear the light & see the sound. Toi Toi Toi Chookas {{"chook [chicken] it is"} May you always play to a full house} |
Posted By: TimW
Date Posted: 8/06/07 at 8:53am
| Something that my local group found out is that it's easier to get grants to remodel a building than to build new. Not knowing who looked into our situation, this is just what I was told. |