Recommended Shakespeare Theatre group has tax credit, low debt strategy
The special theater proposal review committee of the Stratford town council has recommended that Elm Street Theater Co., a group of companies and individuals with a range of theater development experience, be approved as developer and operator of Stratford’s Shakespeare Theatre.
The conglomeration includes principals from Lockwood and Mead, a Greenwich real estate development company; Reid & Reige, a Hartford law firm with specialists in nonprofit organizations; GTL Construction of White Plains, N.Y.; architect Mark Schulman of Development Design PLLC; Theater Projects Consultants for strategic planning and theater design; Brian Wishneff & Associates, specializing in tax credit financing; Suzanne Cahill, chairman of Wall Street Theater Co. of Norwalk and Milford and a media and entertainment entrepreneur; and Bob Kennedy, an event producer and executive director at Wall Street Theater Co.
Cahill is the owner of RedMat Media in Milford, which publishes Milford Living magazine, and she serves on Milford’s economic development commission. She is a former alderman of Milford, and she serves on the board of the United Way.
She describes herself as one who has worked on or developed “many, many boards and nonprofit organizations” and is “a successful businessperson.”
Cahill is leading a similar group of partners in renovating and reopening the former Globe Theater in Norwalk. She is programming for that theater now, which is scheduled to open as the Wall Street Theater in September 2015.
Wall Street is “a different area with different opportunities,” Cahill said, but it is similar to Stratford in that the taxpayers are not expected to carry the burden of getting the theater reopened.
Cahill said she found the state of Connecticut interested in supporting the Norwalk theater, because “they see it as an economic driver” for the Norwalk area. The state provided a grant of $1.5 million so the nonprofit set up by Cahill could acquire the building, which it has done.
She said the group also obtained “HUD 108” federal financing, which is for projects that are expected to create economic development.
Elm Street Theater Co. describes itself as “a not for profit corporation created for the purpose of the redevelopment and operation of the American Shakespeare Festival Theatre … to oversee the construction, renovation, maintenance, and operation of the [theater]. Theater management will consist of the programmatic administration of a performing arts theater, providing the town of Stratford a live venue to host professional performing arts as well as community performing arts.”
Finance is key
Larry Ciccarelli, who chaired the five-person proposal review committee that reviewed the five proposals that were submitted to the town for redeveloping and operating the Shakespeare Theatre, said it was his expectation that the Town Council would not approve of a company without a source of funding.
“We picked this group because we thought they had the best financing in depth,” said Ciccarelli.
The financing element that is key to Elm Street’s plan, in Ciccarelli’s view, is to generate cash from the sale of tax credits that it expects to obtain from state and federal government. Tax credits are apparently available for rehabilitating historic buildings, and the sale of the credits is a financing mechanism not uncommon with nonprofits, Ciccarelli said.
“They have buyers already” for the tax credits, he said.
“Having a list [of funding sources], and having a plan to get funding from the sources are two different things,” said Ciccarelli. “It’s the immediacy of funding that gave [Elm Street] the upper hand.”
While tax credits may be marketable and a reliable source of cash, Elm Street will need to apply for them and obtain them before having them to sell.
Obtaining tax credits “is labor consuming, not time consuming,” said Frank Farricker, who is the developer in the Elm Street partnership.
Elm Street’s plan calls for obtaining federal historic tax credits, state historic tax credits, film tax credits, and “green” (environmental) tax credits totaling about $11 million. He said the process of obtaining the credits might take a year.
“We believe we are totally in compliance with the standards to be issued tax credits,” Farricker said. “We are a strong benefit to the state and the country.”
“Nothing’s perfect, and there are no guarantees,” Ciccarelli said, “but Elm Street is further along with their financing.”
A principal with the Stratford Stage Group, David Reed, who also submitted a proposal to operate the Shakespeare Theatre, said that his group submitted a $15-million letter of credit, which was for immediate use.
Loan for predevelopment
Another part of Elm Street’s financing plan is to obtain a loan of $750,000 for predevelopment start-up expenses, and its plan calls for asking the town of Stratford to provide the loan.
Cahill and Farricker said they have an alternative source for the start-up funds if the town does not provide them, and Ciccarelli said that during the proposal review process he advised Elm Street not to expect the town to provide the loan.
Stratford Mayor John Harkins is on the record saying numerous times that taxpayers do not want to pay for the operation of the Shakespeare Theatre.
Said Cahill, “We are ready to take responsibility” for the start-up costs, but “the request [of the town] stands.”
“This is a loan, not a grant,” Cahill said. “All in, all out — $750,000 and the town gets a $13-million fully functioning theater.”
“The town should want to do it,” said Cahill. “The town and the people should want to take ownership in the project.”
Elm Street is planning to use the revenue from the sale of tax credits for rehabilitating the current theater building to its original 1,500-seat capacity.
Getting the building renovated is “first and foremost,” said Cahill. “The facility has to be what it needs to be for the programming.”
She said it will be designed for multiple and various uses. Some sections may be able to be cordoned off, creating smaller spaces. “We will figure it out so it makes the most sense,” she said.
Arts Consultant Group, which studied the feasibility of a sustainable, re-opened Shakespeare Theatre for the town, advised that a theater of 600 to 800 seats would serve the market well.
When asked what type of show would fill the house of 1,500 seats, Elm Street Executive Director Bob Kennedy said, “A lot of different styles of entertainment would do that.”
Added Cahill, “Good marketing and good business will fill the house.”
When asked to describe the unmet market demand for another theater in this region, Cahill said that the other theaters in the region are in business because of the support from their communities.
“What we have [in Stratford] is people who want a theater,” Cahill said.
She pointed also to local theater groups that could use a new home, education opportunities for teachers and students, and New York City theatrical groups that could come out to Stratford.
Mix and timing
The variety of types of entertainment that Elm Street expects to offer is spelled out in its proposal as about 25% concerts, 20% professional plays, 18% films, 10% comedy or dance, plus the annual Shakespeare Festival, community theater uses, and other community activities.
Shakespeare productions might be as high as 25% of the entertainment mix, Cahill estimated.
Ciccarelli said he was pleased to see a lot of space on the calendar dedicated to community events and rentals.
Elm Street’s proposal envisions the Shakespeare Theatre opening as early as mid to late 2016, after a year of predevelopment and a year of renovation/construction.
A board of directors would be developed largely from the Stratford community, Cahill said, and the “very important” role of artistic director would filled after the board was in place.
Beyond tax credits and a loan for starting up, Elm Street explains its business strategy as including support from the town and private investment and then converting to “development and donor base” to cover any shortfall between revenues and expenses.
“There is a subset of people in Fairfield County who are supportive of theater and theater renovations,” Farricker said. “There is real interest in historic theaters.”
Farricker and Cahill said they anticipate their annual operating costs at around $2 million. They did not say that they have a number in mind for an annual operating deficit, which would need to be covered by a donor base.
Part of their overall strategy is to be “low debt.”
The success of artistic endeavors is often determined by the amount of debt carried by the operator, Farricker said. Theaters with high debt have to charge more and sometimes the ticket prices are “out of market,” he said.
Low debt allows for some experimental productions and allows for the company to “take some risks.”
The role of the town
What Elm Street Theater needs from the town of Stratford, according to Farricker, is “support of the community and getting them in the door and making it part of their life.”
From the town’s elected officials, “we need them to be partners, cheerleaders, to work with us to communicate and show that this will be successful,” said Farricker.
Stratford Arts Commission Chairman Ed Goodrich said, “The town owns the property and the building, so they are almost like a partner. How the town is going to engage in the process is the real question now. They need to engage the process.”
Cahill added that what her group needs from residents is for them to let their council representative know they support the theater project. She asserts what she calls a “principle of economic development” — that for every $1 spent at the theater another $46 will be spent in the local economy.
Cahill said her group is ready to meet with the council during its deliberations if members so wish.
“The theater is part of the heart of Stratford,” Cahill said.
“The residents are going to be so excited. The time is right, and the people are right.”
For more information and a copy of the full proposal submitted by Elm Street Theater Co., see ElmStreetTheater.com.