The Unified Government might soon get out of the theater business.
The UG is asking the commission to allow it to sell The Legends 14 Theatres, currently under the management of Phoenix Theatres, and execute a purchase agreement under terms outlined in an agreement. There is a $1 million breakup fee that the UG may have to pay.
Tonight, the Economic Development and Finance Standing Committee gave its approval to move the item to the full UG Commission for consideration, expected to be on the April 30 agenda.
Doug Bach, UG administrator, told the UG committee that when the UG first announced projects coming to the Village West area, in 2001, the plan was for a private developer for the theater. However, that did not work out, he said. Because one of the highest requests from the community was to put a theater at The Legends, the UG put together a plan where it would own the property and theater, and hire a management company.
The Legends 14 Theatres have now operated for 10 years, without any taxpayer dollars going into it, he said. The theater has covered all its own costs, he added.
Now the UG is in a position to say a market exists where the theater could be sold to a private owner, he said. The UG will look at selling property, evaluate proposals and turn it over to the private sector if it can do so, but there is no motivation to do so at a loss, he said.
According to Marlon Goff, of the UG’s economic development department, The Legends 14 Theatres is a 129,000-square-foot building with 14 screens and just under 3,000 seats. It has a lounge and balcony area, along with two rooms used for birthday parties. It is on an 8.6-acre site.
The theater, which opened in November 2005, underwent digital upgrades and 3D conversion in 2012.
Goff said the theater consistently is in sixth through eighth place in the Kansas City market among 33 movie houses.
Lew Levin, UG chief financial officer, said the UG would be looking at an $8.8 million price for the theater. In addition, there may be additional funds from existing accounts of about $400,000, he said.
The current outstanding debts are $6.8 million for the building and $275,000 for the equipment, Levin said. The termination fee to Phoenix is $1 million. The net property taxes are listed as an expense of $300,000. Contingency obligations, to be determined, could be $500,000, and other closing costs may be $50,000.
If the UG decides to sell the theater to a third party, it would terminate the management agreement with Phoenix Theatres, according to UG officials. Under the management agreement, the UG would give Phoenix 120 days written notice and pay Phoenix a $1 million fee. After receiving an estimate of the currently unknown transitional costs and obligations, the UG would have 45 days to make a final decision to proceed with the termination and pay the $1 million fee or to rescind the notice of termination. Levin projected an ending balance of $255,000 in the UG’s favor.
If the UG sells the theater to Phoenix, there would be no payment of $1 million to Phoenix. According to UG documents, RED Legacy would have a right of first offer if the UG desires to sell the theater to someone other than Phoenix for use as a motion picture theater.
UG officials said the UG would need to make sure the potential third-party buyer was unconditionally committed to proceeding to closing on the sale, and also require $1 million of earnest money be escrowed by a potential buyer when the termination decision is made.
Todd LaSala, an attorney working with the UG, said when the original agreement was drawn up, RED Development wanted to know if the UG wanted to sell it, and that is why there is a right of first offer goes to it. RED also has a right of first refusal if the theater is ever changed to another use. There is no discussion of changing its use currently.
Commissioner Gayle Townsend asked if there was a buyer yet? Bach replied that the first step is to offer the theater to the owner of RED or KKR, the owners of The Legends Outlets, as the right of first offer.
Townsend said that since the theater meant a lot to the community, was it possible to put restrictions on it so that it would stay a theater. That could be done, LaSala said, although there has not been a lot of conversation about it.
“If we’re not going to own it any more, I would hate to see that if it was sold sometime in the near future, that it no longer operates that way,” Townsend said. “I would like to see that considered or talked about.”