CAPE MAY— If the city insists in the next 60 days on collecting $100,000 it loaned to the Beach Theatre Foundation, the non-profit group could be forced in to bankruptcy.
In addition, Frank Theatres, owner of the Beach Theatre, is suing the Beach Theatre Foundation for $50,000 for a breach of contract for common area maintenance area fees for the theater complex.
The foundation operated the theatre for a year and a half under a lease agreement and has undertaken a vigorous campaign to preserve the theater and partner with a developer to refurbish the property.
Beach Theatre Foundation President Steve Jackson told the Herald the organization does not have $100,000 in the bank and if the city presses the foundation for full payment in 60 days, it would have to file for bankruptcy and the city would have to go to the 35 persons that signed pledges to guaranty the loan amount.
Jackson said calling for the money at this time does not accomplish want the city wished to do when they made the loan to the Beach Theatre Foundation. A term of the loan called for full repayment if a lease with Frank Theatres ended.
The Beach Theatre Foundation’s 18-month lease ended March 31, 2009 but the foundation continued to search for a developer. The foundation did not commence paying cash interest on the principal of the note when interest became due on or after 12 months from the date loan proceeds were disbursed nor did it pay the entire principal balance of the note when lease of the theater terminated.
In September 2009, the foundation sent a letter to City Manager Bruce MacLeod written as a follow up to a meeting between Beach Theatre Foundation President Steve Jackson and McLeod.
In the letter, Jackson requested the principal amount of $100,000 as of Sept. 7, 2008, become due September 7, 2012. As consideration for the waiver and amendment, the foundation offered payment of cash interest monthly.
Jackson said the city did not answer the letter until April 20, 2010 when City Solicitor Tony Monzo demanded the money be paid in 60 days. Jackson said the foundation is requesting a meeting with city officials.
He said if the city continues to press the repayment in 60 days, “They have pretty much put the wrecking ball to the building because no one as a group is going to save the theater.”
He said the foundation was asking for time not forgiveness of the loan.
Did the city see any benefit from loaning the foundation $100,000? Jackson said the foundation kept the theater open the summer of 2007 to spring 2009.
With all the repairs the foundation put into the building, Frank Theaters operated the theater last summer, he said, so the theater remained open for three seasons and without the foundation, it most likely would have closed and possibly been demolished.
If the city recovers the $100,000 from the foundation, the money can only be used for loans for other projects, not for the city’s general fund, said Jackson. He said the city could not loan the money to itself to build a new Convention Hall.
Jackson said the city’s loan fund has $600,000 in it from interest accrued even without the Beach Theatre Foundation’s repayment. He said he did not know of any other groups or developers seeking to borrow from the city’s fund which is designed to create jobs.
Jackson said the city would be better off giving the foundation until October 2012 to repay the loan as the group continues to seek a developer to purchase and restore the theater, perhaps combined with a small “boutique hotel.”
As far as the lawsuit from the Frank Theaters for back, common area maintenance payments, Jackson the foundation spent tens of thousands of dollars to get the theater usable including replacing the gas line to the theater. He notes the foundation paid $150,000 in lease payments to Frank Theatres and did not get the full value of the theater.
Jackson said the foundation wants to pay back the loan by using ticket revenue after getting the theater reopened.
“Without the theater, we can’t pay back the loan,” he said.
In a letter to MacLeod and City Council, the foundation noted total revenues for the theater in 2008 was $311,548 with total expenses and payroll totaling $369,801 which included $50,000 advance rent to extend the lease six months. It notes the theater was unusable during the last five months of the lease due to failures of the electrical and heating thus cutting off the foundation’s revenue.
Jackson said the foundation was looking vigorously for a developer. He suggested the project could be built in phases starting with retail space refurbished and parking and adding a hotel when the national economy improves.
The city’s Historic Preservation Commission has identified the theater as a historically significant building. The Beach Theatre turns 60 years old on June 25.
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