July 18 (Bloomberg) -- Martin Markinson said he had no interest in selling the Helen Hayes Theatre, Broadway's smallest house, until a year ago, when the nonprofit Second Stage Theatre came calling.

``This is the right fit,'' Markinson, 76, said from his home in Santa Fe, New Mexico. ``My interest was never to sell to anybody who would use it as a toy.''

With a partner, Markinson paid $800,000 for the 600-seat theater in 1979. Second Stage acquired the right to buy it for ``substantially less'' than $30 million, Executive Director Ellen Richard said yesterday. The troupe put down a 10 percent deposit towards the sale, which closes in June 2010. The company plans to raise $35 million for the purchase, renovation and operation of the theater, as well as to create an endowment.

Richard said the Hayes will provide a permanent home for contemporary American plays on Broadway, although it will also be used for musicals. Second Stage will continue to lease its 296- seat, Rem Koolhaas-designed off-Broadway space on West 43rd Street and a 99-seat theater on Broadway near West 76th Street.

The Hayes will be the fifth Broadway theater operated by a nonprofit. The deal blurs the already fuzzy distinction between nonprofit theater and Broadway.

Commercial producers have complained privately for years about competing for audiences -- and Tony Awards -- against publicly subsidized nonprofits on Broadway. Nonprofits don't pay taxes and have lower labor costs for actors and other union workers.

The other Broadway houses operated by nonprofits are the Roundabout Theatre Co.'s American Airlines Theatre and Studio 54, Lincoln Center Theater's Vivian Beaumont Theater and Manhattan Theatre Club's Biltmore Theatre.

`Enhancing' Shows

Further complicating matters: commercial producers increasingly invest in or ``enhance'' shows at nonprofits in exchange for the right to present them commercially.

``The 25th Annual Putnam County Spelling Bee'' debuted at Second Stage, for example, and went on to run for almost three years at Broadway's Circle in the Square Theatre before closing in January.

The following month, Second Stage presented ``Next to Normal,'' a musical about electric shock therapy. It was enhanced by the lead producer of ``Spelling Bee,'' David Stone. Reviews were disappointing and ``Next to Normal'' didn't transfer.

Carole Rothman and Robyn Goodman founded Second Stage in 1979 to give a second life to American plays that didn't find an audience the first time. It has presented such playwrights as August Wilson, Tina Howe, Edward Albee and Lynn Nottage. Today it offers premieres as well.

`Manageable' Costs

``I think it's really exciting for Carole to program a Broadway house,'' said Goodman, who now works primarily as a commercial producer. ``Taking a small, compact house, the financial expectations are manageable and they're totally ready for that.''

Nonetheless, Richard -- a longtime employee of the Roundabout Theatre, the city's largest nonprofit theater, before joining Second Stage -- said the pressure to succeed will be formidable. Second Stage's annual budget will double, to about $15 million. And her staff must raise $35 million at a time when the city is reeling from Wall Street job losses and a punishing stock market.

Richard said Second Stage is open to renaming the Helen Hayes after a generous patron.

To contact the reporter on this story: Philip Boroff in New York at pboroff@bloomberg.net.

Last Updated: July 18, 2008 00:01 EDT