July 28 (Bloomberg) -- Three years after agreeing to buy its own Broadway house, New York’s Second Stage Theatre is struggling to close the deal.
The highly regarded company, whose hits include “Next to Normal” and “The 25th Annual Putnam County Spelling Bee,” risks forfeiting a $3.65 million down payment should it fail to come up with the $21.1 million balance for the theater by May 2012, according to a financial statement filed with the New York State attorney general.
In April 2008, Second Stage announced its plan to purchase the 597-seat Helen Hayes Theater for $24 million. Like most nonprofits, it is still grappling with a recession that short-circuited capital fundraising.
The group is also navigating Broadway’s blurring boundaries between commercial and subsidized producers. Buying the Hayes would make it the fourth nonprofit with at least one Broadway house.
“People who used to donate to theaters now call themselves producers and invest in commercial productions,” said Robyn Goodman, who co-founded Second Stage in 1979 and is no longer involved.
“And there’s homogeneity between the not-for-profits and commercial producers. They’re bidding for the same plays.”
With fundraising suspended during the financial crisis, the group postponed the Aug. 31, 2010 closing, the disclosure said. The extension added $750,000 to the purchase price.
“Is it a daunting task to raise all the money? Yes,” said Second Stage Chairman Stephen Sherrill, a managing director of the private equity firm Bruckmann, Rosser, Sherrill & Co.
The theater’s board includes finance mavens along with educators and artists such as actress Patti LuPone. The vice president is Hamilton E. James, the president and chief operating officer of Blackstone Group LP, the world’s largest private equity company. He recently bought a Fifth Ave. duplex from director Hal Prince for $24.9 million.
Second Stage is seeking $15 million from an individual or corporation in exchange for renaming the theater. That’s $3 million more than Manhattan Theatre Club got in 2008, when it sold the naming rights to the Biltmore Theatre to the family of late press agent Samuel J. Friedman.
Martin Markinson and Donald Tick paid $800,000 for the Hayes in 1979. Markinson, and Tick’s heirs -- he died in 2006 -- are entitled to terminate the sale and keep Second Stage’s deposit, plus interest, if the company fails to pay the balance.
“I don’t see that happening,” Sherrill, 58, said of any forfeiture. “We will extend or close the deal.”
An extension could result in another deposit, Markinson said in an interview.
“I would be inclined to give them more time if they have some money and they’re close,” he said. “We want to do a deal.”
Markinson put the theater up for auction in 1988, assigning a minimum bid of $5 million. It failed to sell. As Broadway’s smallest house, it’s a difficult venue for commercial producers to recoup costs.
Among other nonprofits, according to public filings the Roundabout Theatre Co. leases the American Airlines Theatre and Stephen Sondheim Theatre on Broadway and bought Studio 54 in 2003 for $22.5 million. Manhattan Theatre Club bought the Biltmore for $19.9 million in 2008 after leasing it for years. Lincoln Center Theater leases the Vivian Beaumont, its Broadway house, from Lincoln Center for the Performing Arts.
Sitting in a conference room at his firm’s 29th-floor midtown office, Sherrill said that as expenses rise, it becomes increasingly difficult for Second Stage to pay bills with the 296-seat house it leases west of Times Square. (During the summer, it also operates in a 108-seat house on the Upper West Side.)
Second Stage can better capitalize on commercial successes of the contemporary American plays and musicals it presents with a Broadway house, he said, instead of depending on commercial producers for transfers.
“The Helen Hayes enables us to dramatically increase our ability to sell tickets to our hits,” said Sherrill. He donated at least $330,480 to Second Stage from 2008 to 2010, through interest-free loans he made and then forgave, according to the financial statement.
Sherrill said he has commitments of more than $15 million toward Second Stage’s roughly $40 million capital campaign, which also includes funds to renovate the theater.
“We’re in a good position,” said Second Stage Executive Director Casey Reitz, a 35-year-old former development director at New York’s Public Theater. “Our board is very enthused.”
Goodman now produces commercially and consults for the Roundabout but remains a Second Stage fan. Enthusiastic about the leadership of Carole Rothman, who is artistic director and co-founder, Goodman believes Second Stage will complete the purchase. Sherrill is also optimistic.
“This is ambitious,” he said. “I never thought it would be easy.”
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