Friday, 18 November 2011 09:26

City passed on alternate theater proposal

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The city passed on a leaseback proposal last year that would have repaid the $23 million Music and Entertainment District Special Revenue Bonds on the Roanoke Rapids Theatre, Mayor Emery Doughtie confirmed this morning.

A second proposal made by Greenfire Capital Partners on behalf of Municipal Acquisitions was sent to the city but was not considered, Doughtie said.

Disclosure of the documents comes as the city considers a proposal from Chicago businessman Lafayette Gatling to buy the theater at, for right now, is an undisclosed price.

Sources familiar with both documents said the second proposal was similar to the first proposal, which the city received on December 3 of last year.

According to a copy of the first proposal, which was obtained by Thursday, Municipal Acquisitions proposed to pay the city $23 million in cash for the theater, including all permanent fixtures and systems.

The document proposed a leaseback deal in which the city, which would be clear of its payments to Bank of America and would be able to put the venue back on tax rolls, would lease the theater from the company for rent of $158,270 a month fixed for a 300-month term. The new proposal saves $48,000 more a year and would total approximately $23.5 million, making the monthly payments around $154,000.

The document notes the investor was willing to consider alternative rent schedules including a fixed escalation of different terms.

The company proposed the tenant would have an option to buy the property at any time over the initial lease term which would be assignable to a third party. “After year 10, tenant may purchase the building at 101 percent of the unamortized balance of the lease,” the document says. “During the first 10 years of the lease, the purchase price shall be equal to the present value of the remaining rent payments — assuming exercise of the 101 percent option at year 10 — discounted at a rate equal to the yield of the on-the-run U.S. Treasury bond closest to the year 10 date.”

The proposal said if no election to buy the property occurred during the lease term, “Upon payment in full of all rent and other charges due under the lease, the property shall be re-conveyed to tenant at the conclusion of lease term.”

The sources familiar with the document said the proposal would save the city between $100,000 to $200,000 and do away with adjusted interest rates and give the city a fixed rate.

They said it would still be the city's responsibility to find someone to manage the venue if it wanted shows to be booked at the theater.

The sources acknowledged that without knowing the full details of Gatling's proposal they couldn't say with certainty that the proposal was better than Gatling's or that it was worse. They also said there was the possibility neither proposal would help the city.

Doughtie said the city passed on the proposal because it does not want to be in the theater business. “It's still a huge payment and still probably would have required a increase. It's like getting a small raise in your paycheck while you are trying to make house payments.”

The mayor said documents for the sale of the theater to Gatling have been prepared and sent to his attorney. He said council will call another emergency meeting as soon as the paperwork is returned.

Read 2836 times Last modified on Friday, 18 November 2011 10:11

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