The Chicago Theatre Loan: $12.5 Million Short at Deadline
The moment of financial reckoning has come for the Chicago Theatre. Next week the city must answer to the federal government for the $12.5 million loan used to help buy the 3,700-seat former movie palace and transform it into a gilt-edged venue for live performances.
With the deadline rapidly approaching, a well-placed source says one of two scenarios is likely regarding the theater's immediate future. Among city planning honchos the preferred option would involve a restructuring of the multimillion dollar loan. According to the source, several federal government-backed real estate development loans made to building projects in the city have recently been restructured, including loans on the New Regal Theater on the south side and One Financial Place in the Loop. While it would not let the city off the hook for the Chicago Theatre loan, a restructuring would buy much needed time to find a huge chunk of money that hasn't been forthcoming--and isn't likely to be--from Chicago Theatre Restoration Associates.
CTRA is the investor consortium headed by Margery al Chalabi, Marshall Holleb, and Rodman and Renshaw, to whom the city forwarded the $12.5 million to help buy and restore the theater. CTRA got into trouble with its payback when at least two theater- management organizations leased the theater from CTRA, failed to operate it profitably, and pulled out. Another problem for CTRA has been the adjoining Page Bros. Building, which has never been more than half leased and has not generated the revenue that CTRA expected would help offset the theater's losses.
A directive from the feds to pay back the loan immediately is of course the second possible scenario, one the city hopes to avoid. Planning-department executives argue that the government transition in Washington, D.C., may work to the city's advantage in staving off a payback, but that could be wishful thinking. Next week's discussions with the feds should tell the tale. If the money is demanded now, one source for it would be a cache of $80-$100 million in community development block grant funds the city receives annually from the federal government. Otherwise the city would have to pull the money out of an already-cut-to-the-bone budget.
Whatever happens, it appears certain CTRA won't be in charge of the restored Chicago Theatre much longer. The source cited above confirmed that the city will seek to turn over the theater to another landlord, ending an often tense relationship with CTRA that worsened as the theater's financial situation deteriorated. The exact amount owed by CTRA to the city is in dispute, but both sides agree the original $12.5 million loan has yet to be paid back. Last week CTRA appeared to be awaiting some news from the city of its own fate as well as the theater's. "We have made some recommendations to the city," says Holleb, "and now we're waiting to hear what they have to say." It could not be immediately determined what group would take on CTRA's role at the theater, though two possible contenders mentioned are the managers of the Fox Theatre in Detroit and the powerhouse local promoter Jam Productions.
If the immediate loan and landlord issues are resolved, it still remains to be seen if the theater can fare profitably in years to come. The theater's entertainment bookings continue to be rather sporadic, but one possible engagement could substantially improve its financial outlook. Several sources have confirmed that Toronto-based Live Entertainment Corporation has zeroed in on the Chicago Theatre to house its hit production of Andrew Lloyd Webber's Joseph and the Amazing Technicolor Dreamcoat for an extended run beginning in late 1993. A long-running hit, which the high-energy revival could certainly be, could turn into a rental bonanza for the theater. Since the Chicago reopened in 1986 shows have rarely played the venue for more than two or three weeks at a time.
Originally Joseph was scheduled to play at the much smaller Shubert Theatre, but concerns about whether the set would fit on the Shubert stage apparently prompted Live Entertainment to consider the Chicago. Chicago Theatre general manager Joe Arneth said he could not comment on Joseph's status vis-a-vis the Chicago, but an announcement from Live Entertainment is expected shortly.
There's never a dull moment in the city's Department of Cultural Affairs. Last week the department was rocked by the news that it will lose eight positions, or about one-sixth of its 46-person staff, because of the city's budget constraints. Particularly hard hit was the cultural grants-making division, which is losing half of its eight-person staff. Other departments affected by cutbacks include Cultural Center programming and public relations. News of the firings immediately raised concerns about how smoothly grant applications will be processed in the months to come. Cultural Affairs spokeswoman Pat Matsumoto tried to adopt an optimistic tone: "You analyze the work load and you get it done, but you end up working much harder."
Matsumoto indicated one way the cultural department may deal with the smaller work force in the grants area would be to shorten and simplify the grant application. The Illinois Arts Council adopted such a tack recently when it was hit with cutbacks. The current reduction in personnel comes after the city cut the amount of money available for cultural grants last fiscal year.
Art accompanying story in printed newspaper (not available in this archive): photo/Charles Eshelman.