PITTSFIELD — A Michigan-based theater chain is interested in buying the Beacon Cinema on North Street, but there's a catch.
In order for the deal to go through, the company has asked the city of Pittsfield to restructure $2.55 million of debt that is left on the six-screen cinema complex.
The restructuring plan needs to be approved by the City Council, which referred the matter to subcommittee during Tuesday night's meeting.
Officials from Insight Management Consulting of Farmington, Mich., which does business as Phoenix Theaters, are scheduled to appear in front of the council's Community and Economic Development subcommittee on Nov. 20, according to papers filed with the city.
"The proposed sale of the property to an experienced independent theater owner has been determined to be the best option," papers filed with the city state, "with the only reasonable alternative being foreclosure which could result in the immediate closing of the Beacon Cinema and elimination of all the city debt."
The debt is the result of the "magnitude of investment" that was required to convert the historic Kinnell-Kresge building into a six-screen cinema complex 10 years ago, according to papers filed with the City Council.
The funding for the $23 million complex, which opened in November 2009, includes $7.7 million in equity through tax credits supplied by the Massachusetts Housing Investment Corporation, $4.6 million in loans from five local financial institutions, $2.9 million in state and federal historic tax credits from the city of Pittsfield, and $800,000 from the project's managing partner and owner, Richard Stanley, of Egremont.
The Massachusetts Housing Investment Corporation exited the project as planned in 2016, which caused the debt to be restructured.
The city's current debt restructuring proposal would allow $1.05 million of the Beacon's existing $2.55 million debt to be immediately forgiven. The remaining $1.5 million would be forgiven over a 10-year-period under the condition that the Beacon Cinema remain open to the public for that period of time.
That $1.05 million sum includes a $1 million loan that was used to restore the historic facade of the Kinnell-Kresge building on North Street where the Beacon is located, and a $50,000 loan that the city granted for accessibility improvements to the structure.
The remaining $1.5 million loan was granted to the Beacon from the city's Economic Development Fund when the cinema was built 10 years ago. Under the city's proposal, that loan would be restructured as a 10-year secured forgivable loan with 10 percent forgiven annually as long as the cinema center remains open in the building.
Amending that loan in this manner would align its debt structure with the same system the city customarily uses for investments from the Economic Development Fund, said Community Development Director Deanna Ruffer.
Both IMC and the Beacon's current owner, North Street Cinema, originally asked the city to forgive the entire $2.55 million debt, but agreed to modify their request following a counter offer by the mayor's office.
In a telephone interview, IMC's owner, Cory Jacobson, said the debt restructuring needs to occur in order for the deal to take place.
"In essence, there's not a lot of choice in it," Jacobson said. "The other option is the bank is prepared to foreclose on the business."
Founded in 2000, IMC owns three first-run motion picture theaters in southeast Michigan and a fourth in Dubuque, Iowa.
IMC became familiar with the Beacon two years ago when it was retained by Berkshire Bank to conduct an independent analysis of the cinema center's operations. Berkshire Bank, which represents the consortium of five local financial institutions that provided $4.6 million of the cinema center's $23 million total price tag, approached IMC again in August to gauge to firm's interest in either buying the historic Kinnell-Kresge building that the Beacon is located in or managing the cinema center, Jacobson said.
"Everyone's looking for solutions to manage a movie theater in downtown Pittsfield," Jacobson said. "We liked what we saw when we saw it in August. We were surprised where it was at this stage of the game. We were working on an arrangement to potentially lease the theater, and when that didn't work they approached us to see if we had an interest in buying the building.
"We didn't want to carry that much debt in the company," said Jacobson, referring to the $2.55 million in existing debt. "It's in everybody's interest to have this matter settled instead of foreclosing on the building."
The Beacon's current owner, Richard Stanley, who developed the complex 10 years ago, did not return a telephone call seeking comment.
"I can't speak for his reasons" for selling the Beacon, Ruffer said. "But I know he has begun a discussion with us about the debt restructuring before there was a purchaser, to our knowledge. I think discussing the restructuring with the city was the next activity in the evolution of this project."
Two years ago, Regal Cinemas in the Berkshire Mall in Lanesborough upgraded their seats, which impacted the Beacon's attendance and added to its financial challenges. Following the independent analysis of the theater's operations conducted by IMC, the Beacon upgraded its seating last year when it installed state-of-the-art electronic reclining seats, which boosted attendance by 40 percent from the prior year, according to the city.
But Stanley has continued to struggle to meet the project's financial debt obligations. The commercial lenders and owner have been exploring options to reduce or restructure the debt for the past two years.