ARLINGTON, VA.: Consider it a gift from the real estate gods. The Arlington County Board voted on Wednesday, Dec. 17 to grant a $5 million loan to Signature Theatre, plus 19 years of free rent.
The loan untangles what Signature managing director Maggie Boland calls a “messy real estate situation.” When the theatre moved into its new space in 2007, growing from a 12,000-square-foot facility to a 47,000-square-foot facility on 4200 Campbell Ave. (on top of a public library), it borrowed $10 million from United Bank to finish the construction of the building.
The rent on the space was a pegged to a percentage of Signature’s box office revenue (in fiscal year 2015, it would have been 10 percent, though that number was scheduled to escalate). That—plus loan repayment, real estate taxes, business taxes and facility costs—meant that Signature had $1.7 million to pay annually in bills.
“It became very clear after a couple of seasons in the building that the total cost for Signature to be in this facility was totally out of proportion to our operating budget and our ability to generate revenue,” says Boland.
Under the new loan from the county, Signature will be on a 19-year payment plan with an interest of one percent, reducing their yearly debt payments to $200,000, plus taxes. Signature’s annual budget is currently at $8.5 million.
“This is completely transformative for Signature financially, not to attempt to cover a million dollars worth of debt service every year,” exclaims Boland. “We are not an organization with an endowment; we are under-capitalized in terms of reserves and all of that stuff. Just to devote more of our own resources to our mission and not to servicing debt is a phenomenal opportunity for us.”
In addition to the lower debt payments, the county will forgive $411,000 in unpaid lease and utility payments, and United Bank will forgive $2.7 million. The $5 million loan will allow Signature to pay off the original bank loan. This will make the county the owner of the building, which they will allow Signature to occupy rent-free for 19 years.
The story of Signature Theatre’s rent woes is familiar to many small theatres who suddenly grow into new buildings—a large step up that, while it comes with more more space, also comes with higher bills.
“The folks who worked in the theatre’s previous space were doing their best to envision the future, but they had a lens of doing that from a much smaller venue,” says Boland, who joined Signature in 2008. “I think that…lack of ability to envision the new operations is something a lot of organizations that grow very quickly experience.”
Boland also adds that artistically, under this new loan agreement, Signature will no longer need to be so wary of financially risky shows. “Now that we’re on this track, we can stay the course and make great plans for the future, where we had to be more tentative before.”
The rescue of Signature’s new space happens to come at the same time as another’s demise. At the same meeting, the board also voted to close the 62,000-square-foot Artisphere cultural center on June 30, 2015.