San Marcos Mercury | Local News from San Marcos and Hays County, Texas

February 16th, 2010
Updated: City to consider $2.5M, interest free theater loan

021610cityhallSan Marcos City Hall, where Tuesday could be a late night. File photo.

STAFF REPORT

The San Marcos City Council will consider granting a $2.5 million loan, free of interest, to Triple Tap Ventures, which would build an Alamo Drafthouse Cinema in the vacant Best Buy building at Springtown Mall. The council will take up the matter during Tuesday night’s deliberations.

Documentation with the city council’s agenda says the loan would be repaid from the increase in sales and property tax revenues generated by the improvements to the property. The term of the loan would be 10 years, though the city estimates it would be paid back in nine years. The developers would pay any unpaid balance on or before the tenth anniversary of opening the theater.

Triple Tap would build a six-screen Alamo Drafthouse seating 600-700 people. The city estimates that the theater would generate revenues between $5 million and $5.9 million per year while employing 70-80 people (plus an additional 30 during the summers). The city also estimates that, over a ten-year period, the property would generate $2.8 million in sales taxes beyond its present performance.

The proposal was made public Tuesday morning, when city employees returned to work after the President’s Day holiday weekend. The item was originally posted as an addendum to the agenda at 4 p.m. last Thursday, a day after the agenda was originally posted.

San Marcos City Clerk Sherry Mashburn said the agenda had never included an addendum with back-up information before, so the staff faced technical difficulties making the back-up information accessible through the Internet.

The owners of Springtown Mall, who stand to benefit from the possible incentive deal, owe nearly $10 million on the two Springtown parcels that are listed for foreclosure — and Hays County has appraised those parcels at a total value of barely less than $8 million.

Between the two Springtown Mall parcels, according to calculations by Real Estate Foreclosures, Inc., Lamy-Springtown Mall, Ltd., has negative equity of more than $2 million.

The Alamo Drafthouse, through Triple Tap, would provide Lamy-Springtown Mall with a key tenant for a shopping center that appears to be drowning in red ink.

On one of the Springtown parcels in foreclosure, Lamy-Springtown Mall owes $4 million against a $6.1 million loan from Thrivent Financial for Lutherans dated Nov. 2, 2005. But the Hays County Central Appraisal District (CAD) last assessed the property for $297,560, as the mall is nearly empty since the anchor tenants moved to StoneCreek Crossing. Lamy-Springtown’s negative equity on that piece is estimated at $3.976 million.

Lamy-Springtown is much better off on the other piece of property, for which it took out a mortgage of $7.65 million from Thrivent on Sept. 26, 2006. Lamy-Springtown still owes $5.665 million, but it has an estimated equity of $1.723 million. The county last assessed the property for $7.698 million.

The latest movement re-opens the city’s tortured affair with Springtown Mall, which has languished in the city’s gateway since the city council granted $6 million of incentives for StoneCreek Crossing on the south end of town to move Target, JC Penny and Bealls from the Springtown location. The council approved the last of those incentives in December 2008.

Last July, two attempts by the city to make re-development deals with Lamy-Springtown foundered amidst robust public disapproval. After the city council turned back a $5 million interest-free loan to support Lamy-Springtown’s plan for an entertainment facility anchored by Alamo Drafthouse, Lamy-Springfield pulled a request for a $3.9 million loan to be defrayed by 50 percent of the resulting sales tax increment. Among other reasons for objecting to the incentives, critics said bar and restaurant businesses don’t pay the breadwinner wages that make incentives worthwhile.

Triple Tap Ventures is owned by Norman Abdallah, co-founder of the Carino’s Italian Grill chain, and Austin entrepreneur Neil Billingsley-Michaelson. The company purchased franchising rights for the Alamo Drafthouse in six Texas markets, including San Marcos, Houston and Corpus Christi.

Shortly after making the deal last October, Abdallah told the Austin American-Statesman that he plans to run the venture largely from his Seattle home, while Billingsley-Michaelson would run the day-to-day operations from Austin.

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20 thoughts on “Updated: City to consider $2.5M, interest free theater loan

  1. This points out the inequity of the property tax system. From Hays CAD web site it appears the Target building had been valued at $4.6 million on the tax rolls and then last year was dropped to $1.17 million. From $42/sq ft to $10.50/sq ft. How can I get such a deal on my house? Did the value really drop because the building was empty? I wonder if Lamy/Abdulllah would take $8 million for the whole mess. I doubt it. They’re already getting a tax break and don’t need another. As a note to authors, your article appears to be using 2008 values. A Lamy-Springtown tract valued at $297,560 in 2008 was reduced to 198,370 in 2009. I say let ’em go to foreclosure and in the meantime get the tax values back up where they’re supposed to be. We’ll see how long Thrivent wants to hold on to that hot potato.

  2. One method of appraising property is income production, but I believe CAD usually uses that for agricultural land, not commercial. Certaily if the property were being sold it would be valued at its income potential.

  3. I think this is a win-win. Reasonable price and great payoff. Look at Triple Tap’s record, they know what they are doing.
    5 to 6 mil. seems like a low revenue to me. When you consider ticket prices and the rise of movie attendance. Especially when you look at the numbers for “Avatar” and “The Dark Knight.” You get more movies like those two and a good year will turn out 8 mil. This theater will be more popular than anyone thinks.

  4. Hello Guys,

    One of the issues that will come to the front on how/why people/businesses move here/stay here is the issue of how much monies it will cost them for taxes(property).
    This figure (if it is the same for every business) will be factored in on the total cost that the business owner will deal with.
    This figure hopefully will remain level. The business owner can figure then if he can make a profit and if he is capitalized properly to make it for the long term.
    If temporarily given a discount or some sort of incentive the long term picture can not be accurately figured. The business with a temporary incentive may not be able to acelerate its revenue to the level to support the time when the incentives will be gone. This could cause the failure or reason for it to move to another city to get a free lunch .

    The Moral of this story is:

    Only those well capitalized and with business plans that do not include public assistance to be successful should participate in our beautiful city!!

    Do not use our tax revenue for you to do business with the private sector. It is not your personal check book.

    If this guy with Springtown was not prepared for ownership, the private sector will work its way. Another investor probably with a real plan(not one that changes with every knee-jerk) will get a great buy on the property and will be successful and be able to help our community by paying taxes like the rest of us.

    Respectfully,
    Lee Porterfield

  5. Personally, I don’t like going to regular theaters. When I do go to movies, I generally drive to Austin to go to the Alamo. It would be nice to have one here. My girlfriend feels pretty much the same way… There’s two more moviegoers…

    I do have to say that I don’t know where they are getting the estimate of additional employees during the summer. Until last year, town pretty much emptied out during the summer. Banking on the continuing trend of high summer enrollment?

  6. Which one, because the chain that wants to move here is not the same as the original Alamo (pretty sure).

    The original Alamo (originalalamo dot com) shows some less mainstream films than the other ones (drafthouse dot com). The latter shows exactly the same things we have at our theaters now.

  7. I did the posting below late last night so I am reposting it for todays readers. The situation has gotten lots worse since last night. We now know the City is going to loan Triple Tap, Resturants Unlimited, Sun Capital 2.5 million dollars which is not a loan. The 2.5 million will be paid back with sales tax receipts that will be collected at the movies. Why does the City of San Marcos need to give 2.5 million to a multi-billion dollar hedge fund like Sun Capital. If they want to do this in San Marcos, they have more money than probably all of us combined. Smell, stink, stink.

    I am really getting tired of government by ambush from the City of San Marcos. Forget that this is about a specific business. Just look at the basics of this deal. Why the secrecy from the City and the Mayor. What does the Mayor know and when did she know it? The citizens of San Marcos are not allowed any prior knowledge of the deal. Why? Because it can’t pass the smell test. If this deal was going to be good for us, the Mayor would be shouting the details. Instead we get an item placed on the agenda a day later than normal which just happens to coincide with a City three day holiday. Have any of our Council been advised of the details of this deal? My guess is that only select few of the Council know what is up with this transaction. Those will be the Council members that Susan! can depend on to vote her way regardless of the merits of the incentive package. Do any of you think that Chris Jones or John Thomaides have received any information about this agenda item.

    Why would the very first discussion, and possibly last discussion if the Mayor gets her way, be in executive session. It sure can’t be done is secret so the City can drive a harder bargain. If the City was interested in doing this deal at the least cost to the taxpayers, we would let Springtown go to foreclosure. Instead, as the last time this came up, the Mayor seems hell bent on rescuing Lamy from it’s own folly. Why? The Mayor has become obsessed with this project. What is going on here.

    If this were a deal to put a bar and restaurant into Springtown, would you look at it any different. Of course you would. Some of you are willing to accept this deal simply because you think an Alamo Draft House would be cool. Don’t be blinded to the reality. Who is Triple Tap Ventures? Why would they purchase the franchise rights to an Alamo Draft House in San Marcos, issue a press release that they are putting a Draft House in San Marcos and then claim they will not do the deal unless they get concessions from the City.

    Take a look at who the City is dealing with in the form of Triple Tap Ventures. Unfortunately, I can not put links in the post but you can quickly verify my information on Google. The CEO of Triple Tap is Norman Abdallah. Mr. Abdallah is also the CEO of Restaurants Unlimited. This is a brief profile of the company.

    “Restaurants Unlimited, Inc. operates a chain of restaurants in the United States. It operates restaurants in Anchorage, Alaska; Phoenix, Arizona; Berkeley, Burlingame, Los Angeles, Oakland, Redondo Beach, San Francisco, and San Leandro, California; Denver, Colorado; Honolulu, Hawaii; Carmel and Indianapolis, Indiana; Bloomington, Minneapolis, and St. Paul, Minnesota; Cincinnati… ”

    Apparently Triple Tap is a subsidiary of Restaurants Unlimited. Restaurants Unlimited is a subsidiary of a hedge fund called Sun Capital Partners. Below is the description of Sun Capital from Wikipedia.
    “Sun Capital Partners, Inc. is a private investment firm focused on leveraged buyouts, equity, debt, and other investments in market-leading companies. Sun Capital affiliates have invested in and managed more than 145 companies worldwide with combined sales in excess of $35.0 billion since Sun Capital’s inception in 1995. Sun Capital has offices in Boca Raton, Florida, Los Angeles, California, New York, New York, London, and Shenzhen.

    The firm’s portfolio includes many regionally and nationally recognized companies, such as Bruegger’s, Boston Market, Exopack, Marsh Supermarkets, Fazoli’s Restaurants, Wickes Furniture, Nationwide Furniture, Mervyn’s department stores, Anchor Blue Clothing Company, The Limited clothing stores, ShopKo, Pamida discount store chains, Smokey Bones and Hickory Farms.

    In 2006, Sun Capital announced the purchase of Marsh Supermarkets of Indianapolis, IN, the owner/operator of 128 supermarkets/food stores, and 154 Village Pantry convenience stores, among other divisions. In 2007, Sun Capital acquired majority interest in the plumbing fixture company American Standard Americas. In 2008, Sun Capital acquired majority interest in Gordmans, a department store headquartered in Omaha, Nebraska. Sun Capital funds own a minority share of the following: BlueLinx Holdings, Chrysler, Dale and Thomas Popcorn ,Easy Gardener Products, GMAC Financial Services”

    This poor little company just can’t possibly open an Alamo Draft House in San Marcos, Texas with out help from the taxpayers. BS. This whole deal is just another fat cat Wall Street hedge fund trying to squeeze the last dollar out of us poor rubes in San Marcos.

    Demand some transparency from out Mayor and City Council. Don’t let this happen. If it does, as voters, we must punish every elected official who hides and approves this deal. We must start to expect that our City Council follow the Open Meeting laws of Texas. This secrecy must stop.

    Charles Sims

  8. Mostly the South Lamar location, which plays a number of first run movies. The least mainstream Alamo is the League owned one at the Ritz. The other two League owned locations (South Lamar and Village) both play mostly first runs, although they do more of the offbeat stuff than the franchise theaters. I just like being able to get beer and something more substantial to eat than popcorn and candy when I watch a movie. Yeah, that’s what it takes to get me into a theater.

  9. So what would all the naysayers be o.k. with the city giving to get Springtown filled again and have it not sit empty? Waiting for someone to do it on their own is not a solution and will result in Springtown sitting empty for years.

    It seems like there are two political camps in this town: One making bad and shortsighted deals that move businesses to the outskirts of town (I’m plenty mad a them…), and the other that thinks that any sort of incentive to bring businesses back into the center of town and improve the quality of life for everyone is still some sort of back room conspiracy (You know who you are and you’re no better…) Again, it was dumb of the council to encourage businesses to move out of Springtown, and even worse to not have a plan for redeveloping it before anyone moved. but that is the situation we have. If you really hate the current council that much, you think you have the answers and can do better, run yourself. Start coming up with solutions, because we need them. Griping on a blog doesn’t fix anything. Figure out how to attract something other than strip-malls on the outskirts of town that result in a better quality of life for those that live here. I’m all ears, but expecting crickets.

    Anyone want to take a bet as to how long Springtown sits empty without incentives? I’d put my money on at least 5 years. Maybe 10.

  10. Just about anything that pays a living wage, although it would be nice to see us actively seeking out businesses which are in line with some sort of economic development plan, rather than settling for whatever shows up on our doorstep.

    Incidentally, there are lots of other empty buildings in town. My quality of life hasn’t suffered because of them.

  11. $2.5 million could fund one helluva search, with plenty of incentives left over.

    Perhaps a business incubator, to support our stated goal of being the small business capital of Texas (which appears to be Austin, at the moment).

  12. Ted, but you’re mostly reasonable and appear to be able to look at things in the long view 🙂 I want to hear from the folks that think any expenditure of money is a back room deal by the council.

  13. I think the city should focus on how to safely move traffic through that Hopkins/Thorpe lane intersection before trying to bring more cars back to Springtown. The left hand turn lane from Hopkins onto Thorpe is a mess w/some people trying to get into the HEB parking lot , others trying to turn onto Thorpe, and those rubber poles (whatever you call them) in the middle of the turn lane…

  14. What a joke, this is just a large corporation trying to manipulate everyone into thinking we NEED to give them money! We already have a movie theater run by a small local company, there is no reason why taxes should go up just so these greedy people can invade our town and buy bigger vacation homes!

  15. Jesse B.

    It isn’t about back-room deals in my mind. I think every member of Council has the community’s interests in mind. I think it is about an approach to government. An active Council gets in the way of prosperity more than it creates it.

    Empty buildings are best filled by economic activity; economic activity is not driven by Council but occurs organically in the local business community. Retail is not a driver of activity; it is a byproduct. Nobody moves to a community because they have a new movie theater, but as people move and incomes rise, movie theaters come in without corporate welfare. I doubt the City of San Antonio paid millions of dollars to convince Alamo Drafthouse to open their newest theater adjacent to North Star Mall; instead, the area grew, people came in, and the theatre followed. San Marcos could take the short route and bring in more retail by spending tax dollars, but I feel subsidised retail is a poor and lazy substitute for building a sustainable economic environment. I cannot accept tax dollars being thrown at the former but am open to targeted use of tax dollars or infrastructure to aim for the latter.

  16. Jesse B.Try these on for size. A low interest loan, not a gift, but a real loan, below market rate, there’s an incentive I could live with. Banks will complain, but …. Streamline the permiting process. Some zoning allowances.Favorable placement of traffic controls. There a lot of good incentives short of giving away millions of taxpayer dollars.

    Do remember that Springtown may have a new owner in less than two weeks, so any quick deal is in danger of faling thru no matter what.

    As for how long it stays empty, that’s up to the owner. Several of the smaller tenants told me around the time Penny’s moved that their leases were not being renewed. Bad business planning on Lamy’s part does not mean the taxpayers need to bail them out. And personally, I don’t believe it’s the City’s job to plan the redevelopment of privately owned property.

    As for a conspiracy, sorry, I don’t have any tin foil hats, and the only black helicopters I see are all of them at night. But I would suggest that everyone follow the money trail.

  17. Jesse, I posted some fresh ideas in the “San Marcos council tables Alamo theater incentive” article comments section. I’d be interested to see what you and others here in the online community think about some different approaches. I certainly believe it is healthy for us to be able to talk about these things.

  18. ” And personally, I don’t believe it’s the City’s job to plan the redevelopment of privately owned property” Amen, Amen, Amen!!

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