Curtain call: Aspen’s Isis Theater needs saving, again
Plot thickens for local movie theater that is facing increasing debt and no operator come this fall
The future of Aspen’s only movie theater is playing out behind the scenes as Aspen Film has taken on a new role of finding a tenant who is able to successfully operate even though unprecedented challenges in the film industry continue to force many small and mid-sized theaters into bankruptcy.
When Los-Angeles Metropolitan Theatres — the longtime tenant of the Isis Theater and to Aspen Film, which is the subleasee to the city-owned building — ends its run here in August there is no operator lined up to show movies in the four-screen cinema.
Metropolitan plans to show films from the end of May through August, and then walk away from the Isis after 14 years.
Their departure is due to unaffordable lease terms that were determined in a 2007 deal among the city, Aspen Film and an out-of-state for-profit retail group, who all partnered to buy the building in order to save the movie theater from becoming another use.
The model was in place for more than 12 years despite thinning margins, according to Aspen Film Executive Director Susan Wrubel. However, it’s no longer a viable, long-term solution because over the past decade the film exhibition business has drastically morphed, and the economics and structure that allowed a for-profit operator to run a sustainable theatrical business have changed, she said late last week.
The Isis financial numbers are problematic as they were predetermined in the 2007 agreement when the Isis Theater was condominiumized, Wrubel noted.
The rent was calculated as the mechanism to pay off the debt on the building, as well as the common area maintenance (CAM) charges to the homeowners association.
Metropolitan declined to renew its lease after June, but offered to pay one-third of the price of its prior rent.
Aspen Film and the city last summer created an imperfect Band-Aid fix that was meant to get the partnership through to January with Metropolitan paying a percentage of gross receipts back to the organization in an effort to keep the theater operating for the community, according to Wrubel.
But that temporary solution won’t cover the debt obligations that Aspen Film is responsible for paying to its landlord, the city of Aspen.
When Metropolitan returns in May, it will pay a percent of gross revenue, which is expected to be fairly low given COVID-19 restrictions and not a lot of film product available as more viewers are watching movies on online platforms like Netflix.
Additionally, Disney+, Apple+, WarnerMedia and others have been waiting to launch online, adding more competition to traditional movie going.
“(Metropolitan has) been a great tenant and we’ve had a wonderful partnership so they’re putting their best foot forward and at least we can offer programming to the community over the summer,” Wrubel said. “(But) we are going to be responsible for 82 percent of the rent.”
That’s not only problematic because that’s a big nut to cover for a local nonprofit that has an annual budget of $650,000, but also Aspen Film owes $277,000 in back rent to the city, among other costs like CAM charges and taxes.
The pandemic shuttered the theater 10 months out of the past 12, so with no revenue coming in Aspen Film is in a precarious position.
“It’s a conundrum,” said Aspen Film board chair Ryan Brooks. “This situation deserves and needs a long-term solution.”
The municipal government has not pressured Aspen Film into paying the back rent thus far, and has refinanced the debt on the building which has offered $100,000 in savings for this year and in 2022 on an outstanding $2.1 million balance, according to Wrubel.
The city also floated $80,000 to Aspen Film last summer to cover debt on the space up to September. That payment to the city is deferred for two years.
Aspen City Council has met in executive session regarding the Isis, but Aspen Film has not been part of those closed-door discussions.
City Finance Director Pete Strecker said there’s been no direction from elected officials yet on how to proceed, if at all.
“Council is concerned about the film industry and is trying to be supportive,” Strecker said. “I think the city feels obligated that the community is getting what it needs from this asset.”
Wrubel said the first and preferred option is to find a new operator to show films on all four screens at the Isis.
How likely that is is a big question given the economics.
Metropolitan Theatres had a triple net lease on the building, which meant that not only were they paying $220,000 in rent per year, but another $97,400 annually in CAM charges, plus $1,800 annually for the HOA’s capital reserve, totaling $319,200 a year or $26,600 per month, according to Wrubel.
In 2017, annual revenue at the theater was averaging $1.1 million, so margins were thin and the theater operated at a deficit in 2018 and 2019 before the pandemic, she said.
By early 2019, Aspen Film representatives were aware Metropolitan wanted to change its lease terms so they started conversations with other theater operators locally and out of state, but none were interested, according to Wrubel.
“We gave ourselves over a year runway to try to get in front of this and started talking to exhibitors and that’s when we learned that the business had really shifted as a whole and the margins weren’t what they used to be,” she said, “so the model that was put into place that was supposed to sustain this relationship didn’t work anymore.”
Metropolitan was paying 29% gross of occupancy cost, far above the national average of 20% that most theater operators were paying.
As examples, Wrubel said Regal was at 15% and Cinemark was at 12% in 2018, and both are currently suffering from financial challenges.
Short of finding a new theater operator, Aspen Film would look to partner with other arts and culture nonprofits to turn the Isis into a community hub.
Aspen Film also would like to amend the partnership deal inked with the city in 2007 to something that works financially in a new movie industry landscape where people are preferring to watch movies at home rather than in the theater.
“We’re going to continue to explore all options, but we’re hopeful that an alternative solution might present itself in the time being,” Brooks said.
Wrubel said it is Aspen Film’s goal to find a long-term solution, or plan, by the end of May.
“We’re hoping to come up with a solution sooner rather than later,” she said.
Meanwhile, Aspen Film has identified a number of operational and programming inefficiencies at the Isis.
“Aspen Film not only understands our community better but could create a new and more exciting future for the Isis,” Wrubel said. “Rather than half-empty theaters, we envision expertly programmed theaters that provide bespoke experiences for Aspen, keep steady local jobs in our community, and offer a long-term future for the Isis. We see potential in not only working to improve the movie-going experience, but also in working to create a community-centric hub at the Isis that could serve as space for a number of nonprofits, art organizations, educational programs and more.”
As a film society that puts on three festivals a year, Aspen Film representatives want the Isis to remain a community asset, which is why they turned down an offer from developer Mark Hunt to buy it in 2019.
“The theater was not for sale, and we have no interest in selling the theater,” Wrubel said. “In a town where the needs of short-term visitors can sometimes come ahead of long-term residents, the Isis Theater stands out as a critical community hub and anchor for keeping Aspen invested in the local community.
“Neither Aspen Film nor anyone in the community wants to see the Isis disappear as a theatrical venue from Aspen’s landscape.”
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