Theaters Could Become Acquisition Targets During Pandemic

As theaters remain dark, there might be a game of musical chairs behind the scenes.

According to Broadway investment banker Lisbeth R. Barron, who brokered the deals for British firm Ambassador Theatre Group to take over six theaters in the United States, the overwhelming losses that the COVID-19 pandemic has caused might lead to some theaters changing hands. “Some of the smaller independent venues, particularly those in smaller markets, that may not be well capitalized may be more likely to be sold,” she commented, adding that “the right buyers are just as eager to buy regional theaters, whether they are in the United States, Europe, or parts of Asia.”

“Venues, without a doubt, will hold their value,” Barron said. “Regardless of any economic or geopolitical circumstances, they will always be iconic, they will always have scarcity value, and they are always going to be in demand,” she continued.

Two years ago, a Ukrainian billionaire paid about £45 million ($59.3 million) to take over the Theatre Royal Haymarket in London’s West End. It was believed to have been the biggest deal for a British theater, overshadowing the £26 million ($41.1 million) sale of the Victoria Palace theater to producer Cameron Mackintosh four years earlier. “Anything that is a West End or a Broadway theater will always be in high demand, and will always be able to command premium values,” commented Barron.

However, the thought of buying a theater during the pandemic might not seem appealing to most people.

Even after a vaccination becomes available, it is uncertain when families will feel comfortable returning to theaters, while their owners must still pay all of the property taxes, utilities bills, and maintenance expenses during the long shutdown. “Our backs are against the wall,” admitted the leader of a small regional theater, praying that politicians will support a new bill designed to provide various venues with federal aid.

“We also can’t stay in business much longer closed with no revenue whatsoever,” lamented Bonnie Schock, the executive director of the Fox Tucson Theater in Arizona. “Relief is needed, [and] it’s needed quickly,” she said.

Yet, Barron believes that there are some folks who can look on the bright side of life.

Working alongside a team of 10 bankers at Barron International Group LLC, she stated that her firm can “ferret out players who are impervious to whatever environment we are in, who can appreciate the long term value of assets, and who are willing to look past the lack of revenues in 2020 and probably at least the first half of 2021, and really focus on the next five years or 10 years.” “There are a fair amount of pension funds, some long-dated private equity funds, some family offices, and some strategic players who really are willing to think that way, and have patient capital to see that there is an opportunity to create a global leader,” she said.

Some current theater owners might also want to expand their portfolios.

Although Barron declined to discuss which specific companies might be looking to make a move, the private equity-funded Ambassador Theatre Group has seized control of several historic theaters over the past few years, and it recently received £160 million ($203.9 million) in funding to help support its operations during the pandemic. Also, Trafalgar Entertainment, which Barron helped line up with financial backing from the investment management firm Barings, made a deal in May to take over the Theatre Royal in Australia when the 1,100-seat venue reopens next year. British producers Cameron Mackintosh and Michael Cassel had previously been eyeing up the property.

The Nederlander Organization, which operates 30 venues across the United States, might also decide to go shopping. Barron brought Nederlander and Jam Theatricals together last November to create a new company to oversee season ticket subscriptions at 26 theaters and manage the National Theatre in Washington, D.C.

In addition, industry insiders suspect that Broadway Across America might want to add some more theaters to its collection. Lauren Reid, the chief operating officer of its parent company, confirmed before the pandemic that the organization would be open to acquiring theaters outside of New York and in the West End, and it now controls the booking rights to more than 45 theaters across the United States.

The Australian ticketing company TEG, which a private equity firm bought last year, might also be interested. Due to the pandemic, “there will be a lot of casualties,” stated its chief executive officer, Geoff Jones. “Without sounding like a vulture, that presents opportunities,” he said.

“If the right buyers are to step up now and allow the owners to take some cash off the table, but also to build for the future, then that is really the best scenario,” commented Barron.