IN-FIPS-TIGATION: Why The Pavilion Movie Theatre is a Dump

image via nycsoleICYMI, there were some lively discussions in the comments of our Pavilion theater post last week. 

The co-managers of that craptastical theater were offering their apologies for the broken seats and lack of heat, and trying to share the current state of affairs over there. Basically they claimed that: their hands are tied unless their budget requests for making repairs/upgrades are approved by their "holding company."

A few of you btchz got curious about this "holding company" sitch, and that's where the research began. FIPS reader Brad, in fact,  is a regular Sherlock Holmes apparently, and so he managed to bang out a pretty detail rich account of what *seems* to be going down. For the record, he attempted to get quotes from both the Pavilion managers and someone at the holding company, but no one called him back. Here's the scoop as best as Brad can piece it together:

Aside from the non-stop bedbug rumors at the Pavilion Theatre, have you ever wondered why the theater is in such disarray? Many of the seats are broken or missing, the heating and air conditioning are often on the fritz, and there seems to be no budget for the basic up-keeping of their bathrooms, concessions and staff. Recently, the managers of Pavilion Theatre issued a statement to Park Slope Parents apologizing for the poor state of their theater. They claim they are waiting for their parent company to approve a budget proposal, which got us thinking..is something else going on altogether?

But before we dive deeper, it's good to understand the theater's recent history. In 2005, ADM Cinema, a subsidiary of Cinedigm, purchased the business for $5.2 million. ADM Cinema planned to use the theater as a test site for Cinedigm's digital cinema technology while continuing to operate the theater as a fully functional multiplex. It was the only theater that Cinedigm owned, as its core business was focused on transitioning movie theaters over to digital technology. However, a lot has happened in the six years since ADM Cinema purchased its digital laboratory. Not only have box office results steadily declined, but the industry experienced a dramatic shift in the consumption of content. Combined with the impact of the recession, Cinedigm's stock valuation decreased roughly 90% from its peak in 2006.

There also appears to be some bad blood between ADM Cinema and the current landlord, Pavilion on the Park, LLC. In 2008, the landlord sued ADM Cinema in the Supreme Court of New York in an effort to terminate the lease which expires in 2022. The landlord claimed that ADM Cinema violated the terms of its lease for failing to comply with an order from the FDNY to install a sprinkler system. The two parties settled, but on the condition that any option to renew or extend the lease beyond 2022 would be eliminated.

Based on recent company filings, Cinedigm has been trying to sell the theater to streamline its core business. Their digital technology, having been widely adopted, no longer needs to be showcased. Since March of 2010, Cinedigm has listed the theater as a discontinued operation and in September had to lower the sales price due to a decline in operating performance. The company has also declared an impairment of goodwill of $1.7 million, which means the perceived value is less than the fair value of the theater itself.

Because of this, the theater has been in a state of limbo. The landlord is seeking to evict the tenants, whose interests were never aligned with running a theater, and the tenant can't sell the business because it's operating at a loss. It's no wonder that the theater has fallen into such disrepair. Possibly the only reason the theater is still running is to pay the underlying lease ADM Cinema is contractually obligated to pay for the building.

But don't expect improvements to the theater anytime soon. Cinedigm has no interest in our local theater as it no longer fits into their master plan. This, of course, is a shame as they owe something back to the community they stole a well-run local theater from.