Debt was a plot twist Senator hoped to avoid Theater threatened with foreclosure

February 01, 1993|By Eric Siegel | Eric Siegel,Staff Writer

How is it that the construction of an office supply store came to ensnare a historic movie house in the first step of foreclosure proceedings?

It's a question cinema-goers have been asking since they learned that a local construction company has threatened to foreclose on the Senator Theatre at 5904 York Road. The theater's owners owe the construction company more than a half-million dollars for building a Staples superstore across the street.

It's a question that resonates deeply among architecture- and movie-lovers. Not only is the 53-year-old theater the city's last remaining art deco movie house and a landmark on the National Register of Historic Places, it has been the site of the premiere of all the filmed-in-Baltimore movies. It also has been the scene of several charity benefits and the choice in every newspaper and magazine poll as the city's best place to watch a movie.

The answer is not simple. The Staples store was a key part of a complex -- and at times controversial -- deal that allowed the partnership that owns the Senator to purchase the theater five years ago, according to the Senator's owners and others familiar with the project.

The first pieces of the puzzle were put together in 1988. That's when Thomas A. Kiefaber and partner J. Hollis Albert III agreed to purchase the Senator and a three-acre parcel across York Road for $2 million. Mr. Kiefaber is a member of the Durkee family, which owned the Senator in 1988.

To generate enough money to make the deal work, and ultimately to improve and expand the Senator, the owners had to develop the lot into income-producing property. At the same time, it had to maintain the parking spaces for patrons of the theater and employees of a nearby Chesapeake and Potomac Telephone Co. office, which rented the lot for its employees during the weekdays.

In 1991, the Senator's owners contracted with Lawrence Construction Co. to build a large store for Staples, a Massachusetts-based office supply chain.

Once Staples opened in late 1991, the Senator's owners planned to use a portion of the rent paid by the store to seek additional financing. They planned to use the new loan to pay off Lawrence, and they put up the theater as a guarantee for the $562,000 they owed, promising to pay the debt by Aug. 1, 1992.

When the payments had not been received by late December, Lawrence filed court papers to foreclose on the theater.

"The cash flow from our two tenants -- C&P Telephone and Staples -- is sufficient to support the debt we incurred in building the office supply building. What we are now on the verge of

achieving is converting our cash flow into long-term debt and paying off our current obligations," Mr. Kiefaber recently explained.

Mr. Kiefaber blames the partnership's inexperience for the failure to meet the payments by the Aug. 1 deadline.

"Neither of us had any experience in real estate development. As a result, in this economy, we were unable to accomplish all we wanted to in the tight time schedule we had agreed to," he said.

While the partnership scurries to line up additional financing, it says it has finally found a developer willing to build the first of four homes on vacant land it owns at the back of the Staples parking lot and is negotiating with an operator to run a diner across from the theater.

The diner and the homes are part of a complex Planned Unit Development that was two years in the making and generated a great deal of community controversy.

A Planned Unit Development, or PUD, is a contract between the city and large property owners about the way in which a piece of property will be developed that attempts to accommodate the concerns of the neighborhood and the developer. Over 100 PUDs have been approved throughout Baltimore during the last 20 years.

In the case of the property across from the Senator, Mr. Kiefaber and Mr. Albert were allowed to extend their parking lot in exchange for agreements on landscaping, lighting and other improvements the neighborhood wanted.

"The PUD was a very painful process because the neighborhood got more commercial instead of more residential," said Fern Applegate, president of the Belvedere Improvement Association.

But Alfred W. Barry, assistant director of the city planning department, says the process was also difficult for the city and the developer.

"On the one hand, residents were saying they wanted as much parking as possible so people going to the theater wouldn't park on their streets. Yet they weren't sure they wanted the lot expanded, either. It was frustrating," he said.

Some of those involved in the planning process were not thrilled that Staples would be a tenant. Third District Councilman Wilbur E. "Bill" Cunningham, for example, felt a franchise restaurant would have been more compatible. Others expressed concerns about the apparent fragility of the financial package.

"We were worried early on that they would get into trouble and wouldn't be able to carry out the PUD in its entirety," said Nancy G. Lidard, co-chair of a community planning committee.

But she said there is no glee in seeing the fears come true.

"We don't want to see an I-told-you-so situation. We want them to get out of their financial trouble and complete the PUD," she said.

Mr. Kiefaber said he expected the new financing to be in place and the debt to be erased "in the near future."

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