Sundance Cinemas negotiated a lease earlier this year for the space formerly occupied by the Angelika Film Center in Bayou Place. The city, through the Downtown Redevelopment Authority, agreed to reimburse up to $750,000 of the $2.3 million renovation now under way.
Sundance is to repay the authority, which reinvests some taxes collected from downtown property owners into the area, through “percentage rent” payments based on the theater’s annual sales. But a similar agreement to redevelop an old firehouse into the Downtown Aquarium restaurant and entertainment complex hasn’t yielded any such payments.
Under an agreement between the city and Baltimore-based Cordish Co. — which leases Bayou Place from the city and is Sundance’s landlord — Sundance will pay the city 10 percent of annual revenue over $3.5 million. The percentage increases if annual revenue exceeds $5 million.
Like the arrangement with Landry’s, an earlier percentage rent deal with Cordish has failed to produce revenue for the city.
In developing Bayou Place, formerly a convention center, the city required Cordish to pay $50,000 in rent plus 25 percent of gross revenue — but only after Cordish covers its expenses.
In the 14 years it has operated Bayou Place, Cordish never has paid the 25 percent because of its investments in building out the Hard Rock Cafe and other improvements offset revenue.
Steven Craig, an economics professor at the University of Houston, said the deals make sense if they draw businesses or consumers from out of town but not if they simply displace business from one part of town to another.
“If we didn’t build the Aquarium or a movie theater downtown, would people still get entertained in Houston? Yes. You’re not really importing business,” he said. “You’re just relocating money from one part of town to another.”
Craig is essentially making the Andrew Zimbalist argument about public financing for sports stadia on a smaller scale. I see where he’s coming from and can’t really argue the point, but I can see why the city might be interested in ensuring that an entertainment development adjacent to the Theater District remains viable. Whether they did a better job negotiating a deal that might actually pay them something for their investment is another question.