Nelson Civic Theatre Feasibility Study Results and Business Plan

Transcription

1 Nelson Civic Theatre Feasibility Study Results and Business Plan Submitted by the Nelson Civic Theatre Society October 15, 2012 Nelson Civic Theatre Society Feasibility Study Results and Business Plan

2 Table of Contents Executive Summary...i! 1. Feasibility Study Results...1! 1.1 Demographic Study... 1! 1.2 Economic Benefits of our Theatre... 3! 1.3 Social Benefits of our Theatre... 3! 1.4 What the experts told us... 3! 1.5 Industry context... 4! 1.6 Stakeholders... 5! 1.7 Barriers To Entry... 7! 2. Business Plan...8! 2.1 Description of project... 8! 2.2 Financial Analyses... 9! 2.3 Comparative Pricing Model... 12! 2.4 Revenue Model... 12! 2.5 Funding Model... 12! 2.6 Social outcomes... 14! 3. Operations...15! 3.1 Legal structure... 15! 3.2 Concession... 15! 3.3 Sales and marketing plan... 16! 3.4 Staffing... 16! 4. Management and Oversight...18! 4.1 The Board of Directors... 18! 4.2 Committees of the Board specific to management... 18! 5. Building Renovations...19! 5.1 Leasehold Improvements... 19! 5.2 Building Program... 21! Option A... 21! Option B... 23! Appendix I: Board of Directors and Key Advisors...25! Appendix II: Financial Reports...26! Table 2: Balance Sheet Single-screen, Years ! Table 3: Cash Flow Statement Single-screen, Years ! Table 4: Stmt of Income & Expenses Single-screen, Years ! Table 5: Statement of Cash Flows (Projected)... 29! Table 6: Statement of Income & Expenses (Projected)... 30! Table 7: Capital Budget, Option A, Option B... 31! Table 8: Audio & Video Equipment Budget... 32! Table 9: Funding Mix... 33! Table 10: Civic Theatre Box Office Model (single-screen)... 34! Table 11: Box Office & Concession... 35! Table 12: Salaries & Wages... 36! Table 13: Actual financials... 37! Table 14: Pricing Comparative... 38! Nelson Civic Theatre Society Feasibility Study Results and Business Plan

3 Appendix III: Population Breakdown for Nelson & Region...39! Appendix IV: NCTS Membership Breakdown...39! Appendix V: Membership Breakdown, Distance from Theatre...40! Appendix VI: Membership Distribution Sample...41! Appendix VII: Survey Results, Yearly Cinema Visits...42! Appendix VIII: Member Comments...43! Appendix IX: Letters of Support...44! Nelson & District Youth Centre... 44! Watershed Productions... 45! Nelson Youth Theatre... 46! BR 51 BC Senior Citizens... 47! Astral Media... 48! The Capitol Theatre Restoration Society... 49! Association des Francophones des Kootenays Ouest... 50! Lions Club of Nelson... 51! Nelson & District Chamber of Commerce... 52! Appendix X: Abandoned single-screen theatre model...53! Appendix XI: Capital Cost Estimate for Theatre Conversion...54! Appendix XII: Approximate breakdown of City's capital costs...55! Appendix XIII: Conceptual Diagrams...56! Lobby View... 56! Auditorium Plan... 57! Upper Auditorium Plan... 58! Section Through Auditorium Plan... 59! Option A - New Construction... 60! Option B - New Construction... 61! Nelson Civic Theatre Society Feasibility Study Results and Business Plan

4 Executive Summary Preamble Nelson has been without a movie theatre since Moviegoers must now drive to Castlegar or Trail to see a big screen movie, where shopping and dinner out may be part of the experience, and with travel time of one to two hours and sometimes in the dark or inclement weather. The Nelson Civic Theatre Society began as a group of citizens with a shared vision: to restore the Civic Theatre to be able to present first run and second run Hollywood films, independent and art films, and related activities for the entertainment, education, and inspiration of Nelson and area citizens. In four months, since receiving the mandate from the City to undertake the work contained in this document, our group of dedicated volunteers has: Recruited a board of directors with a range of experience Organized a solid membership drive that has resulted in 1,268 paid members, raising a total in membership fees of over $27,000 Run a very successful film night and information session at the Capitol Theatre with 225 in attendance as part of our community engagement Consulted with industry experts, equipment suppliers, architects, contractors, film booking agents and for-profit and non-profit theatre owner/operators Consulted with the City of Nelson, Enterprising Non Profits, local groups, and potential funding agencies Engaged in cost and market analysis, and financial modeling to determine (a) whether a movie theatre in Nelson makes sense and (b) if it will be sustainable. Worked with a quantity surveyor and other professionals to establish cost breakdowns for a phased approach to leasehold improvements Our objective is firstly to be financially self-sustaining we intend to operate the movie theatre on the basis of sound business principles and secondly to be a social enterprise a business operated by a non-profit for the blended purpose of generating income and achieving social, cultural or environmental goals. Our discussions with industry experts, including other cinema operators, combined with our own financial analysis concluded that: When comparing single screen models with multi screens, the multi-screen model provides greater programming options, which in turn results in greater box office revenues and also greater concession sales for a defined market area; Programming flexibility is key to ensuring sustainability; Concession revenues can contribute as much to the bottom line as net box office receipts; and The Civic Centre is the best-suited location for a movie theatre. Nelson Civic Theatre Society Feasibility Study Results and Business Plan i

5 Feasibility With the advent of digital technology, relaxed distribution rules, reduced shipping and box office charges, and with a community-focused programming model in a renovated space, we believe that the new Nelson Civic Theatre will be a viable enterprise, and a considerably different model to what our community has experienced. Our study of market demographics ascertains a total resident market of 26,000+, as well as a considerable tourist market, and has assisted us in determining audience demographics. We determined that, using actual box office receipts from available western Canada cinemas, we could reasonably expect box office receipts in the range of $550,000 for a three-screen theatre, with revenues for a single screen coming in at approximately $155,000. The new Nelson Civic Theatre is positioned as a key aspect to Nelson s vibrant downtown. Its situation as a landmark building in the downtown core offers visibility and accessibility. It offers both economic benefits (direct and peripheral) and social benefits (through partnerships with organizations and business, employment policies, and benefits to other nonprofits). As a part of our process we consulted with stakeholders, including the City of Nelson, our members, the business community, various local institutions, and funding agencies. We consulted with industry experts with regard to operations, and building professionals with regard to leasehold improvements. A combination of operational and building considerations determined our prudent, phased approach to achieving three-screen flexibility and increased revenues. Business Plan As a community organization, we are uniquely placed to respond to community interests, unlike a chain cinema. By involving our membership in programming and by building partnerships with local organizations, we can develop a diverse program that speaks to the community and that will result in long-term financial success. A standard industry estimate shows that concession sales can amount to 50% of gross box office receipts, and yet Nelson has particular demands when it comes to use of local products, therefore we will seek a mix of traditional concession goods with some that are locally produced. Using conservative models for attendance and concession spending based on industry standards, we have conducted a full financial analysis comparing two phased theatre renovation options towards an identical goal of a three-screen theatre. As a non-profit, NCTS will return profits to the community through annually reviewed funding programs in consultation with stakeholders. Operations The Nelson Civic Theatre Society is an incorporated non-profit society operating as a social enterprise (profitability combined with social goals). Through careful and diverse programming and concession planning, a staffing policy that considers youth and people with barriers to employment (ideally working with Nelson and District Youth Centre), and the inclusion of volunteer opportunities as a support to staff and Board, we expect to satisfy both aspects of social enterprise. Nelson Civic Theatre Society Feasibility Study Results and Business Plan ii

6 Management and oversight Our board of nine directors includes people with business and financial backgrounds, experience in the cinema industry, and people who have worked in cultural development. The Board and committees of the board work to oversee and support staff. See Appendix I. Building renovations The theatre is in need of substantial work. There are building code deficiencies, inadequate HVAC, and the Civic Centre have had minimal maintenance work over the past decade. The building envelope appears to be sound, and we believe the costs to bring it up to code are worthwhile to preserve this landmark building. Working with architects, planners, and a quantity surveyor with expertise in theatres, we have established, to the best of our ability, the costs of necessary leasehold improvements with regard to building codes, standards, and public safety, and those specific to our purposes. We look forward to working with the City to deal with these problems in a manner that is mutually advantageous. We propose two renovation options, A, and B. Option A sees the lower auditorium reopened quickly with minimal upgrades, followed by the development of two upper balcony theatres as funding allows; Option B focuses on establishing two upper balcony theatres first, followed by a restoration of the lower auditorium as funding allows. Both options involve renovation of the lobby, concession, and washrooms. The final vision (a tri-plex) is identical in both options so the final choice will be made based on further investigation of the auditorium space, the success of our fundraising and grant application, feedback from our members and support of the City. Support may include the following: Rent relief in exchange for our funding of required leasehold improvements Support and/or partnership in grant applications Assistance from City staff in a timely manner to answer questions and provide insight, knowledge, or advice Assistance of City workers as in-kind donation from time to time A minimum 20-year lease to satisfy funders and demonstrate City support We anticipate raising funds for capital costs through a mix of community fundraising, funding agencies including Federal, Provincial, regional, and corporate, crowd-funding, and possibly the use of debt financing in the form of community bonds. Summary Given the current number of unknowns (city support, grant availability, the space itself) we are confident that a phased approach is prudent, and that either option will result in a sustainable, enjoyable cinema experience for our community. Nelson Civic Theatre Society Feasibility Study Results and Business Plan iii

7 1. Feasibility Study Results 1.1 Demographic Study We have segmented our market area into Prime, Occasional and Tourist markets. Table 1: Market Populations, below, shows the populations from the 2011 census. Note Castlegar and Trail are not shown, as they have their own cinemas. Table 1: Market Populations Population Comments Nelson & Surrounding Area Nelson 10,230 RDCK Area E 3,781 RDCK Area F 3,976 17,987 Prime market (within 40 km ) Slocan, Ymir, Salmo, Kootenay Lake North of Balfour RDCK Area H (Slocan) 4,289 RDCK Area G (Ymir, Salmo) 1,597 RDCK Area D (Ainsworth, north end of lake) 1,413 Kaslo 1,026 8,325 Occasional market Total Resident Market 26, Prime Market Local residents could reasonably be expected to attend the Civic Theatre as their primary objective, with other activities in mind (dining, shopping, work, business) Occasional Market Residents living out of town could be expected to attend the Nelson Civic Theatre as one of their objectives, although it is reasonable to assume this may not be the primary objective. Other more critical objectives will be (1) shopping, (2) medical, (3) business or (4) other entertainment or recreation. Of this subset it is noted that the largest constituent, Slocan because of proximity to Castlegar could travel to Castlegar or Nelson, depending upon their primary motivation. We anticipate that unique programming will serve to draw moviegoers to Nelson, which may result in combined purpose trips (shopping and a movie, dining and a movie) Tourist Market Nelson & area has long had a reputation of being a four-season playground. The occasional visitor market specifically those visitors who spend multiple days in the Nelson area is significant. The average number of campsite bookings at Kokanee Creek Campground is 12,000 (May to September) for an average total of 36,000 campers per season. It is estimated that 85% of these visitors about 30,000 are from Nelson Civic Theatre Society Feasibility Study Results and Business Plan 1

8 outside the area and therefore would not be included in the census numbers above, and would potentially be interested in seeing a movie while on vacation. While we were unable to obtain definitive winter visitor numbers, we believe they are statistically significant to represent another potential draw to the Civic Theatre. We have not included this tourist market in our financial modeling but it is reasonable to assume that both summer and winter visitors are likely to be interested in having a Cinema as a potential diversion (in particular during inclement weather in the summer and after a day of skiing or after enjoying dinner at one of Nelson s many dining establishments) Our Audience According to the MPAA 1, frequent moviegoers (who visit a cinema more than once a month) drive the movie industry. While comprising of only 10% of the population, they bought half of all movie tickets sold in Generally people between the ages of 18 and 39 are most likely to frequent the cinema and therefore a larger percentage of our offerings should be targeted towards this age group 2. We must also recognize that movies targeted towards the 18 to 39 demographic may not be of interest to younger or older viewers. To capture these demographics we will need to bring in product that is targeted towards these age groups. A key advantage in the long term goal of operating a cinema with three screens is that it will allow us to target more than one demographic simultaneously, greatly increasing the chances that there will be programming of interest to a potential viewer on any given night. In Option A, Phase 1, we will maximize programming diversity by showing matinees on weekends and by splitting the screen (different showings at 7 and 9pm) when possible, although distribution restrictions make this more difficult. According to the MPAA, the average Canadian visited the theatre 3.9 times in Based on our modeling related to the Nelson and area permanent resident population (excluding Castlegar, Trail and Nelson s significant tourist market), it is reasonable to expect box office receipts in the range of $550,000 for a three screen theatre (refer to Table 11 and Table 14), with revenues for a single screen coming in at approximately $155,000 (refer to Table 10). Of the 799 members who responded to the question on our membership forms asking if they had attended a movie in Castlegar in the last twelve months, 501 (63%) said they had gone to Castlegar at least once. A further 180 people (23%) said they went to a movie in Castlegar at least five times, and 310 (39%) went to Castlegar for a movie at least twice Competitive Advantage The well-known downtown location of the theatre in Nelson s Entertainment District, near to the majority of Nelson s 50 restaurants and its vibrant nightlife, near to public transportation routes, and walking distance for much of Nelson s densely packed population, is ideally suited for theatre operations. The closest competition is the Kootenay Centre Cinemas located 45km from Nelson in Castlegar. Due to the distances involved and the high level of support in the community we are confident that we will capture the majority of the local and surrounding market. 1 Motion Picture Association of America 2 Nelson Civic Theatre Society Feasibility Study Results and Business Plan 2

9 1.2 Economic Benefits of our Theatre The City of Nelson s Sustainable Waterfront and Downtown Master Plan offers a 20-year view of Nelson with the downtown as its economic hub. A key aspect of this plan is to maintain Nelson s vibrant and sustainable downtown. Like other major initiatives, including Kootenay Co-op s Nelson Commons project; the redevelopment of the CPR Station; Touchstones Museum, and the revitalized Hume Hotel, the restoration of the Civic Theatre is an important initiative that will add to the vitality of our city. We believe the Nelson Civic Theatre has the potential to become a marquee attraction in the downtown area. 1.3 Social Benefits of our Theatre As a community focused organization, we are uniquely positioned to respond to community interests. By involving our membership in programming and by building partnerships with local organizations, we can develop diverse programming that speaks to the community, differs from our competition, and that will result in long-term financial success. We reached out to local groups to discuss how a new cinema/multi-use space could benefit them and we discussed with the Nelson and District Youth Centre employment strategies for youth. We spoke to film instructors to see how affordable screening rooms could benefit students, or how NCTS scholarships or bursaries could help budding filmmakers, and we talked with local theatre producers to determine interest in daytime rehearsal space and alternate small performance space, as a complement to the Capitol Theatre. NCTS will, where possible, support local enterprise through local products available in our concession. 1.4 What the experts told us As part of our due diligence to ascertain the viability of a cinema in Nelson, we contacted a number of industry experts and cinema operators. The message was consistent: independent theatres can be highly successful operations, but it is important to understand the challenges Mark Satok, Satok Cinema Services, Toronto Satok Cinema Services is a film booking service that caters to independent cinemas across Canada, acting as a liaison between the cinemas and the distributing studios, brokering favorable terms and sharing industry information, trends, and analysis. Mark Satok visited Nelson at our request for a site visit and consultation. He offered insights into the industry and our theatre s opportunities and challenges, and shared revenues and scenarios from other B.C. theatres. Mark met with Nelson City Manager Kevin Cormack, and councilors Bob Adams, Deb Kozak, and Donna Macdonald, where he shared his inside knowledge of several successful small-town B.C. theatres, providing observations regarding single vs. multi-screen theatres, and the benefits of digital technology. Mark was of the opinion that a multi-screen model was the most viable option, and that Nelson could easily support a movie theatre as a successful enterprise Kevin DeRijck, Cinematronix, Vancouver: Kevin DeRijck from Cinematronix, a motion picture supplier and technical service provider, evaluated the theatre space and provided insight on the various options of a single, double and tri-plex from a technical standpoint. Kevin provided technical information on digital projectors with 3D capability, silver screens, and Digital Dolby surround-sound system. He advised on challenges in, and solutions for, achieving optimum sound quality within the space. It was his opinion that a tri-plex would make Nelson Civic Theatre Society Feasibility Study Results and Business Plan 3

10 better business sense for programming versatility, and recommended a phased approach Daila Duford and Bruce Killick, Salmar Theatre, Salmon Arm Geographically nearby and offering real-world experience, operators of the Salmar Theatre in Salmon Arm, also a non-profit, shared insight into the trends and responses of the movie-going public. We were fortunate to learn a great deal about technical considerations and day-to-day operations through two site visits to the Salmar. The Salmar board has offered to assist us in learning the theatre business, and has been generous in sharing information. They have indicated that the slower economy, a rise in minimum wage, and a subsequent increase in ticket price have all affected the Salmar s bottom line, and yet the Salmar remains a community success story, having repaid the initial loan of 1.4M to build the Salmar Grand (a 4-plex) in less than ten years and has since upgraded their theatres while providing grants to local community groups from surplus revenues Tom Hutchinson, President, Magic Lantern Theatres, Edmonton Tom Hutchinson has become a valuable resource. Magic Lantern Theatres began in 1984 and operates 81 screens across Canada. In his early days Tom sold and serviced cinema technology and this work brought him to Nelson when our theatre operated as a Famous Players under its original owner, Dale Jackson. His knowledge of our cinema s history through its incarnations offered new insights into the past and present-day including the complexities of operating a theatre, working with distributors, projector technology, seating, programming and the importance of owner involvement Lisa Milne, Royal Theatre, Trail Lisa and her husband purchased Trail s run-down Royal theatre with intent to renovate the space to sell for a profit. During the renovation Lisa learned enough about the cinema industry to realize she couldn t let the theatre go she had fallen in love with the business. Due to the legacy of the previous operators, Lisa s biggest challenge was rebuilding professional relationships with film bookers and distributors Carl Rankin, Roxy Theatre, Revelstoke Carl purchased the Roxy, a single-screen theatre, approximately 19 years ago. Carl is a businessman and the theatre is but one of his activities. He is very enthusiastic about the movie industry and firmly believes that Nelson given its larger regional population base should have a theatre. He believes the demographics of Nelson make it a no brainer. Further, he commented that the winter tourist trade in Revelstoke is responsible for sustaining his theatre during the slow months. (NB Revelstoke population 7,139 census 2011). I would put in multiple screens in the Roxy if I could commented Carl, but the size of the Roxy constrains further expansion. 1.5 Industry context Movie content drives the industry and box office receipts can fluctuate greatly based on the strength of that content. A cinema programmer or film booker brokers the terms that must be satisfied to show a particular movie, based primarily on how recently it was released. The cinema pays a set percentage of box office gross revenue to the distributing studio at the end of the title s run. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 4

11 1.5.1 Purchasing/programming Summary Cinemas can follow one or a combination of the following models: First-run, Off-release, Second-run and Repertory. First-run theatres 3 pay a box office percentage of 60% or higher to the distributing studio. Terms on first-run titles are also restrictive: in many cases the cinema may not split the screen with any other titles on the screen during the run of the film, and a multi-week commitment may be required. Off-release 4, and second-run 5 theatres are becoming more popular thanks to digital distribution and increased print availability. By showing off-release titles, cinemas gain flexibility, may split the screen with a second title, and pay lower box office percentages (35-40%). Repertory cinemas show notable titles from cinema s history such as classics, foreign and independent films. Box office percentages vary depending on studio, but tend to remain at 35%. We expect to be a combination of all of these options to best suit the interests of our community Technology now and then Theatres now use digital projectors, which load the movie via a shipped hard drive or satellite system. The result is a perfect picture and sound without the problems of older mechanical film systems. Gone are the days of scratches, noise of the film running through the projector, breakage and choppy sound. Sound has advanced as well: Dolby Digital 5.1 surround sound reproduces multi-channel audio to deliver a truly immersive audio experience Procurement of films Digital prints are a fraction of the cost of a film print, increasing print availability and ease of shipping via proprietary digital hard drives. Satellite transmission will be the next major shift in distribution to theatres, but securing the content is still an issue. Currently, satellite feed is predominately used for the presentation of live events such as, Live at the Met opera, Bolshoi Ballet, National Theatre and various sporting and concert events. 1.6 Stakeholders The City of Nelson As the owner of the building that houses the Nelson Civic Theatre, the City is a primary stakeholder in the timely and responsible negotiation of mutually beneficial leasehold improvements to ensure the operational success of the enterprise. Excellent communication between the City and NCTS is essential, as is City support in providing information and assistance with regard to the undertaking of leasehold improvements, and support for grant applications. We expect the City to work with NCTS to develop a lease agreement satisfactory to NCTS and its funders, as well as a schedule for rent relief in exchange for the needed leasehold improvements for which a landlord would normally be responsible. 3 First-run theatres: A theater that runs new films as soon as they are released, or off the break 4 Off-release theatres show new films in the third or fourth week after release 5 Second-run theatres show new films after they have completed their initial release Nelson Civic Theatre Society Feasibility Study Results and Business Plan 5

12 1.6.2 Members As a member-based non-profit organization, our members are primary stakeholders. Our members expect delivery of film and other programming at the Nelson Civic Theatre, as well as input into programming, member pricing and similar benefits, and participation in the Annual General Meeting. We see good communication with our membership and with our greater community as fundamental to our operation The Business Community Nelson s business community stands to benefit from a re-opened movie theatre as local residents and visitors no longer need to travel outside of Nelson to see movies, which often includes shopping and dining (see Appendix VIII.) We hope to engage the business community directly in our operations through: Locally produced items in our concession On screen advertising for local business before screenings On screen tourism advertising through Nelson Kootenay Lake Tourism Association before screenings Promotions such as dinner-and-a-movie or ski-pass-and a movie deals Being open to feedback and suggestions from the business community The Capitol Theatre The primary function of the new Nelson Civic Theatre is a venue for screen entertainment, with occasional stage use for rehearsal or small presentations when the screen is not in use. Conversations with the Capitol Theatre president, Martin Oets, and interim Executive Director Stephanie Fischer confirm that our 240-seat Theatre 1 and its stage have the potential to be a complement to the Capitol Theatre s programming. We may partner on special events such as film festivals or youth festivals. NCTS will work closely with the Capitol to find efficiencies and complementary practices Funding Agencies Without City approval and a lease agreement in place our discussions with funding agencies have been preliminary. We have had several consultations with the Columbia Basin Trust, who are poised to assist as soon as we receive City approval and secure a lease. We are keenly aware of our responsibilities to our funders with regard to the timely completion of our funded projects, sound financial management, and complete and timely reporting. See Funding agencies User Groups The new Nelson Civic Theatre is an excellent venue for space rentals to specific user groups. These may include special film showings for private events such as retirement or birthday parties, or targeted user groups for documentaries and discussion. They might also include daytime stage rental for schools and rehearsal space. The Outreach Committee will work to identify potential user groups. The Marketing Committee will ensure information regarding user group rentals will appear on the Website and in other advertising where appropriate. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 6

13 1.7 Barriers To Entry High capital costs Our modeling shows that a significant amount of funding is required to renovate the theatre. Much of this capital will be spent on the building itself so as to comply with current building code, and to split up a one-screen theatre into a multiplex Publically owned building The private sector is not as likely to invest capital into a building that is owned by someone else (the City) Market size While we believe there is a sufficient local market to operate a sustainable non-profit cinema in Nelson, the market size is not attractive to larger, profit-focused chains such as Cineplex. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 7

14 2. Business Plan 2.1 Description of project The re-opened Nelson Civic Theatre will be a different operation than its predecessor. The previous first-run, single-screen model faced challenges relating to distribution requirements and community choice. Having a first-run film meant it had to stay on the screen long after community interest had waned. With smaller box office revenues come smaller concession sales. Our initial study focused on the restoration of a modern single-screen, code compliant theatre. As costing information became available, it became apparent that a renovated single-screen venue was unlikely to generate the cash flow necessary to support the costs involved. See Appendix II, Table 4. Our long-term goal is a three-screen cinema. A multi-screen model offers far greater programming flexibility, allowing films to cycle through the cinemas so as to satisfy distribution agreements with as few empty seats as possible. This in turn results in greater box revenues, and by inference greater concession sales. A multi-screen model turns a break even or small profit business case into a thriving entity that can fulfill the needs of a community such as Nelson and allows us to invest surpluses in the community in order to fulfill our social mandate. Our multi-purpose model is designed for maximum use of the space, with activities that put all viewing areas in use, including daytime activities such as matinees and film school screening space. Some offerings include: First and second-run Hollywood, independent, classic, and Canadian films Films by local filmmakers and youth Film festivals: sport, themed, traveling or local Satellite feed television: hockey and other sports, opera and theatre Web-sourced screenings of TEDtalks or YouTube Theatre rentals for private events, home movies or multi-media presentations As a member-driven organization, we are uniquely positioned to consult with our members to satisfy community interests. We will consistently monitor attendance and review programming in order to achieve maximum attendance. As stated, programming flexibility with Option A, Phase 1 is more difficult due to the limitations of a single screen. As a typical theatre-goer spends the equivalent of 50% of the movie ticket price on concession items, we can assume viability even when using conservative attendance numbers. A made-in-nelson approach to concession goods combined with traditional offerings allows us to respond to community tastes and maximize revenue. A sampling of concession items may include: Traditional fountain drinks Natural bottled drinks Local coffee Traditional candy Locally-made candy and baked goods by approved bakers Non-GMO or organic popcorn with real butter and natural toppings Nelson Civic Theatre Society Feasibility Study Results and Business Plan 8

15 We are eligible for employment programs that will positively impact our bottom line. A strong volunteer program in support of paid staff will also serve to mitigate costs. NCTS also hopes to give back to the community by offering reduced rental rates to other non-profit and social enterprise groups for community fundraisers. Profits that are not used to improve the enterprise will be returned to the community through initiatives such as educational bursaries and scholarships relating to film. While patrons find their seats, we will project on our screen advertising for local businesses and tourism marketing, as well as to promote our sponsors and major donors of the renovation project. As a Virtual Bulletin Board, we hope to promote upcoming local events, community announcements, and local causes on our big screens. 2.2 Financial Analyses Comments on Projections of Single Screen, Years 1-3: Recognizing the significant capital costs of a full build out, we modeled a single theatre scenario for the first three years of operation. This enables us to open the theatre earlier fulfilling a clear desire of the membership and also recognizes that the timing of fundraising or grant application success is difficult to determine, and so the theatre would need to operate on a positive cash flow basis in the meantime. The table below, all referring to the Appendix II, Table 2-4 and the other relevant sheets Nelson Cinema Box Office Model (Table 10), Box office & concession (Table 11), Salaries & Wages (Table 12), Capital Costs (Table 7) & Funding (Table 9), summarizes our findings: ITEM AMOUNT Opening projected cash balance $27,000 Operating loss over three years -$73,309 Positive cash flow over three years $45,666 Cash on hand, end of three years $72,666 Wages and Benefits year ONE $98,000 Capital costs to complete this portion $793,000 Community bonds outstanding, end of three years $81,000 We anticipate an opening cash balance of approximately $27,000 (balance as of October 8 is $24,000). The cash flow statement provides for $15,000 being used to fund the opening concession inventory. Total required funding - $809,000 including inventory, is anticipated to be funded $380,000 through community fundraising efforts, cash and inkind, $348,000 through various granting applications and $81,000 of community bonds, a debt vehicle. We forecast gross box office of approximately $156,000 (refer to Nelson Cinema Box Office Model, Table 10 which shows that achieving 19,200 movie goers over one year is achievable even with occupancy of 15% or less, 73% of the time). Film rental costs are calculated at 56% of box office gross, which is in line with other cinemas (see Actual Financials, Table 13). Concession sales are forecast to be 50% of box office with a 30% cost of sales (again, in line with industry experience). Nelson Civic Theatre Society Feasibility Study Results and Business Plan 9

16 The other large expenditure is salaries and wages, which is forecast to be about $98,000, including benefits. Under this scenario, there is a positive cash flow. The model shows this accumulating ($45,666 over three years), though some of it could be used to retire a portion of the expected community bond. The operating loss is due entirely to $119,000 of amortization of capital assets, which is a non-cash item. To be clear, a successful operating business must generate sufficient cash to ultimately replace aging capital assets (i.e. must generate positive operating income, not cumulative losses). This is not the objective of this three-year model. The three year model is only presented to recognize the time required to raise capital to complete the multi-screen model, and also to get a screen open so people can see movies again and to show that positive cash flow is reasonable to assume. This cash flow will of course be used to fund the phasing of additional capital as the additional screens are added. Operating in this mode (single theatre) does present some challenges, as follows: While this model does generate cash, there are operating losses. This model is not sustainable in the long run, as it would not be possible to build cash reserves for equipment replacement or upgrade or for reinvestment in the community (part of our social mandate). Some operating costs specifically wages and benefits consume a considerable portion of overall operating costs. For example, in year ONE wages and benefits represent 39% of expenses. Box office revenues are significantly constrained as we are catering to one demographic at a time. While the overall Nelson and area resident market is 26,000 sufficient to support a theatre once demographics are broken out, the potential viewing public for any given movie is much smaller. Under the single screen model, increases in box office revenues are essentially a function of ticket price increases, not additional moviegoers. Comments on Phasing: It became clear in our research and discussions with management and owners of other theatres and other industry experts that the industry had changed dramatically in the last several years. The single screen model is gradually being replaced with multiple screen models. We believe there are essentially two primary reasons for this. Programming flexibility allows for showing more products to more diverse demographic types. However, an equally important advantage is that of cost characteristics. A prime example of this is one of the largest cost items of wages and benefits. In a single screen scenario, wages and benefits can represent 40% of overall costs (refer our single screen model). However, as you add additional screens, incremental wage costs are much less. Other costs can behave similarly. Examples are advertising and promotion, telephone and Internet and property taxes. In accounting parlance, costs are sometimes referred to as fixed or variable. In reality there are variations of this including step fixed or stepped variable. This is sometimes referred to as economies of scale but basically it means that you are spreading your costs over a in this case greater number of tickets being sold. The result is a lower overall cost per ticket sold which results in greater cash flows and more profitability. Our modeling for the phasing (Option A and Option B) considers the issues of capital costs and funding sources as the primary purpose of the modeling. Presenting three year income and expense statements and cash flow statements for each of the phases Nelson Civic Theatre Society Feasibility Study Results and Business Plan 10

17 will be overly complicated. As such, we have modeled the income and cash flow statements based on the completion of each phase (essentially, the first year after completion of that phase). Our assumption of course is that if the model is profitable when the phase is complete, then it follows that the profitability will continue. The table below, referring to the Phasing Options A and B Appendix II Table 5-9, as well as the supporting schedules Appendix II, Table summarizes our findings: Item Option A Option B Opening projected cash balance $27,000 $27,000 ANNUAL Operating income per year when phasing $103,671 $165,835 completed Positive operating cash flow, annually, at completion $242,852 $245,052 of phasing Wages and Benefits as a % of gross box office at 19.2% 17.5% completion Capital costs to complete Option A / Option B $2,770,000 $2,690,000 Community bonds outstanding, end of three yrs (after $445,000 $380,000 repayment) Community bonds repaid, year ONE at full operation $100,000 $150,000 Debt to Equity Ratio (approximate), (grants/fundraising as equity) 1:5 1:5 As in the single screen model, we anticipate an opening cash balance of approximately $27,000 (balance as of October 8 is $24,000). The cash flow statement provides for $15,000 being used to fund the opening concession inventory. At completion of Option A, funding sources of $2,770,000 is anticipated to be approximately 48% from community fundraising efforts cash and inkind, 32% through various granting applications and 20% community bonds, a debt vehicle. The highest level of community bonds under either option is anticipated to be no more than $445,000. An interest rate of 4% has been modeled, which is very competitive in this low interest rate environment. We anticipate there will be interest in this from the community, in particular those individuals who are looking for a return on their savings as well as supporting a good cause. As an example, assuming only one in four of our current membership-base invested in a community bond in the amount of $1,500 each we would achieve our objective. Similarly, 100 individuals, in a community of 10,000 (i.e. 1%), each investing $5,000 in a community bond would raise $500,000. We forecast gross box office of approximately $557,000 at full operation (refer to Box Office and Concession, Table 11). We modeled revenues for two and three screens from actual gross box office figures provided to us by industry participants, adjusted for the resident market size of the Nelson area (resident population only, not tourist potential). Film rental costs are calculated at 56% of box office gross, which is in line with other cinemas (see Actual Financials, Table 13). Concession sales are forecast to be 50% of box office with a 30% cost of sales (again, in line with industry experience). The other large expenditure is salaries and wages, forecast to be about $150,000, including benefits. Note that while this is a much larger absolute dollar figure than under Nelson Civic Theatre Society Feasibility Study Results and Business Plan 11

18 the single screen modeling, it represents a much smaller percentage of gross receipts (20% under the three screen compared to 40% under a single screen) (an example of step variable costs, referred to earlier). Under option A or B there is positive cash flow. Operating cash flow is similar at full build-out for either option. This cash flow projected to be approximately $245,000 per year, will be used for (1) retirement of debt, (2) replacement reserve and (3) reinvested in the community, which is part of our social mandate. The above table shows debt retirement commencing one year after project completion. In summary, at full build-out under either of Option A or B, the three-screen model is profitable and it is sustainable. Sufficient cash flow exists to establish equipment and leasehold replacement reserves thereby ensuring the movie viewing public will have an enjoyable experience at the Civic theatre again. It also allows Nelson Civic Theatre Society to fulfill its mandate of returning funds to the community. 2.3 Comparative Pricing Model Our research has shown average adult ticket prices across B.C. to be approximately $9.25. We expect to be within industry averages. We recognize that historically Nelson residents enjoyed lower than average prices. However, we believe our community will support our pricing structure in exchange for the brand new theatre experience they will be able to enjoy. Refer to Appendix II, Table 14 for pricing comparisons of theatres throughout B.C. Bear in mind that these ticket prices include HST of 12%, so what the operator receives is somewhat less. 2.4 Revenue Model The gross box office projections in our modeling are consistent with the information we have gathered on box office sales from other theatres operating in Western Canada (mostly in British Columbia) with similar permanent resident market sizes. Some of this information has been given to us on a confidential basis and thus we are precluded from divulging the source. (Refer to Appendix II, Table 14) 2.5 Funding Model Funding for this project will be achieved through a mix of community and crowd-sourced fundraising, Regional, Provincial and Federal grants, and, if necessary, debt financing. (Refer to Appendix II, Table 9) Community Fundraising Raising money locally in a City with many admirable causes can be challenging, however our highly successful membership drive and indications of interest from a few local donors who have made enquiries on an unsolicited basis suggest that there is the will and enthusiasm to see the Civic Theatre re-opened, and people are willing to back that enthusiasm financially. Our membership sales have raised more than $27,000 to date. We expect that certain contributions made through the City of Nelson may qualify for a charitable tax receipt. This has been discussed with City management but not yet confirmed. Our community fundraising drive will include: Seat sales: We will invite the community to purchase (sponsor) seats within the theatre. We anticipate a total of approximately 480 seats in the renovated Civic Theatre available for sponsorship. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 12

19 Sponsorships: Donors (corporate or individual) may sponsor certain areas of the theatre and have naming rights, for example each of the three theatre spaces, the lobby, and concession area. Special events: Special events will serve to raise awareness and funds. These may include film nights, film festivals, and other related events, held at the Capitol Theatre or at the Civic Theatre once sufficiently renovated Funding agencies Regional Provincial and Federal Grants have been researched to determine those grants most applicable to our project, their criteria, and intake timelines. Preliminary discussions have taken place with Columbia Basin Trust (Rona Park), RDCK Director Ramona Faust, Community Futures Development Corporation (Paul Weist), Tom Atkins from the Nelson District Credit Union, and Osprey Foundation Chair Vivien Bowers. Once our project has the go-ahead from the City and we have secured a lease agreement, we will move forward with these and other funding agencies. Potential Funders may include, but are not limited to: BC Gaming Columbia Basin Trust Community Development Program Columbia Basin Trust Community Initiatives Columbia Basin Trust Heritage Arts and Culture program Corporate funders Cultural Spaces Canada Heritage Canada Cultural Spaces Fund Nelson and District Credit Union Osprey Foundation Regional District of Central Kootenay Southern Interior Beetle Action Coalition (SIBAC) Southern Interior Development Initiative Trust (SIDIT) The Vancouver Foundation Western Diversification Community Infrastructure Initiative As a non-profit society, we look forward to assisting the City of Nelson, as owners of the Civic Centre, in applications for infrastructure and community development grants. These grants will be used to assist in financing the building s capital improvements Crowd-Sourced Funding Earlier this year, an independent theatre in a rural B.C. community fully funded their $90,000 digital projector by receiving $90 donations from 1,000 community members. Using the professional social-marketing experience within our group, we are planning an additional web-based fundraising campaign using successful "crowd-funding" platforms such as kickstarter.com or indigogo.com Debt financing Our ability to complete this project is subject to the success of our fund raising efforts and our ability to access grants. As is common in any successful business launch or expansion, debt financing needs to be considered. Our modeling contemplates up to Nelson Civic Theatre Society Feasibility Study Results and Business Plan 13

20 20% of project costs being raised through the issuance of community bonds 6. Using 20% leverage implies a debt to equity ratio of 1:5, which is conservative. Where debt appears in our modeling, we have used an interest rate of 4%. 2.6 Social outcomes As a Social Enterprise 7, the Nelson Civic Theatre provides a safe, accessible venue for people of all ages to enjoy big screen programming for entertainment and education. The new Nelson Civic Theatre: Offers an affordable family entertainment for parents and children, grandparents and grandchildren, and a safe place for youth. Offers community-building opportunities through partnerships with business and other community groups and institutions for mutual benefit. Endeavours to employ youth and partner with programs that assist in jobreadiness and skill development. Partners with community institutions and non-profit organizations to create coefficiencies in marketing, budget, and manpower through shared resources and reciprocal arrangements. Partners with local educational institutions to offer new space for local film screenings, multi-media presentations, and other opportunities. Provides a community venue for film to encourage creativity and skill development, recognize talent and enterprise, and to share the results of these endeavours with the greater community. Regularly surveys its members with regard to programming and member satisfaction. Offers opportunities for community engagement through volunteerism as a complement to paid staff, or as a member of a committee of the board, such as special programming or community outreach Eventually returns surplus funds to the community through special programs to encourage film and theatre endeavours, especially by youth. Shares the knowledge and expertise we have developed with others. 6 Please refer to for details on community bonds 7 A Social Enterprise is an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximising profits for external shareholders Wikipedia.com Nelson Civic Theatre Society Feasibility Study Results and Business Plan 14

21 3. Operations 3.1 Legal structure The Nelson Civic Theatre Society is an incorporated non-profit society (Registration number S ) under the British Columbia Society Act. The society is governed by a Board of Directors (Refer to Appendix I), which in turn is governed by the society s constitution 8. NCTS is a social enterprise, a model that is experiencing an unprecedented evolution as a tool for community development and non-profit sustainability. 9 As a social enterprise, a sound business case for profitability is combined with social goals towards building a stronger community. In August of this year, five members of the board of directors attended a workshop presented by Enterprising Non Profits (ENP), a collaborative program that promotes and supports social enterprise development and growth. ENP s granting body assisted in funding our feasibility study. ENP introduced us to a recent initiative by the Province of British Columbia relating to the Community Contribution Corporation (CCC). A British Columbia order to amend the BC Corporations Act to enable the CCC model is in process 10. The CCC is a blend of profit and non-profit models with benefits that include increased attraction for investors. As a non-profit organization operating a profitable business, we will explore this new model as it develops. NCTS does not have charitable status. The ability to raise funds is greatly enhanced by the ability to issue receipts for tax purposes, which give the donor tax credits. We are working with the City to determine how this might be accomplished, since gifts to a municipality qualify under the Income Tax Act as charitable contributions. 3.2 Concession The concession is a significant profit centre in the theatre business. Typically, concession sales have averaged $3-5/ patron with profit margins of 70%, which we have verified with other theatres across the province. We recognize that the profit margin will be lower on locally-made products. Initial costing puts new concession equipment, including popcorn maker, butter dispenser, pizza warmer, commercial refrigerator and freezer, refrigerated display case, and ice cube machine at a maximum of $30,000. We will seek partnership and sponsorship opportunities (for example, The Coca-Cola Company) The Canadian Social Enterprise Guide, Enterprising Non Profits 10 Nelson Civic Theatre Society Feasibility Study Results and Business Plan 15

22 3.3 Sales and marketing plan Our marketing plan involves four key strategies: Building our membership Support for programming Promote the space to outside user groups Building our membership The relationship between the members and the theatre is reciprocal: our members provide programming feedback and help direct the choices we make. Our members are also our first targeted marketing group, already engaged and invested and reachable through our member newsletter. NCTS works with members and member groups to achieve targeted interest programming, and may liaise with specific-interest groups to take advantage of advertising opportunities such as in-house newsletters, e-newsletters, our website, Facebook pages, and other means of member communication Program Marketing Marketing of films and special events will be done through a mix of print advertising (individual and co-operative), web advertising, marquee, and co-advertising of special promotions with partner businesses. A Marketing Committee will make recommendations to the Board and undertake regular assessments of the Marketing Strategy. Box office sales and special offer coupon use (dinner-and-a-movie, for example) will be indicators of success. Web advertising and social networking will be key components. A more diverse program will require a different approach to marquee advertising, with a changing digital screen an attractive option. Film reviews, columns, and other means of engagement through print or radio will provide interest and advertising at no cost Rentals and outside use Based on our conversations with local live theatre presenters, we anticipate interest in daytime space rental for rehearsal. Instructors in filmmaking have indicated interest in daytime screenings. Our theatre spaces may at times be rented for screenings of home movies or other group-specific needs. NCTS will promote these opportunities through community networking, web advertising, in-house advertising, and community outreach. 3.4 Staffing Theatre Manager: The theatre manager, who will also serve as a projectionist 11 will be responsible for the day-to-day running of the theatre, including staff hiring (with Management Committee), training and supervision of the concession workers and cleaner. The Theatre Manager maintains financial records, reporting, and payroll, and is responsible for the preparation of an annual budget in consultation with the Management Committee for review by the Board. Floor Manager: The Floor manager, who is also the film programmer and a projectionist, is responsible for working closely with the Programming/Planning Committee and the Theatre Booker. The Floor Manager develops the monthly film and event program, books the films, provides simple maintenance to the equipment and assists with operations when needed. 11 Prior to digital technology, running the projector and loading films was a very specialized skill. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 16

23 Both the Theatre Manager and Floor manager liaise with Committees of the Board concerned with Theatre operations and are both responsible for publicity and overall community relations. Staff: Regular staff includes concession workers, who are responsible for service of customers, cleaning, stocking the concession, and other related duties. These staff may also be responsible for some janitorial work. A cleaner will be hired for daily theatre cleaning. Volunteers: Volunteers may include work experience students, people with barriers to employment who seek meaningful activity, and any community members wishing to assist the general operations of the theatre, or sit on subcommittees. Volunteer duties may include, but are not restricted to: Concession assistance, ticket taking, customer flow assistance, and cleaning. They may also take part in subcommittees such as the Youth Committee or Outreach Committee. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 17

24 4. Management and Oversight For advice on Management and Oversight, as well as operations staffing, we turned to the model developed by the Salmar Theatre, who has generously offered to train us in Theatre operations, as well as models provided by Enterprising Non Profits. 4.1 The Board of Directors Oversight of the Nelson Civic Theatre is the responsibility of its Board of Directors as executed through its management and supervisory staff. The day-to-day running of the Theatre involves the Manager, Floor managers, Projectionists, Concession and Box Office staff, and volunteers, with support from specific Committees of the Board. The Board of Directors will hire and work to support its Theatre Manager, and undertake a performance review with the Theatre Manager on an annual basis or as necessary. The Board will work to ensure clear communications between the Board and its Committees and Management staff. 4.2 Committees of the Board specific to management All Committees are liaisons between Board and Staff. The Management Committee is the direct liaison with the Theatre Manager. The Committee develops and adjusts job descriptions, researches and applies for employment assistance programs, responds to staffing and management concerns and brings issues to the Board as necessary. The Management Committee consists of at least three Board members who have experience in enterprise management, and may include individuals drawn from its membership who hold expertise in financial management, staff management, theatre operations, or have legal expertise, to a maximum of seven Committee Members. The Technical Committee is responsible for procurement or repair of technical equipment, and is the direct liaison with the Manager regarding technical aspects of theatre operations and responds to issues as they arise. The Technical Committee consists of at least two Board members and may include individuals drawn from its membership who hold expertise in technical operations, to a maximum of five Committee Members. The Programming/Planning Committee works closely with the Theatre Manager. The Committee develops, with member input, community outreach, and advice from an outside Film Booker, the general program of film, performance, and special events. The Programming/Planning Committee consists of at least two Board members and may include individuals drawn from its membership who hold expertise in theatre programming, communications, community relations, or have an understanding of opportunities in film or stage, to a maximum of five Committee Members. Other Committees indirectly supporting management may include, but are not limited to Marketing, Fundraising, and Outreach. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 18

25 5. Building Renovations It should be noted that the capital budget and timelines we have included in this plan are based on full remediation of code non-compliance, market price labour, and gutting the building back to a solid concrete base. We anticipate, based on discussions with various stakeholders, that involvement from local builders and volunteers, and price breaks from local building suppliers may allow us to reduce our costs and/or timelines. To estimate our capital costs we hired Quantity Surveyor Jim Bush, of Jim Bush & Associates Ltd., of Surrey, B.C. Jim has over 1000 projects under his belt, ranging from $100,000 to $200 million, including a number of theatre conversions. Jim provided us with an overall project estimate from which we derived our capital budget figures. (Refer to Appendix XI) 5.1 Leasehold Improvements Deficiencies We are under no illusions that bringing the Civic theatre up to a standard that meets today s building code will be easy or inexpensive. There are major improvements to infrastructure that should be undertaken. The BES Condition Assessment Report 12 revealed [The] condition assessment highlighted several serious building performance and maintenance problems which should be addressed with the utmost urgency. The deficiencies identified include flammable construction materials within the theatre and asbestos, present throughout the building. In addition: The existing ventilation does not meet code nor provide thermal comfort There is no insulation in ceiling or walls Neither auditorium nor lobby meet accessibility code requirements The washrooms are not code compliant There are no dedicated parking facilities We cannot know the full extent of required remediation until we have access to alter the space Leaseholder/Owner Responsibilities These deficiencies must be corrected, and we see this as a shared responsibility between the NCTS and City of Nelson. The table on the next page details the typical division of responsibilities in most leases between leaseholder and building owner. 12 Building Energy Solutions Ltd. (BES) was commissioned by the City of Nelson to complete a visual condition assessment of the Civic Centre, 719 Vernon Street, Nelson, BC. The report was completed on completed on 29 th June 2011 Nelson Civic Theatre Society Feasibility Study Results and Business Plan 19

26 TENANT - Leaseholder Responsibilities Tenant Improvements include: Finishes Equipment Signage Special occupancy requirements re: mechanical/electrical/ac Specialties: Ticketing, acoustics, lighting, stage theatrical equipment OWNER - Base Building Provisions Access/site parking Structure: adequacy for purpose intended is assumed Envelope: roof, insulation, walls, Utility and service connections Safe occupancy: space is ready to be used as intended; hazmat remediation as required (asbestos, lead paint issues, PCBs if found) Insurance Special purpose code requirements include: Washroom and accessibility upgrades Sprinkler upgrades for 3-screen partitioning and deluge at stage proscenium Fire alarm for different zoning Exit signage for 3-screen We look forward to working with the City to deal with these problems together in a manner that is mutually advantageous. Our building program is going to depend on the full support of the City. Of our capital budget, approximately $667,000.00, or 36%, is allocated for some of the base building provisions listed above (See Appendix XII), specifically, structural improvements, envelope upgrades, utility and service connections and hazmat remediation. NCTS will work with the City to achieve funding for these costs Risk Analysis and Mitigation We are aware that there are many uncertainties in the building; historic restorations are prone to problems. The City has advised the Society that until a lease agreement is in place we are unable to do selective demolition to investigate building condition and systems. This creates a high level of uncertainty and necessitates assumptions. We do know that there are safety issues to be addressed and that safety is paramount. The table below outlines risk factors and mitigation plans. Design phase Construction phase Risks Hazardous materials Code compliance Structural, mechanical and electrical adequacy Hazardous materials extent/cost Cost overruns Time delays Unforeseen elements Mitigation Hazmat Testing Consultant to investigate code variances Detailed engineering investigation Contingency fund of 10-15% Experienced construction manager/general contractor Experienced trades Adequate scheduling Nelson Civic Theatre Society Feasibility Study Results and Business Plan 20

27 Besides the risks within the building itself, we recognize the additional risk of setting unreasonable expectations on our community at the start of this project. With today s economy, and the interests of the community in mind, we have broken our building program into multiple phases. 5.2 Building Program Our plan is to ultimately divide the auditorium into three separate theatres. Our first step is to hire a Project Manager and develop a masterplan that will set the context for the entire building program. A Request for Proposal from local architectural firms will be issued. A code analysis will be undertaken as will testing for hazardous materials. Structural, mechanical and electrical system condition and suitability will also be examined in detail. We have identified two different approaches to our phasing: Option A and Option B Option A Phase 1 Option A Phase 1 is a transitional phase while we raise funds for phase 2. The building program for Phase 1 will focus on rebuilding the lobby, washrooms and make minimal updates to the lower, single-screen auditorium to enable us to reopen the theatre as quickly as possible. Lobby The lobby will be completely refurbished with new lighting, flooring, drywall, ticket booth and concession stand built-ins and cabinetry. Washrooms Washrooms will be completely renovated with additional stalls added to both the men s and women s rooms. A new wheelchair accessible washroom will be built in place of the existing office. The renovation will include new fixtures and fittings, new tile on the floor and walls, new mirrors and accessories. Auditorium The lower auditorium will be separated from the upper balconies with a temporary wall that will allow us to proceed with construction of theatres 2 and 3 during Phase 2 without disrupting our ongoing programming in theatre 1. To save time and costs, upgrades to theatre 1 will be minimal but would include: Patching and painting the floor Modifying and installing the existing seats on the raked floor Installing new aisle lighting, and emergency exit signage Carpeting the aisles and the ramp It should be noted that Option A Phase 1 requires approved code variances from city council. Phase 2 In phase 2, we will split the upper balcony into theatres 2 and 3. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 21

28 Theatres 2 and 3 Renovations will include code compliance, complete fire separation, a new heating, cooling and ventilation system, electrical upgrades, acoustic treatment and new lighting, seating and audio/video equipment. At the end of phase 2 we will operate two new theatres, and continue to operate theatre 1 while we fundraise for phase 3. Upper Washrooms To ensure enough washrooms for our patrons, we will convert the existing projector room into two small washrooms. Phase 3 In phase 3, we will return to theatre 1, which received minimal updates in phase 1. Renovated Auditorium The auditorium will be refurbished to the level of theatres 2 and 3 with new seats, lighting, heating and cooling, electrical upgrades and a new sound and lighting booth to serve the stage. The projector and audio equipment will remain, as they were upgraded in Phase 1. Pros of Option A: Opens a single-screen theatre as quickly as possible New lobby, concession, and bathrooms Spreads renovation costs over three phases, with lower initial capital required Defers the risks of unknown issues (asbestos, lead paint, structural) present in the auditorium until Phase 2, by which point we would have a better understanding of the state of the building Shorter initial construction time allows a single-screen theatre to re-open sooner Cons of Option A: While sustainable, we would see lower revenues and programming flexibility than Option B Minimal renovations would require variances on existing code deficiencies within the auditorium Additional cost of the temporary dividing wall, designed to allow future phases while the theatre remains open Minimal cosmetic and mechanical upgrades to the auditorium, preventing the new theatre feeling Nelson Civic Theatre Society Feasibility Study Results and Business Plan 22

29 Timelines Option A Please Note: This timeline does not include fundraising schedules. Phase 1: Year 1 Design Construction Develop masterplan Issue RFP Tendering Renovate Lobby, concession Washrooms Temporary wall Minimal upgrades, theatre 1 Phase 2: Year 5-7 or as funds permit Design Develop masterplan Issue RFP Tendering Construction Theatres 2, 3 Erect new sound-proof walls Upper washrooms Emergency exit corridor Phase 3: Years 8-10, or as funds permit Design Construction Develop masterplan Issue RFP Testing Theatres 1 upgrade Remove temporary wall and construct permanent theatre 1 rear wall Stage upgrade Lighting and sound booth 2-4 Months 6 Months 8-10 Months 2-3 Months 6 Months 8-9 Months 2 Months 6 Months 8 Months Option B Option B also rebuilds the washrooms and concession in Phase 1, but focuses on opening theatres 2 and 3 immediately and retains theatre 1 (the lower theatre) until phase 2. This is attractive as it allows us to open immediately with 2 new theatres (the balcony theatres), saves the cost of building temporary walls, and most importantly increases our initial cash flow and programming flexibility. It would mean, however, a higher initial capital requirement and additional design and construction time. This option is preferred from a revenue and programming perspective and will be selected if our initial round of financing proves successful enough to support the additional capital cost. Phase 1 In Phase 1, we develop the lobby and washrooms, the upper balcony theatres 2 and 3, and two additional upstairs washrooms. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 23

30 Phase 2 Phase 2 of Option B will see a full redevelopment of the lower auditorium and would receive new audio/video equipment. Pros of Option B: New lobby, concession, and bathrooms New two-screen theatre experience from the start Requires only two construction phases and two fundraising campaigns Increased revenue and programming flexibility from the start Cons of Option B: A higher upfront financial and time commitment Delays our re-opening due to a few additional months of construction Uncertainties (asbestos, lead paint, structural) present in the existing auditorium must be dealt with now Timelines Option B Please Note: This timeline does not include fundraising schedules. Phase 1: Year 1 Design Construction Develop masterplan Issue RFP Testing Renovate Lobby, concession Lower and upper washrooms Theatres 2, 3 Erect new sound-proof walls Emergency exit corridor Phase 2: Years 5-7, or as funds permit Design Construction Develop masterplan Issue RFP Testing Theatres 1 upgrade Stage upgrade Lighting and sound booth 5-6 Months 6-8 Months Months 2-3 Months 4-5 Months 6-8 Months Nelson Civic Theatre Society Feasibility Study Results and Business Plan 24

31 Appendix I: Board of Directors and Key Advisors Board of Directors: Anne DeGrace, president works at the Nelson Library, is a published author, and has been working in cultural development in Nelson for 30 years. Roger Ley, vice president works as a software developer, systems architect, and business consultant, and has more than 18 years experience in live theatre. Rick Dietrich, treasurer is a Certified General Accountant with 32 years experience in public practice and the investment industry. Ken Spencer, secretary is a software engineer and entrepreneur with 12 years experience managing web projects for corporations and government clients. Jason Asbell is a graduate of Simon Fraser University Film Program with knowledge and experience in independent cinemas. John Brand is manager of Kootenay Savings Credit Union. He has served as a director of the Nelson and District Chamber of Commerce and Nelson Rotary. Marilyn Mint is an interior designer specializing in interior architecture, space planning, and design development. Darryl Santano is a power engineer currently employed at Kootenay Lake Hospital. He is a former projectionist at the Nelson Civic Theatre. Advisors: Peter Gosney is a building contractor with more than 20 years experience in Nelson and area. Graeme Leadbeater is an architect with many years of experience in dealing with public buildings. Rob Stacey is an architect donating his time and talents to the project. Mark Satok is an independent theatre booker and former vice-president of Cineplex Canada. Kevin DeRijck is a principle of Cinematronix and an expert in digital projection and sound. Daila Duford is Manager of the Salmar Theatres, and Bruce Killick is ithe society s Treasurer John Southam is a former City of Nelson building inspector. Others who have given time and advice include: Scott Grimshaw, Terratherma Heating; Ken Shukin, ComfortZone Heating; Brian Garvey, Quality Interior Kontracting; Rick Dawson, Heritage Roofing; Joe Arcovio, Arcovio Electric; Stephen Collens, Plumber; Sharon Huizinga, Dutch Dame Productions (lighting). Nelson Civic Theatre Society Feasibility Study Results and Business Plan 25

32 Appendix II: Financial Reports Table 2: Balance Sheet Single-screen, Years 1-3 Nelson Civic Theatre Society Feasibility Study Results and Business Plan 26

33 Appendix II (Con t): Financial Reports Table 3: Cash Flow Statement Single-screen, Years 1-3 Nelson Civic Theatre Society Feasibility Study Results and Business Plan 27

34 Appendix II (Con t): Financial Reports Table 4: Stmt of Income & Expenses Single-screen, Years 1-3 Nelson Civic Theatre Society Feasibility Study Results and Business Plan 28

35 Appendix II (Con t): Financial Reports Table 5: Statement of Cash Flows (Projected) Nelson Civic Theatre Society Feasibility Study Results and Business Plan 29

36 Appendix II (Con t): Financial Reports Table 6: Statement of Income & Expenses (Projected) Nelson Civic Theatre Society Feasibility Study Results and Business Plan 30

37 Appendix II (Con t): Financial Reports Table 7: Capital Budget, Option A, Option B Nelson Civic Theatre Society Feasibility Study Results and Business Plan 31

38 Appendix II (Con t): Financial Reports Table 8: Audio & Video Equipment Budget Nelson Civic Theatre Society Feasibility Study Results and Business Plan 32

39 Appendix II (Con t): Financial Reports Table 9: Funding Mix Nelson Civic Theatre Society Feasibility Study Results and Business Plan 33

40 Appendix II (Con t): Financial Reports Table 10: Civic Theatre Box Office Model (single-screen) Nelson Civic Theatre Society Feasibility Study Results and Business Plan 34

41 Appendix II (Con t): Financial Reports Table 11: Box Office & Concession Nelson Civic Theatre Society Feasibility Study Results and Business Plan 35

42 Appendix II (Con t): Financial Reports Table 12: Salaries & Wages Nelson Civic Theatre Society Feasibility Study Results and Business Plan 36

43 Appendix II (Con t): Financial Reports Table 13: Actual financials These numbers are actual numbers obtained from a non-profit society operating a theatre and a for profit operator. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 37

44 Appendix II (Con t): Financial Reports Table 14: Pricing Comparative Actual finances of a non-profit and for-profit model Nelson Civic Theatre Society Feasibility Study Results and Business Plan 38

45 Appendix III: Population Breakdown for Nelson & Region Age Population Breakdown for Nelson % of Population Extrapolated breakdown for entire market area , % 4, , % 3, , % 3, , % 3, ,535 15% 4, , % 3, % 1, % 2,309 Total 10,230 26,998 Appendix IV: NCTS Membership Breakdown Nelson Civic Theatre Society Feasibility Study Results and Business Plan 39

46 Appendix V: Membership Breakdown, Distance from Theatre Using Postal Codes, we calculated the distance from our theatre to our member s home addresses. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 40

47 Appendix VI: Membership Distribution Sample Using Postal Codes & Google Maps we have plotted our memberships geographically. Figure 1 - Memberships - Region Figure 2 - Memberships - Nelson Nelson Civic Theatre Society Feasibility Study Results and Business Plan 41

48 Appendix VII: Survey Results, Yearly Cinema Visits We asked our members How many times have you traveled to Castlegar to watch a movie in the past year? 799 members and website visitors answered this question. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 42

49 Appendix VIII: Member Comments A sampling of member comments, collected from membership forms. *Important to have public film choice * Vegan popcorn * Coconut oil popcorn *Opportunity for guest speakers & presentations A town without a movie theatre is like a town without a grocery store. Been going to the Civic Theatre for 50 years, nearly every week. Bring back Thursday night movies. Each time we traveled to Castlegar it included dinner and a show. For my grandkids! Having grown up in Nelson I can't imagine my childhood or teen years without almost every weekend going to see a movie. Kids need movies and so do adults. I am a chef at XXX X XXXXX & owner. I have suggestions regarding concessionary. I am so thrilled all of you are making this happen! I hope the theatre stays. I have many memories for going with my friends in the past. I can't wait to see movies again. Not quite an artsy city without a movie house. I grew up in Nelson and I have many fond memories of movies at the Civic. I want to see them continue even though I live in Vancouver. I grew up with the theatre & want to be able to see movies in Nelson again! I hope you are successful - I'm tired of ONLY DVD's on my TV! I REALLY want our theatre back and please try to include intermissions (great chance for more concession sales) & possibly wine, beer & ice cream (Little Miss G) I was born and raised here in Nelson. I have a lot of memories of the theatre. I could not imagine being a youth in this city now without a movie theatre. I would like to see alternative movies (as well as regular releases). I would like to see the Civic Theatre remain a theatre. I'm sure that tourists would welcome the opportunity to attend a movie. I'm hoping you will be able to "stream" live performances - I have heard it is even done from London West End Theatres. Also foreign films, documentaries. Thank you! Important to re open the Nelson Civic Theatre (cinema) as a meeting place for all again. Lots of labour and handyman experience/visual arts/interior deco Love going to the theatre; love what ur doing. Traveling for the next few months, then available to volunteer. Love Nelson and want to help it survive. Matinee if possible, French Canadian (with sub titles) No senior should be denied theatre (movie) entertainment in Nelson, BC!!! Really miss the theatre! I have been coming every summer for 50 years and we always went to the movies. The movies of late (Castlegar) have not been great, otherwise I would most certainly have traveled to Castlegar to see one. This is an essential part of our community - an opportunity to share culture, art and fun! We need this theatre for the city and its people near & far. We really would use the movie theatre here in town - much rather spend $$ locally. Glad this group has formed. Will be willing to help with labour when work commences. Would love to see foreign film nights and TED talks live stream. Nelson Civic Theatre Society Feasibility Study Results and Business Plan 43

50 Appendix IX: Letters of Support Nelson & District Youth Centre Nelson Civic Theatre Society Feasibility Study Results and Business Plan 44

51 Appendix IX (Con t): Letters of Support Watershed Productions Nelson Civic Theatre Society Feasibility Study Results and Business Plan 45

52 Appendix IX (Con t): Letters of Support Nelson Youth Theatre Nelson Civic Theatre Society Feasibility Study Results and Business Plan 46

53 Appendix IX (Con t): Letters of Support BR 51 BC Senior Citizens Nelson Civic Theatre Society Feasibility Study Results and Business Plan 47

54 Appendix IX (Con t): Letters of Support Astral Media Nelson Civic Theatre Society Feasibility Study Results and Business Plan 48

55 Appendix IX (Con t): Letters of Support The Capitol Theatre Restoration Society Nelson Civic Theatre Society Feasibility Study Results and Business Plan 49

56 Appendix IX (Con t): Letters of Support Association des Francophones des Kootenays Ouest Nelson Civic Theatre Society Feasibility Study Results and Business Plan 50

57 Appendix IX (Con t): Letters of Support Lions Club of Nelson Nelson Civic Theatre Society Feasibility Study Results and Business Plan 51

58 Appendix IX (Con t): Letters of Support Nelson & District Chamber of Commerce Nelson Civic Theatre Society Feasibility Study Results and Business Plan 52

59 Appendix X: Abandoned single-screen theatre model Estimated development costs of an up-to-date, code compliant single-screen venue, which was abandoned once it was deemed unsustainable. BUILDING DEMOLITION AND ASBESTOS REMOVAL 150,000 FOYER CONCESSION AND WASHROOMS 321,200 AUDITORIUM 593,885 Walls: 69,500 stud and insulation to lower 15' of side walls 31,800 upgrade firerating at back of stage 24,800 enclose truss for proscenium arch 9,000 partition walls to washroom 3,900 Doors: 10,845 4 light and lock 6,545 1pr exterior exit 4,000 repaint existing dressing room 300 Finishes 82,900 Fittings and Equipment: 86,150 theatre seats, ,750 roof hatch and ladder 4,000 wc partitions and accessories, incl. Vanities 5,400 signage 4,000 Electrical Systems 95,000 Mechanical Systems 195,500 GC Overheads and Fee 53,990 Design & Pricing Contingency 53,990 TOTAL CONSTRUCTION COST 1,605,085 Design, fees, permits, project contingency 25% 266,271 TOTAL PROJECT COST 1,331,356 Nelson Civic Theatre Society Feasibility Study Results and Business Plan 53

60 Appendix XI: Capital Cost Estimate for Theatre Conversion Quantity Surveyor Jim Bush, of Jim Bush & Associates Ltd., of Surrey, B.C. ORDER OF MAGNITUDE ESTIMATE - Existing Building Renovations October 2, BUILDING DEMOLITION & ASBESTOS REMOVAL $150, Tear-out of Building Interiors 51, Asbestos Removal 74, Lead Paint Remediation 25, Other Environmental Remediation Not Included 2 MAIN THEATRE (incl. Access Ramp & Exit Corridor) $811, New Demising Walls, Fire Rating to Stage 142, Projection Booth 42, Doors 22, Finishes 60, Fittings & Equipment (incl. install seats) 40, Electrical Systems 157, Mechanical Systems 199, Elevators NONE 2.9 GC Overheads & Fee 73, Design & Pricing Contingency 73, No. CINEMA'S FITOUT (incl. Storage & Upper washrooms) $557, New Walls 53, Storage Room Construction 12, Doors 14, Finishes 42, Fittings & Equipment (incl. install seats) 67, Electrical Systems 95, Mechanical Systems 170, GC Overheads & Fee 50, Design & Pricing Contingency 50,700 4 FOYER, CONCESSION & WASHROOMS $321, New Walls 9, Doors 9, Finishes 40, Fittings & Equipment (incl. Concession Equipment) 37, Electrical Systems 32, Mechanical Systems 130, GC Overheads & Fee 30, Design & Pricing Contingency 29,800 5 EXISTING BUILDING UPGRADES Not Included 5.1 Roof Replacement including insulation upgrade Not Included 5.2 Seismic & Structural Upgrade of existing building Not Included 5.3 Base Building Systems Upgrade - Electrical Service, Water Supply etc. Not Included TOTAL CONSTRUCTION COST (Excl HST - Oct 2012 Dollars) $1,840,000 Design Fees & Expenses Project Contingency (incl Change Orders during construction) Permits, Insurance, Project Administration, Legal Fees etc Payable TAX 25% $460,000 TOTAL PROJECT COST $2,300,000 James Bush & Associates Ltd. Professional Quantity Surveyors Order of Magnitude Cost Estimate JBA Nelson Civic Theatre Society Feasibility Study Results and Business Plan 54

61 Appendix XII: Approximate breakdown of City's capital costs These costs appear in our overall funding plan and estimated budget, and look forward to working with the City to secure outside funding. See Section Demolition $38, % of 51,000 Asbestos removal $74, Lead paint remediation $25, Electrical upgrades $95, % of 158,100 Wall insulation $31, ceiling drywall $21, Fire rating upgrade $24, proscenium $10, HVAC $257, % of 429,400 Testing for hazmat unknown TOTAL $578, GC overheads and fee $44, % of total Design and pricing contingency $44, % of total TOTAL $666, Percentage of Total Capital Budget: 36% Nelson Civic Theatre Society Feasibility Study Results and Business Plan 55

62 Appendix XIII: Conceptual Diagrams Lobby View Nelson Civic Theatre Society Feasibility Study Results and Business Plan 56

63 Appendix XIII (Con t): Conceptual Diagrams Auditorium Plan Nelson Civic Theatre Society Feasibility Study Results and Business Plan 57

64 Appendix XIII (Con t): Conceptual Diagrams Upper Auditorium Plan Nelson Civic Theatre Society Feasibility Study Results and Business Plan 58

65 Appendix XIII (Con t): Conceptual Diagrams Section Through Auditorium Plan Nelson Civic Theatre Society Feasibility Study Results and Business Plan 59

66 Appendix XIII (Con t): Conceptual Diagrams Option A - New Construction Nelson Civic Theatre Society Feasibility Study Results and Business Plan 60

67 Appendix XIII (Con t): Conceptual Diagrams Option B - New Construction Nelson Civic Theatre Society Feasibility Study Results and Business Plan 61