11 June 2016

New Theatre Royal 2015

Large capital projects take time; evidently so do blog posts about them.

Buildings can certainly be troublesome: chip away at the bricks and mortardecode the space, detach the income targets and the value of large capital projects suddenly becomes very fuzzy. Of course, contrarian internet chatter shall ne'er deter the march of progress and a slew of large capital projects are planned or currently taking place across the country, including, but not limited to; The Factory, Glasgow's Citizens Theatre, Hull New Theatre, development of St Peter's Seminary, Chester Storyhouse, Edinburgh Rose Theatre, London Theatre Company, NT Future, Oval House, Colchester Mercury, Octagon, Polka Theatre. Plus, of course, a brand new Merseyside Shakespeare theatre (note: this post has been a work in progress for so long that some of the above projects may have actually been completed by now...but probably not).

Portsmouth's New Theatre Royal officially reopened in March this year following their own large capital project. The theatre is a Grade II listed building, originally built in 1854, re-built in 1884, 1900 and arguably again in 2015. The most recent building works repaired damage done by a fire in 1972, returning the theatre to its former glory with a new fly tower and a 10 meter deep stage. The auditorium was increased in size from 500 to 700 seats and new offices, dressing rooms and a studio theatre (a learning centre developed in collaboration with the University of Portsmouth) were added in the vacant back lot.

The New Theatre Royal has seemingly staggered from closure to closure over the last 100 years. A lull in popularity in the late 1920's (attributed to the rise of radio, evidently the Netflix of the 20s) and rising operational costs nearly forced closure. It became a cinema in 1932 and operated thus until 1948. It closed in 1956, reopened as a rep theatre for a couple of years and then closed again. It was reopened as a boxing/wrestling arena and bingo hall. From 1966 onwards, the theatre seemed destined for demolition as squatters moved in and the fixtures and fittings were moved out; the 1972 fire seems somewhat inevitable with the benefit of hindsight. Damage from the fire was not repaired and the building was not protected by the owners or the council. Volunteers were allowed to enter in 1975 to secure the building and a Trust was established to fight (successfully) against the pending demolition of the building.

In 1980, ~£1mil (~£3.8m adj.) was spent on repairs on what was a dangerous husk of a building: the roof about to collapse and the balcony unsafe. The money spent made the auditorium and foyer structurally sound and helped restore some plasterwork. In 1994, the main dressing room block was demolished and 'temporary' (although it seems they were there for 20 years) dressing rooms were installed at the back of the theatre. In 2004 the theatre went dark for six months as the auditorium was scaled up from a capacity of 370 to 525.

The first mention of the 'back lot' project appears to be in the 2009 accounts, following a full structural survey of the theatre made that year (although one must assume that the dream existed before that date). Planning permission was granted in 2011 and initial estimates were that work could be finished by the summer of 2013. In reality, the theatre went dark in February 2013 and reopened in October 2015 (a 'soft' opening: the official opening took place in March 2016 as mentioned above). The oft stated overall aim of the project being to develop a 'theatre quarter' in the city of Portsmouth.*

Before getting into the New Theatre Royal's 2015 accounts, it's worth recapping the recent history of the back lot project.

In 2009, an initial agreement was reached with the University of Portsmouth to develop the vacant back lot (essentially a poorly functioning car park at the time). Part of the initial agreement involved the sale of land to the university, as well as the university contributing about 80% of the project costs. The New Theatre Royal appointed a professional fundraiser to the project to help raise the ~£4m required for their share of the project (the total cost being estimated at ~£24m, the remaining funds coming from the University of Portsmouth).

In 2010, architects Penoyre & Prasad were commissioned. The money from ACE began to flow, with an initial tranche of ~£100k. Over 70 applications were made by the New Theatre Royal to various trusts and foundations.

In 2011, the development agreement between the New Theatre Royal and the University of Portsmouth was extended. It now included development company Watkin Jones who intended to build student accommodation on the site. The idea behind this was that NTR would own the freehold, Watkin Jones would lease from NTR and then sub-lease to UoP. The ACE money from 2010 had been spent but ~£250k from Garfield Weston and £30k from Heritage Lottery came in. Lottery funding of £939,000 was also received in October 2011, with planning permission finally granted in December 2011.

In 2012, Watkin Jones pull out of the tripartite arrangement. This means the loss of  their ~£500k contribution to the project and delays whilst another partner is sought.  The NTR side of the project is split into two stages as a result - the structural works and the refit of the auditorium (which will follow at a later date). The Partnership for Urban South Hampshire (PUSH) funding starts coming in. The application to PUSH was based on the space becoming home to 10 new touring companies and 85 gallery exhibitions by 2013, a target missed by a country mile. Around this point, a transfer of ring-fenced restricted funds was made to the general unrestricted funds pot, with 'consolidation' the stated intent. Reading between the lines, this likely means there was no cash to pay the bills.

In 2013, the loss resulting from Watkin Jones abandoning the project was restated at £600k, a further £750k was secured from ACE. A bridging loan was then required from Parity Trust (to be explicit, this should again be read this as 'there was no cash to pay bills'). The construction contract was awarded to ISG (who also built the 2012 Velodrome). PUSH money comes in (~£500k). Further transfers totalling ~£200k are made from restricted back lot funds to unrestricted general funds. The second stage of works (auditorium refit) appear to have now been abandoned. The theatre goes dark.

In 2014, work was ongoing. Cash was clearly in short supply as £1.5m of restricted back lot funds was again transferred to unrestricted general funds. It's worth remembering that throughout all of this, the New Theatre Royal was (and remains) part of ACE's National Portfolio with annual funding of around ~£100k. The theatre continued their outreach work, retained a skeletal staff and clearly worked hard to make it clear that the lights were off but somebody was home.

In 2015, major delays to the project meant missing the planned March 2015 opening. The Foyle Foundation increased their support and ACE stepped in with additional financial intervention. The theatre finally had a soft opening in October 2015, most likely because their future NPO status depended on hitting that date. Official opening occurred in March 2016.

The 2015 financial statement for New Theatre Royal Trustees Ltd. (governing group) is shown below:

Clearly, there is money coming in and pure bottom line analysis suggests cartwheels are in order. In reality, almost all of the income was from voluntary income and relates to grants intended for the back lot project.

The percentage of income derived from charitable activities is exceptionally low due to the theatre's closure and the high level of fundraising. What is worth noting is that the level of expenditure on charitable activities remains relatively high at £377,479. Around £72,000 of that has been booked as 'Production costs - marketing and advertising' which can only be described as a terrible return on investment. Another ~£34,000 was attributed to touring company fees, ~£190k for staffing costs and the rest in miscellaneous fees (such as legal, audit etc.) or expenses (travel, printing etc.).

The reason that the financial statement shows a significant surplus for 2014 and 2015 is that, as a large capital project, expenses relating to the back lot project have been capitalised rather than listed as expenses in the period in which they were incurred. This means that the cash received in relation to the capital project is written onto the balance sheet as a fixed asset in 2015. That asset is then depreciated over a set period of time and at a set rate.

The New Theatre Royal were not obliged to provide a cash flow statement this year but should do so in the next accounting period. This is due to a change in financial reporting standards. In order to opt out of preparing a cash flow statement, organisations must be considered micro-entities which means they must hit 2 of the following 3 criteria for 2 years in a row: turnover less than £632,000, Balance sheet total under £316,000 and less than 10 members of staff. In a sector that should pride itself on financial probity, it's surprising that more organisations don't publish cash flow statements. As it stands, we can only infer that the New Theatre Royal were not in a healthy place operationally.

Buildings are certainly troublesome.

*Field of Dreams