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Nathan Kaplan has a vision.
What he doesn't have yet is the money.

by  BOB DORAN

by BOB DORAN

NATHAN KAPLAN IS ON A MISSION. THE FORMER ADVERTISING salesman has spent the last five months working on a plan to purchase the Arcata Theatre, a landmark building just off the city's plaza. Kaplan has assembled an investor group and a board of directors for something he calls the Arcata Theatre Multimedia Group.

Kaplan's grand plan: "bring the building back to its original Art Deco state" while adding "complete 21st-century technology," including state-of-the-art digital sound and video recording equipment.

He has a deal on the table. The building's owner, Robert White, has agreed to a $455,000 purchase price. All Kaplan needs to do is find the money -- and fast. The agreement has an expiration date, Nov. 15, and it is not certain that White will extend it.

Up until last Wednesday, Kaplan -- who has never before attempted a project of this kind -- was confident that the city of Arcata would provide a sizeable loan, $364,000, to help with the purchase. But after making a presentation at the Nov. 6 City Council session, he stormed out when it became apparent that his request would not be granted.

The council continued the discussion in his absence, with at least one council member expressing unease at Kaplan's inexperience. The council ended up deciding that Kaplan could apply for a loan for as much as $100,000, one that could be approved by staff and the city manager without a vote by the council.

Bolstered by that development, Kaplan by week's end seemed optimistic, saying he was looking for additional funding and hoping that White will give him more time.

A love for music

Born in San Francisco and raised in the East Bay, Nathan Kaplan says he "got into music in the fourth grade -- and it's been an integral part of my life ever since." After graduating from San Ramon High School in Danville, where he played drums in "an award-winning jazz band," he attended California State University at Hayward and earned a music degree. After college he joined his father in a firm that franchised convenience food stores in the Bay Area and worked there from 1982 to 1990.

"I got married in 1984, had my first child in '86, my second in '88, a boy and girl respectively, and shortly after that their mother abandoned them and she hasn't been heard from since," he said.

Kaplan moved to Humboldt County in 1992. "I came here with my children and a car that barely ran. It was a hard thing to go through. I had to learn how to be a mom and a dad.

"I worked for KXGO [radio station] from '93 until '98 doing advertising sales, then worked for KWPT down in Fortuna for about two years. And here I am today."

Where is he? Well, when he's not playing drums at a recording studio in his Arcata home or with the local group Stone Crazy, he's working on his proposal to purchase the Arcata Theatre, a former movie palace that, aside from two shows in May, has been dark since the beginning of the year.

The deal

For more than a quarter-century the Arcata was owned by David Phillips and the Minor Theatre Corporation. Phillips, who bought the Arcata in 1974, still owns the Minor Theatre, along with the Broadway Cinema and The Movies at the Bayshore Mall. (See "A Love Affair with Film," North Coast Journal, Jan. 27, 2000.)

The economics of today's movie business, in which it is difficult to run a large single-screen theater like the Arcata, eventually persuaded Phillips to sell. When he put it on the market, he was approached by Robert White, an investor from out of the area.

White got interested after being contacted by music promoter Lincoln Wachtel, who formerly handled booking for Café Tomo. The plan was for Wachtel and White to work together in turning the theater into a music venue. A purchase agreement was forged, one that involved a complex three-way land swap that included local developer Don Murrish of Murrish and Associates.

Murrish got involved in the transaction because he owned a piece of land behind the Mill Creek Shopping Center in McKinleyville where Phillips wanted to construct yet another movie complex: the McKinleyville Cinema. When the transaction was completed, Phillips had a site for his new multiplex (now under construction), White owned the Arcata and Murrish held a $135,000 note on the building.

When White took possession in April of this year, he and Wachtel got to work immediately. Unfortunately, they moved forward without keeping city officials informed about what they were planning. The city balked at requests for a dance permit and a beer and wine license and White found himself enmeshed in a bureaucratic quagmire.

The theater finally opened in mid-May for two poorly attended shows, where White lost money. White and Wachtel subsequently had a falling out. At that point White decided to cut his losses. He put the theater up for sale and left town.

The darkened marquee of the Arcata left a hole in the city's nightlife. Not long after White left, rumors started flying about who might take over; according to one story, Nathan Kaplan was spearheading a group of investors who wanted to purchase the Arcata.

In July, Kaplan confirmed that he had made an offer and publicly laid out his plan. "Cities all across the U.S are faced with converting these old theaters. We're at the right place at the right time," he said.

Summer turned to fall, Kaplan made an offer, White countered, the two failed to come to terms. Kaplan regrouped and, with Murrish acting as his agent, negotiated a price of $455,000. Murrish agreed to carry his $135,000 investment forward. Kaplan lined up $80,000 from his investors and looked at getting redevelopment funds to make up the remaining balance for purchase and start-up costs. While the deal was different, his plans for the building remained the same.

THE PLAN

Kaplan's Arcata Theatre Multimedia Group has admittedly ambitious long-term plans -- Kaplan envisions turning the Arcata into a high-tech venue and recording studio. But Kaplan says he's ready to start small.

"The first year we will concentrate on community-based type events," he said. "We'll start with elementary school, junior high, high school, college community oriented performing arts type shows that will be very affordable for all ages. There's a great need for kids to have a place to go that will be drug and alcohol free.

"That will probably account for 30 percent of our revenue. The other 70 percent will probably come from major shows and booking out daytime use for conventions or for gatherings, whatever."

Kaplan has laid out a day-by-day schedule for what will go on in his "multimedia performing arts venue" once it opens.

"To start out, we feel Mondays will probably be dark, and if not, that will be one of the days when major events will roll through town. Groups often stop off here on Mondays and Tuesdays," he said.

"Tuesday night we plan on having a [Grateful] Dead night. We might have a drum circle where you come in and pay $2.50 or three bucks to join in for a few hours, followed by local entertainment by jam-type bands -- and Humboldt has a prolific number of those.

"Wednesday night will be the blues night, kind of like we used to have at the Jambalaya. Thursday night would be alternative. Friday night would be country and bluegrass. Saturday night would be hip-hop.

"During the day Saturday, we will have a musical matinee featuring up-and-coming artists from all grade levels including college. On Sunday we'll have a classic movie matinee. Now that might take a while to get all that together, but those are absolutely our plans."

Over the long term, Kaplan wants to turn the facility into a high-tech multimedia theater.

"My estimate is by the third or fourth year we will start implementing state-of-the-art digital technology: digital movie cameras and projectors, full-on DVD capability so bands can come in and mix and master their DVDs," he said.

"There will be data cable wired throughout the building so we can do satellite hook-ups with VH-1 or perhaps a simulcast with a venue in Petaluma or Manhattan, New York. These are the types of things we want to do, to [apply] emerging technology."

He estimates the cost of the improvements at "anywhere between $1 million to 2 million."

Where will that money come from? "From grants, from revenue generated. The revenue will be generated based on community participation."

Kaplan is adamant in his belief that he can turn a profit. "We are a for-profit company. That's the only way it will work." He dismissed the suggestion that turning a profit by booking touring acts is often easier said than done, making comparisons to the Eureka Theater.

"What do you think Merle Haggard is bringing in?" asked Kaplan, referring to a concert held the same night he was making his presentation to the Arcata City Council. "If they sell out, what do you think the booking agent stands to make? Well, between $10,000 and $15,000, and that goes right into his pocket. We will have an in-house booking agent on either a commission or a salary, and that profit will go back into the company."

At the Eureka Theater that night, the promoter, Washington Vera, said that the Haggard show did not in fact sell out. Asked if he expected to make $10,000, Vera replied, "I wish." He said he is hoping Kaplan's group gets the building because he is interested in booking shows there.

Kaplan says Vera is a member of his board of directors. Other members include a scientist at Lawrence Livermore National Laboratory and an international music marketing executive who, according to Kaplan, discovered the pop group The Cranberries.

High hopes

Kaplan had high hopes for his presentation before the Arcata City Council last Wednesday. City staff had looked over his plans and helped him draft an ambitious proposal for a $364,000 business loan that entailed waiving some rules to shift funds from the first-time homebuyers program and the housing rehabilitation program into economic development.

Kaplan felt he had support from City Manager Dan Hauser and from planner Larry Oetker [in photo at right], who oversees the Community Development Block Grant program (CDBG), the likely source of the loan. He had also run things by the Redwood Region Economic Development Commission (RREDC), which had agreed to perform underwriting services. He assumed that the council would respond with an enthusiastic yes.

Things did not go as planned. To begin with, his item did not come up until two hours into the meeting, and by then his supporters had left. When his time finally came, City Attorney Nancy Diamond informed the council that because of the nature of the proposal, protocol required a hearing with 10 days notice. After some wrangling the council moved the item to new business so Kaplan could speak.

Kaplan made his presentation, there was some comment from others in attendance and the council began its discussion.

Connie Stewart started things off by saying that she did not feel the council should waive its rules to allow for such a large loan and should stick to its usual $100,000 limit. Bob Ornelas was far less enthusiastic and said so flatly.

"All that was presented to the council was a concept paper, a sketch of possible uses for the theater," Ornelas reiterated the following day. "There was no income projection, no payment reschedule. It just listed some of the things that could happen in the building."

"City staff were the only ones who saw my numbers," said Kaplan, also speaking the day after the meeting. "We're not expecting the moon, but it is going to generate revenue. The City Council had not seen that. With Bob [Ornelas'] comment, I got upset and walked out. I said, `Thank you very much' and waved at them."

"I might have been abrupt," Ornelas acknowledged, "but we were talking about funneling money from other worthy causes into [this business]. It did not seem fiscally responsible."

For Ornelas it boiled down to a simple question: "Where's the money?"

"I saw no money-making aspect within his concept paper. Where are the income projections? Where's a realistic look at the overhead and costs, the management team? How many employees? All those things belong here. It was full of holes. I don't see how [his plan] could pay for the utilities and the staff, let alone pay for what was described as a loan.

"This is not an easy business to get into," he went on. "It is high risk. The chance of losing money was made apparent by Robert White. Owning and operating a building like that is big business. And we don't really know [Kaplan] as a business person. He's so underfunded and the city should not take such a huge risk with someone who has no track record.

"[The council] even talked about the city buying the building. But is Nate Kaplan the person we would want to manage the facility? I had to ask myself that when he walked out."

You would think that the council's response would leave Kaplan crestfallen. It did not.

"Wednesday's council meeting did not set us behind," he said on Friday. "It moved the timeline a bit, but we do not consider it a setback, nor are we discouraged. We are moving ahead as scheduled."

Kaplan was mollified, in part, because Oetker had informed him that the city was moving ahead with a petition for a $100,000 loan. "To make a long story short, the city is going to be helping out. They just couldn't do what the staff recommended, so they are going to do what they feel comfortable with, the maximum by the guidelines.

"My investment group has to come up with probably another $40,000 and then RREDC is going to go ahead and lend for the acquisition. We just have to get the numbers right and make sure it's all copasetic. We're just looking at RREDC lending more than the city of Arcata. That's it."

White is skeptical

But according to Realtor Debbie Bindel, who represents White in the sale, it might not be so cut-and-dried. She explained that the deal on the table has a rapidly approaching expiration date.

"We have to have an answer by Nov. 15 as to whether the city will approve his loan," she said. "We'd love to see Nathan work it out. I think he certainly has worked hard on it. It's too bad he didn't get the funding."

Kaplan is hopeful that White will extend the deadline. He assumes that since White will begin making payments on his loan some time early next year, he should be eager to get out from under.

"I'm in no hurry," said White in a call from his office in El Sobrante. While he did not close the door on an extension, he expressed dismay that Kaplan had led him to believe funding from the city was "a done deal."

"Bottom line is when you're entering into a real estate contract and making a bid, you should have your ducks in a row," said White.

According to Bindel, there have been other serious inquiries about purchasing the theater.

"We've had quite a bit of interest but we haven't had any other written offers," she said. "One thing that's been a little discouraging is the media keeps saying that this guy [Kaplan] is going to get it, but they have never talked to me. That makes my job harder because people call and say, `I've heard it's sold.'"

White, for his part, said "Nathan has his work cut out for him.

"I would like to say I have faith in his belief that he can make this thing happen. But I also believe these other interested parties are much more viable. Nathan [has to] somehow create a miracle in the very near future before these other people create an offer."

RREDC TO the rescue?

If Kaplan is looking for a miracle, Redwood Region Economic Development Commission's executive director, Gregg Foster, may be an angel. At least that's the impression you might have if you read a story in the local daily last Friday.

"You may have read in the paper that we've committed $200,000. I read it too," said Foster, speaking Friday afternoon. "The deal is, I think [Kaplan will] make applications here and we will consider them, but we've made no commitments at this point."

Under RREDC guidelines Kaplan could potentially ask for as much as $300,000 as long as he has collateral. "The security would be the building," said Foster. "We would probably be looking at a second position mortgage behind Murrish."

Foster said that is something his organization, which often lends to people who can't get financial assistance elsewhere, has done in the past. "The theory is, if the loan goes bad, we could both get paid off from the proceeds from the sale of the building."

There is some uncertainty about how much money Kaplan can borrow since Kaplan has not yet had the theater appraised. He says his investors were hesitant to pay the cost, which could run as much as $10,000. Without that appraisal, RREDC would look at the building's most recent purchase price to set a value -- the $385,000 White paid to Phillips.

"We might have to get a broker's opinion or some third-party review," said Foster. "Because it's a special purpose building we'd want to be able to do some due diligence, [investigating] to be sure that the value is there and the salability is there."

Foster said that RREDC has occasionally lost money on defaulted loans over its 25-year history, "But now we're pretty good about making sure we're covered by the assets of the business."

Humboldt County's redevelopment agencies have ended up in some awkward situations in connection with past loans. The city of Arcata lost a bundle when the Hotel Arcata project went bankrupt. Foster pointed out a more recent deal where a number of agencies made loans to North Coast Hardwoods.

"People were lending much more against the business than it was worth, so when it went bankrupt, lots of money was lost, hundreds of thousands of dollars. Six Rivers Bank lost money and Arcata some lost money."

The city may still chip in

As for the possibility of getting a loan of up to $100,000 from the city, Oetker, the Arcata planner, said that since no council action is required it could happen relatively quickly.

"It will take some time to do the underwriting, but we are hoping to do a preliminary assessment with some contingencies by the Nov. 15 deadline. There are a host of things that need to be completed: environmental documents, credit reports, title reports, those sorts of things. There's no way we can get all of that by Nov. 15, but we should be able to get sufficient information to be able to say, if all those things are a go, then we would be able to loan them the money."

The money would come from Community Development Block Grant funding, normally used for housing rehabilitation programs and homeless services. But CDBG money can also be used for economic development, as long as it results in new jobs. Rules specify that at least one job must be created for each $35,000 loaned. Recent CDBG loans include a $50,000 expansion loan to Wing Inflatables and a loan to Munki Munki, a children's apparel company, used for materials.

"Generally you can use the money for any purpose as long as the ultimate beneficiaries are low-income individuals. In this case the low-income person would be the one who gets a job," he said.

But Oetker had more on his mind than jobs when he looked at Kaplan's plan. He sees it as a step in the right direction for downtown revitalization.

"When you walk down H Street at night, it's dark; there aren't many people walking around. What the city is all about is getting people walking around, shopping, going to theaters. The hustle and bustle of when 50, 100, 200 people join together for one event and come out all at the same time, that's what we want to see."

Kaplan is the first to admit that his plan will "take a lot of work and support from the community. Every business needs a lot of support -- and an A, B, C and D plan. You never give up. You never say no to an obstacle.

"I feel like I'm the guy for the job," he says with passion. "If anybody can do this, I can."

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