Second Stage to Leave Its Off Broadway Theater
Jan 7
2025, 07:14:51 PM
SIGNATURE AUDITOR RAISES ‘SUBSTANTIAL DOUBT’ ABOUT NONPROFIT’S SURVIVAL
January 7, 2025 by Philip Boroff
EXCLUSIVE: Signature Theatre Co. — which raised the bar off-Broadway by devoting entire seasons to the work of major dramatists while offering $25 tickets across the board — is struggling to stay afloat.
Lutz and Carr, the company’s auditor, said it has “substantial doubt about the organization’s ability to continue as a going concern.” The accountant’s alarm accompanies financial statements completed in August 2024 that were posted on the New York Attorney General’s charities registry during Christmas week.
“It doesn’t mean the organization will definitely cease operations,” Thad D. Calabrese, professor of public and nonprofit financial management at New York University, said about the accountant’s warning. “But it raises the red flag that it is a distinct possibility.”
Lutz and Carr cited Signature’s net asset drop of $6.6 million, or 17 percent, in 2022-23. Most of its remaining $33 million of net assets were related to its theater complex on West 42nd Street. Another “significant” but undisclosed net asset drop followed last season.
The audit also flagged real estate loans that Signature stopped paying interest on in March 2020. As of June 30, 2023, the principal and interest due on the defaulted debt totaled $19.8 million.
Signature’s existential struggle coincides with what American Theatre magazine called an industrywide “crisis of contraction” since the pandemic. In response to anemic audience demand and escalating production costs, nonprofit theater companies throughout the U.S. have slashed programming and staff — when they’re not shutting down entirely.
This season, Signature is producing just three plays, down from eight a decade ago. On Monday, it announced that film and TV star Brendan Fraser (The Whale, The Mummy) dropped out of Samuel Hunter’s Grangeville for unspecified reasons. Fraser will be replaced by Paul Sparks, a six-time Drama Desk nominee who’s busy in movies and television but less of a marquee name.
Signature’s first show of 2024-25, Dominique Morrisseau’s Bad Kreyòl, was a co-production with Manhattan Theatre Club — an increasingly popular strategy by theater companies to pool resources.
Signature management attributes its precarious position “to the challenging environment of post-pandemic off-Broadway theatrical production and its audience,” according to the financial statements. To stabilize its finances, the Signature board approved a balanced budget for 2024-25, which included cutting $500,000 in personnel costs and “outsourcing of production personnel.” For years, the company has rented out its three theaters when they’re idle, and it recently reached a long-term rental agreement with a nonprofit company it didn’t name.
The new tenant, a person familiar with the situation said, is Second Stage Theater, which relinquished its off-Broadway space, the Tony Kiser on West 43rd Street. (Second Stage continues to own a Broadway venue, the Helen Hayes.) On Feb. 12, the Second Stage production of D.A. Mindell’s On the Evolutionary Function of Shame is scheduled to begin previews at Signature’s largest venue, the 294-seat Irene Diamond Stage. Donald Margulies’ Lunar Eclipse, another Second Stage show, is to play Signature’s Diamond Stage in May.
Signature’s rental income was a modest $1.4 million in 2022-23, although that exceeded membership fees and box office income from its own productions.
Inspired by working with playwright Romulus Linney, James Houghton, an actor at the time, started the company in 1991 to showcase playwrights by presenting multiple works by the same dramatist over one season or several seasons. “You could walk through five rooms of Picasso and understand he had a Blue Period, and better understand those two Picassos that are already in your head,” Houghton told Ben Brantley in 2016. “We do that for music, we do it for fine arts, we do it for dance. We don’t do it for theater. And so I tripped my way into that idea.”
In 2012, Signature’s theater complex designed by Canadian-American superstar architect Frank Gehry opened, a project budgeted at $69 million. Even with $27 million in capital funding from New York City and tens of millions of dollars from other sources, Signature took out loans to finance it. The complex was named for hedge fund manager Bill Ackman’s Pershing Square Foundation, thanks to its $25 million gift underwriting Signature’s accessible ticketing initiative. In 2014, Signature became the first New York City company to win a regional theater Tony Award.
The company’s leaders — Executive Director Timothy J. McClimon, Board President Douglas E. Chittenden and Chairman Edward Norton, the actor — declined to be interviewed for this story.
“It’s no secret that Signature, like so many non-profit theaters in New York and across the nation, is facing financial challenges,” McClimon said in a statement sent by spokesman Blake Zidell. “That said, we are genuinely optimistic about the future. We’re working to build partnerships that will enable us to thrive in the Pershing Square Signature Center, which is so meaningful to so many in the community, and remain steadfast in our commitment to our mission of being a home for storytellers and a place for all.”
Houghton, one of theater’s most revered leaders, died of stomach cancer in 2016, at 57, an incalculable loss. He was succeeded by Paige Evans, who stepped down in June 2024 after eight years. On Nov. 1, Emily Shooltz, a veteran of another highly regarded nonprofit company, Ars Nova, took over as artistic director.
Beginning in 2012, Signature offered every seat in the initial run of a show for $25. Now, Signature offers some tickets for $40 (or $20 for students) and others at market prices.
In December 2022, Signature reached a forbearance agreement for one of its defaulted loans; interest continued to accrue but the company temporarily wasn’t required to make payments. There were negotiations with lenders in 2024 about reducing the debt and eliminating some interest, according to the financial statements. Whatever the resolution, Signature will remain under pressure.
The company had $1.9 million in cash as of June 30, 2023, down from $5.6 million a year earlier. To fund operations over the past two seasons, the board drew down half of a $2.2 million reserve fund and most of a $526,000 endowment set up to support productions.
Financial statements are prepared under the assumption that an organization will carry on, NYU’s Calabrese said. “If the auditors believe there is a serious risk that the organization will not continue in business, it must be disclosed in the financial statements, as this one does.”
Houghton’s visionary concept was to present entire seasons of shows by playwrights such as Edward Albee, Sam Shepard and Lynn Nottage at affordable prices. Preserving that legacy hinges on how management is mitigating the crisis as well as Signature’s future financial performance.
https://broadwayjournal.com/signature-theatre-auditor-raises-substantial-doubt-about-nonprofits-survival/
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