Mayor Bill Haslam announced today the City of Knoxville and Regal Entertainment Group have executed a letter of intent to develop an eight-screen, 2,000-seat movie theater in downtown Knoxville.
The letter outlines a proposed budget for the project that estimates the City of Knoxville Industrial Development Board will invest $3 million; operator Regal Cinemas will contribute furniture, fixtures and other assets up to $2.5 million; and the remainder will be raised from third-party investors.
A cost analysis of construction at the 500 block of Gay Street estimates that retaining the existing buildings will add at least $3 million to the cost of the project versus new construction.
Mayor Haslam met with members of Knox Heritage earlier today to inform them of this financing gap and to give them the data upon which the City's conclusion was reached. Knox Heritage has agreed to review the material and explore alternatives within 45 days. The City will give the organization $10,000 to match private funding of $10,000 to hire consultants to review the analysis, especially as it relates to tax credits available for historic buildings. The City's analysis concluded that tax credits to offset the costs of renovations would only be available for the project if 60 feet of the buildings were kept. That scenario would mandate a design that created retail space along Gay Street, with a two-story theater located behind.Johnson & Galyon Contractors, the Public Building Authority and Regal Entertainment analyzed construction costs using that scenario compared to new construction. "This is an important economic development project for Knoxville and it's imperative that we be judicious in our commitment of taxpayer funds and present a project that is financially viable for taxpayers, our partners and third-party investors," Mayor Haslam said. "This 45-day process will allow interested parties to see if other alternatives exist to make retaining the existing buildings an option that is affordable," the Mayor said.Regal Entertainment's Theatre Group CEO Mike Campbell said, "We're pleased to have executed a letter of intent with the City of Knoxville to develop a premier cinema in downtown Knoxville. We will continue to work closely with the City to build a state-of-the-art facility that will also complement downtown's unique design and character."Kim Trent, executive director of Knox Heritage, said, "We appreciate that Mayor Haslam has created this process and committed the time and resources to allow us to determine whether options exist to reduce the cost of renovation. Our goal is to make a better project for everyone, if possible." Construction on the movie cinema is expected to begin this spring and be completed within a year. The theater will offer stadium seating and exhibit first run and other commercially popular films from major distributors. The movie theater concept was initiated and Regal was selected by Kinsey-Probasco & Associates, the development team under contract with the City of Knoxville to redevelop Market Square. Knox County Commission has agreed to swap the City of Knoxville the property on the 500 block of Gay Street for the former News Sentinel site at Church Avenue and State Street. Regal Entertainment Group (NYSE: RGC) is the largest motion picture exhibitor in the world, operating 6,053 screens in 544 locations in 39 states. The Knoxville-based company operates about 17 percent of all screens in the United States including theatres in 46 of the top 50 U.S. markets.
