U., Cinemagic 3 spar over plans for new movie theater

Cinemagic's owner says Penn told him he is too inexperienced to run a proposed new theater. Andrew Sheppard, the owner and operator of the Cinemagic 3 movie theater, wants to bring a new, much-needed multi-screen cinema to University City. But the University says Sheppard lacks the experience necessary to construct a new theater for the Hamilton Village shopping center on 40th Street. And if such a theater is ever going to be built, the two sides -- who haven't spoken since December --Ewill have to find common ground, as Sheppard's lease gives him first shot at any new cinema project. Sheppard maintains that "we are prepared to do whatever it takes to protect our rights" to build the new theater. The months of negotiations between Sheppard and the University have been filled with confusion, charges and counter-charges. Cinemagic 3, the campus' only movie theater, opened on the 3900 block of Walnut Street in 1995, replacing the AMC Walnut Mall 3. Last April, the University initiated its plans for a new theater, as University City Associates, Penn's for-profit real estate arm, informed Sheppard that it planned to bring an art theater to campus. UCA told Sheppard they understood his position in wanting to run the new theater. But the agency also explained that "we're looking for someone with a lot more experience," Sheppard said. Although the University offered to buy out his right to have the first shot at any new development, Sheppard said the amount offered was "a total joke." "The only thing I could think it would mean is they're trying to really embarrass [me]," he said. In response, Sheppard told UCA that he would retain his right of first offer on any theater plans. In September, the University submitted an offer sheet to Sheppard detailing Penn's vision of the theater. The following month, Cinemagic's lawyers returned to the University a list of "about 15 different points that needed to be addressed in order for it to be a [valid] first offer," Sheppard said. The University maintains that the offer sheet was valid, but Penn Managing Director of Real Estate Tom Lussenhop acknowledged "that there were areas of confusion." Although Lussenhop said both parties were in touch "through the month of December," the sides have not met in the two months since. Nevertheless, Lussenhop expressed confidence that all of the differences between the two sides will be resolved within the next "month to month-and-a-half," resulting in an agreement for the theater to be operated by a company other than Cinemagic. But for Lussenhop's deadline to be met, either the University or Cinemagic will have to give ground. Sheppard indicated he would look favorably upon a multi-million dollar proposal to buy out his "right of first offer." But Lussenhop said any further discussions with Sheppard would focus on honoring the University's lease agreement with Sheppard, rather than simply buying him out. Sheppard said the most confusing part of the situation is the University's unwillingness to let him operate the new multiplex theater -- particularly since he feels that Cinemagic is responsible for the perception that University City can support a new mainstream theater in its community. When Cinemagic came to the area, Sheppard said, he was aware of the possibility that he would become a guinea pig testing the viability of a theater in the area, so he structured his lease accordingly. "We needed protection," he said. "We wanted a guarantee that they wouldn't allow another operator to come in" and capitalize on Cinemagic's success. Not too long ago, University City had two cinemas: the AMC theater in Cinemagic's space and the United Artists Eric 3 in the Hamilton Village shopping center. According to Sheppard, "both of them did whatever they could to never cater to students." "They were both constantly focusing on rough action pictures," Sheppard said. Because of that market history, the University could attract only two companies when it went looking for a student-friendly operator to replace the cinemas, both of which closed in 1994 when the University chose not to renew their leases. Cinemagic was eventually chosen to fill the space where the AMC cinema had been. By "catering to students as a first priority," Sheppard knew he was trying something that had never been done in University City. And now, according to Sheppard, the University's position is, "We asked you to prove this [could be done]. Nobody else could do it, but you did. Thank you very much and goodbye." But Lussenhop said that there are other factors involved. He added that the University has been very pleased with Cinemagic's performance. "Our engagement with Andrew was through the leasing of existing premises, not in the entirely different business of building from the ground up," Lussenhop said. One more experienced company which has expressed interest is Sundance, a joint venture of actor-director Robert Redford and General Cinemas. If a new cinema company is brought in, the future place of Cinemagic in University City's retail mix remains unclear. But Lussenhop maintains that there is room in the area for both Cinemagic and a new theater. "[Cinemagic has] got a lease that goes on for at least 10 years, and [Sheppard] has an obligation to be a part of [University City]," he said.