Harvard business reports (1930)

Record Details:

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488 HARVARD BUSINESS REPORTS street. The owner of the adjoining property wanted $40,000 for his land, and negotiations for the purchase at an acceptable price were fruitless. The company did not consider the purchase of the church property. The original parcel of land would cost approximately $110,000, the building $250,000, and the equipment about $65,000. Financing could be accomplished by part payment on the land, a second mortgage to the owner for the balance of the land cost, a bond issue for $200,000 secured by a first mortgage on land and buildings, and the remainder from past earnings and future installment payments. Athens Theaters, Incorporated, decided to build a theater. The land was purchased by a subsidiary of the corporation, this subsidiary being a corporation formed for the sole purpose of owning and operating this particular property. Although the law did not require fireproof construction, it was used. As a result of building with attention to the special division of risk and the addition of sprinklers and standpipes, one of the lowest insurance rates in the state was secured. The judgment of Athens Theaters, Incorporated, as expressed in the erection of this theater, was justified. A considerable number of the "store shows" were closed soon after the new theater was opened. The project marked the transition of exhibition to a strongly organized chain of theaters against which weak individual owners or lessees had little chance in competition. In less than three years, the theater was in a position to pay off all its indebtedness. The failure to purchase the adjoining property was later considered to have been an erroneous decision, as the limited ground area restricted operation of the theater. When two shows were given in an evening, there was insufficient space in the lobby for people who arrived before the first performance ended. Potential customers were obliged to wait on the street. The additional space would have been worth many times the price wanted for the land. The company also believed that it would have been wise to purchase the church property for appreciation in value resulting from the location of the theater. From 1913 to 1928, many changes occurred to affect the situation. Milltown continued to prosper until the end of the period of post-war prosperity. The prohibition amendment diverted a great deal of business from the saloon to the motion picture