DOWNTOWN — There’s a hitch in AMC’s plans to build a 12-screen movie theater on Fourth Street, with the theater operator running into a possible obstacle meeting its obligation to ensure that the new 2,200-seat complex results in only a moderate increase in the total number of theater seats Downtown.

AMC has plans to demolish a City Hall-owned parking structure near Fourth Street and Arizona Avenue in order to proceed with the new theater. While the City Council has final say on the project, city officials have already made it clear they want the project to result in a net gain of no more than 570 theater seats Downtown, citing the traffic and parking concerns.

Since AMC operates three theaters Downtown — all of them located on the Third Street Promenade — the company has several options for eliminating seats.

But its initial plan, referenced in a City Hall report on the theater proposal, may no longer be viable.

AMC had suggested closing its smallest theater, the Broadway 4, even though the company has a lease for the site that runs until 2014. By closing down the theater for at least a year, the theory went, the needed permits to operate a theater would lapse. So any new theater operator who leased the space would have to go through City Hall’s approval process, meaning the Planning Commission could easily deny the permits, thus preventing a new operator from setting up shop.

Not surprisingly, Promenade Gateway, which earns millions of dollars by leasing the Broadway 4’s theater space to AMC, was none too pleased when it caught wind of the proposal.

“Obviously, it creates risk for us,” said Scott Blake, asset manager for Promenade Gateway.

After having attorneys review the Broadway 4’s lease agreement, Blake said he’s confident AMC can’t legally cease operating the Broadway 4 while its lease is in effect. He said AMC is required to continue operating as a theater while its lease is in effect, which means his company should be able to keep all of its “grandfathered” property rights and bring in a new theater operator once the Broadway 4’s lease expires.

Calls to John Warfel, a partner in the proposed new AMC multiplex and a member of Bayside District Corp. board, were not returned on Tuesday. But it seems clear that any attempt to shutter the Broadway 4 before 2014 would bring a legal challenge from Promenade Gateway — a development that could disrupt plans for the new multiplex.

Blake said last month he met with representatives from AMC and both sides agreed to work on an alternative solution to the problem. But he said there’s not yet a concrete plan for how to eliminate the roughly 1,600 theater seats City Hall has said need to go in order to allow the new project to move ahead.

“Up until recently, we really hadn’t had that much contact with AMC regarding their intention to close [the Broadway 4],” Blake said. “We are certainly hopeful that we can reach an agreement that works for everyone on the various sides.”

There are some reasons why Promenade Gateway, under the right circumstances, might look favorably on seeing the Broadway 4 close. Retailers, after all, pay higher rents than movie theaters do. But converting the Broadway 4 space into a site for a different use would require investment and, most likely, building approvals from City Hall, Blake said.

“That property was built around a facade that is unique to movie theaters, by city requirement,” Blake said. “If indeed the city wants us to change to retail, we just hope that the city will cooperate in doing so.”

He added he didn’t expect a potential deal to involve City Hall footing any portion of the bill to renovate the property.

City Attorney Marsha Moutrie could not be reached for comment on the city’s position in the negotiations by deadline Tuesday.

nickt@www.smdp.com

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