The Magic Castle and all Surrounding Land to Be Sold

[Dustin Stinett]

By the way Richard, having a historic designation from LA is no guarantee of anything (the Castle does not have a State Historic Landmark designation and likely never will).

As a wise man said, its easier to ask for forgiveness than it is to ask for permission.

After legally evicting its tenant, what do you suppose the fine would be to a corporate landowner if their old, empty historic but dilapidated building were bulldozed down as the result of an unfortunate accident in paperwork?

Dustin
(The Profit of Doom.)

[Guest]

So, where should the AMA consider moving the enterprise? If they do that, and find another name for it, it will generate $350,000/a year of extra revenue, with no change in finances otherwise. (if you don't understand why, you don't understand the current financial makeup)
______________________________________

If that represents the trademark fee, as I understand the percentage deal that was reported on this forum a while back, that suggests the gross is less than $7 mil a year.

[Guest]

David, lets say it is $6 mil. That means, with no changes in the current financial makeup at all, that the AMA would have to make do with $500,000 a month for rent and misc expenses.

BTW, after write-offs, they only made about $5,000 net this last year. With the plans to hire a person for a new GM position at a salary that has to be in excess of $100,000/year, you can look forward to a dues increase, just for that.

This is not an impossible task, if the planning starts right away. It takes time to figure out what property one wants, find property, make the renovations, furnish, manage the information (people will end up going to the Lane mansion, because they "know" that is where it is at!)
Transitions are not easy things, but are tremendously helped by careful planning, incrementally operationalized.

For example, having demonstrated that they have no clue how to profitably operate a restaurant and bar compared to professionals, they might partner with such an operation, and make a nice arrangement for both. Or, bag the dining issue altogether, and make the "Castle experience" less of an experience that requires some to take out a mortgage.

But such things take time to put together.

[Guest]

My last night working the Castle was the night of the annual meeting. It was something to be there and hear all the rumors buzzing about.

I had a nice talk about this subject with Milt. He and I have agreed to move the Castle to Coney Island in New York. So there.

[Pete Biro]

Todd... no problem with that, but I'd like to see it on wheels and tour the country. What a great membership drive that could be.

Seriously tho... I would love to have been a fly on the wall today where I spotted Board Members in a meeting with Ulloa, representing the land owners.

[Guest]

He and I have agreed to move the Castle to Coney Island in New York.

Then I can visit the Magic Castle AND the World Hot Dog Eating Championships in the same day.

YES!!!

DD

[Guest]

Dustin,

FYI

If a historical landmark was torn down, the City could impose Scorched Earth. This means that nothing could be built on that bare patch of earth, not even a parking lot, for 10 years.

[Guest]

"Sooorry Folks! Park's closed. The moose outside shoulda told ya." -John Candy

Looks to me like Coney Island won't be there much longer.

http://www.curbed.com/archives/2006/11/ ... fishes.php

[Guest]

Kirk the Magician wrote:
Dustin,

FYI

If a historical landmark was torn down, the City could impose Scorched Earth. This means that nothing could be built on that bare patch of earth, not even a parking lot, for 10 years.
_______________________________________________

In the real world it is highly unlikely that any such policy would be applied to people who can afford to spend $150 million or more on the land plus the money that would be spent on developing the property. If anything, they would apologize, possibly pay a fine, and that would be the end of it.

[Guest]

There is no "knowledgeable insider" that valued the property at 150 million - it was merely speculation by a Castle member. The actual valuation will be much, much lower given the building restrictions that are in place in th Hollywood area. Can the AMA buy it? I doubt it. Will it be bought by a group that will keep the Castle? I would say probably. I very much doubt that there will be a public sale of the land and buildings - it is much more likely to be a private sale without any bidding. My understanding, as a person who is at the Castle a lot (much too much according to my wife) is that all of the land must be purchased as the individuals who make up the trust that owns the land want a cash lump sum as opposed to the income from the land.
I have spoken with AMA Board members and we would be surprised if this happens any time soon. We may be wrong, but it would be hard for the individuals concerned to turn down a good offer - something very different from listing the properties for sale.

[Guest]

Brian, my man! I had no idea that you were the guy who does it all and knows it all! Great that you have personally talked to every person involved in this, and know for certain the exact details of every discussion, consultation, and outside estimate obtained by every party involved!

Wow, it will be great hearing the authoritative information from you, even as it happens!

:rolleyes:

[John LeBlanc]

"Don't get saucy with me, Bernaise."

[Guest]

Ill try to be pithy.

With properties like the ones being discussed, fair market forces will probably prevail, and absent some extraordinary act of beneficence, the purchase prices willing to be paid will reflect the current market. Whether or not thats enough money for the Glovers is up to them.

Brian Glicker wrote: I very much doubt that there will be a public sale of the land and buildings - it is much more likely to be a private sale without any bidding.

Since 99% of the properies in LA County (and probably any other county in CA) are sold privately, I certainly agree with Brian's first point. However, if there are at least 2 qualified and seriously interested buyers around at the relevant time, bidding i.e., competition to offer terms which are the most attractive to the seller will indeed take place, although it may not be termed and/or structured as such.

[Guest]

Brian - thank you for at least backing up your opinions by posting under your real name. ;)

[Guest]

The question is if the AMA could afford the mortgage or not, and everyone is saying, look at thier bottom line, last year, where would the mortgage payments come from,,, but remember when looking at the bottom line, you have to add back in rents and commissions that were paid last year, though of course, it is not still enough to cover the mortgage, but gives more opportunity for the AMA,,,, the other questions that arises, if the AMA did buy the castle, where does that leave Milt, it is my understanding that currently he is the leasor, and rents it out to the AMA, so if he is forced out of the picture (not my wishes), he would no longer be collecting his commissions,,, and the other matter is the parking area, if the future owners of the castle controlled the parking land, would they make more profit, that is not currently showing on the books.

[Guest]

Back when Milt could deal directly with Tom Glover, a handshake deal was sufficient to convert an old and low-potential property that possibly/probably required demolition into something that produced income in an interesting way. The land was less valuable than the income brought in by the various rentals and businesses that sit on the land and, as I understand it, the Glover family was much smaller. Things were fine as they were and stayed that way for decades.

Time passes and things change and the Glover family holdings become analogous to what John Cannon experienced in a much smaller scale with his book store, Aladdin Books, in Fullerton. There, like the Glover property, the property had become more valuable than the revenue brought in from the businesses currently renting it. With the increased value, Johns landlord was not maximizing his propertys potential by renting to a bookshop, so John was out.

Adding to this, as I understand it, the Glover family is now in its second and third generations, larger, more disbursed with members not necessarily involved in, or caring about, the historicity of the two primary properties previously mentioned: Yamashiro and the Magic Castle.

Eleven acres of prime Hollywood real estate on the block at once is something unusual in itself. That much land attracts the big players who have the money to buy and do large scale development. As an idea of the value, one real estate website currently offers less than half an acre of Hollywood land for a bit over $7 million. Another listing has a $1 million+ price for less than one-fifth of an acre. Using those as yardsticks would put the Glover property well above the $150 million mark.

The Glover land is prime property with great views. Once the buildings are cleared away the area is perfect for development with hotels and high-end condos. And those who think building restrictions are a problem will learn that the kind of money at play here, if such a sale goes through, usually gets what it wants with restrictions vanishing faster than a birdcage up a sleeve.

If, as acetwos post suggests, the percentage paid to the Glover family holding company from the Castle gross is mere chump change compared to the massive payout an outright sale would bring. Absent an outright sale, a deal could be structured to give the Glover family participation in anything built on their land which would bring in far greater revenue than the few dollars it receives (in comparison) from the current resident businesses.

It should be pointed out that Tom Glovers original intent in buying Yamashiro in the late 1940s was to tear it down and build a hotel. He found something interesting in the property and changed his mind, restoring it over the intervening years, turning it into a cultural and architectural asset in a city that has too few such places. It would be a shame to see it demolished for yet another hotel or high rise, but such is the history of Los Angeles.

The Castle experience that acetwo mentions is an interesting phrase. Years ago Al Goshman mentioned to me that as the first bona fide star of the Castle he attracted people to the Castle, guests who came specifically to see him perform. As such, he asked for a raise in pay and was told that the Castle was the star. Now the suggestion seems to be that the Castle can be moved and the customers will still have the same or similar experience. That remains to be seen. Further, it should be noted that Milt Larsen is 76, hardly an age that welcomes recreating a successful business in a new location.

It seems as though the Glover family understands that the value of the land has far surpassed any rents, profits, or gross percentage participation the current businesses can supply.

It just may be that the Magic Castle and Yamashiro have had their time and that time has come and gone. Time will tell.

[Pete Biro]

It is now time to stop worrying about it, enjoy the Castle and YOUR LIFE... and wait and see what happens.

[Guest]

Thank you, Pete. That's an idea that hadn't occured to me. What a friend! :p

[Guest]

Why can't it be a historic site? Winchester Mystery House in San Jose, a piece of property worth more than that lil' bit of Hollywood, has the status of historic site and that is just about the only reason it is still there. There was an overpass on 101 in San Jose that was a bottle neck because someone was working on making it a historical landmark, held up the highway for years. I don't know anything of course but who ever buys the land will have to deal with bad press if they boot the castle as it is pretty well known.
Steve V

[Guest]

Well here's a question.
IF the Magic Castle can be designated a historical sight. Then why can't someone get the ball rolling?
I know it usually helps to have some sort of group called "Friends of the Magic Castle" or something like that, but why can't someone get the ball rolling?
Heck, that a petition I'd sign in a New York minute.

Gord

[Pete Biro]

Like I said earlier, quit guessing.

Now, here's a message from the Man Who Knows... Milt Larsen, from the Magic Castle Forum:

"To everyone:
Please, please, please stop guessing! We are all working together (F&B, MCInc. AMA) to assure the Castle at the present location for all the members, their kids and grandkids. This is not "Goodbyeeee" it's a positive step into the future. We will no longer be dealing with absentee ownership.
Please have faith in us. The Larsen dreams will never die --- unless of course, you kill it."
Milt

[Richard Kaufman]

I see no problem with discussion of the issue.

[Dustin Stinett]

Posted by Steve V.
Why can't it be a historic site?

Wrong question Steve: The correct question is, why should it?

Is it architecturally unique or special?

No, the architect has another very similar housethat has not been alteredin Southern California. With all its changes, I dont think that the Castle could even be considered an example of the architects work, let alone a special example.

Does it hold any special significance in the history of California?

Not really: Nothing in particular happened there. A bunch of magicians hang out there. So what? The building is no longer the Lane Mansion. (And besides, who was Lane in regard to the history of the State?)

Was it the first, last, or only private clubhouse in California?

For magicians, maybe, but I dont know if that would be enough for a state designation.

Needless to say, the Winchester House meets not just one of these criteria, but all of them! The Castle, on the other hand, would be a stretch to meet just one.

But these are the kinds of questions that would have to be answered in a proposal to the State Office of Preservation. The third question (first, last, only, etc.) is, I believe, where anyone who has the desire, time, means, and wherewithal to try would need to concentrate their efforts. (And I doubt if a few thousand signatures on a petition would be enough to raise any eyebrows there.)

But think about this from the point of view of a bureaucrat for a minute: For the last 40-plus years the Magic Castle has been nothing more than a private club for magicians. Private club elicits words like exclusive, elitist, and dare I say discriminatory. Even though we know betterat least for the most partthose are still the words that will come to mind from someone on the outside. (And yes, discriminatory is an appropriate word since the belief is that you have to be a magician to be a member.) What significance does the Magic Castle hold for the general citizenry of the State of California?

Its very special to magicians and even somewhat special to the community of Hollywood. But is it special to the State of California? I think thatll be something of an uphill battle that would likely have a strong lobby against such a proposition.

Bottom line: Were going to have to wait and see what magic Milt can conjure this time.

Dustin

[Guest]

Is it architecturally unique or special?

No, the architect has another very similar housethat has not been alteredin Southern California.

So is the OTHER house the one we hand out for inspection?

Adrian

[Guest]

To add to Dustins points, and the non-analogous examples of the Magic Castle and the Winchester Mystery House: the Castle has been a business and the Mystery House never was.

And, given the potential for the land, once powerful and politically well-connected development types become interested there would be no way the Castle could even begin the lengthy historic designation process in Sacramento.

[Guest]

It seems clear to me that given its uniqueness and renown, the Magic Castle should be protected as a historic site. If it was in New York City, for example, it would certainly be protected. But New York went through battles to save Penn Station (unsuccessfully) and then Grand Central Station (successfully) before the necessary safeguards were put in place. And now you have entire sub-neighborhoods, with individual buildings of much less uniqueness or historic value than the magic castle under protection.

In my own town of Montclair (New Jersey), there are lots of old victorian houses and there's a strong civic effort to preserve them from developers coming in and knocking them down and subdividing the land to build mcmansions. Through zoning (denying variances), public awareness, historic designations, etc this has had some success or at least forced compromises to be made.

These laws and safeguards don't come about on their own but by the public and preservation groups aggressively demanding them. So I don't think it's true that nothing can be done and that big money will necessarily get its way. We live in a democracy and public opposition can change things.

[Guest]

re "It seems clear to me that given its uniqueness and renown, the Magic Castle should be protected as a historic site."

Perhaps if magic were more important to the public this would be more of a sure thing.

[Guest]

I don't think Americans have been as precious about their history to date, probably because they don't have that much of it compared to the rest of us.

That needs to change, of course, and Bob's post indicates that things are looking up, even if only in the "oldest" part of the country (hopefully no one is going to hijack my point by taking me too literally here....)

If the Castle was in the UK, I doubt if it would be allowed to be torn down or altered significantly. I always foind it sad that all that remains of the hotel where Al Capone had a suite in Vegas is a plaque in the grounds of the new "complex".

Things like that - and the Castle - need to be preserved. In another 100 years people will look back and wonder what on earth was going through our minds as we allowed these things ot be destroyed to build yet another condo, office or shopping complex

Bob

[Dustin Stinett]

What does it tell you when the last of the original hotel/casinos on the Las Vegas strip is imploded?

Different States have different criteria. Those that I listed (albeit from memory in working with my son on a school projectwe live in a town with a California Mission with several protected home sites, etc.) came directly from the Californias Office of Historical Preservation (or Hysterical Preservation, depending on your point of view).

You also seem to assume that most Californians have heard of the Magic Castle and would possibly be outraged if the old place were razed. Ive been a member of the Castle for over 25 years. My best guess is that 1 of 10 people with whom I speak of the old place have even heard of it while even fewer have been there.

Just as an example, the last drive-in movie theater in my county was razed a few years ago. A major stink was raised by a lot of people. It was in the papers and on the news. Petitions were signed in the hopes to save the place. Everyone over the age of 30 here remembers drive-in theaters. After all, drive-ins were very much a part of the culture and history of Southern California.

Its now a Lowes hardware store.

As magicians we are quite biasedand rightfully soabout our Magic Castle. Im afraid, however, that in the big picture the Magic Castle is but a small pixel.

Dustin

[Guest]

I always foind it sad that all that remains of the hotel where Al Capone had a suite in Vegas is a plaque ... [t]hings like that - and the Castle - need to be preserved. In another 100 years people will look back and wonder what on earth was going through our minds...

Actually Bob, given your Capone lament and Castle comparison, it won't take 100 years. :p


Clay

[Dustin Stinett]

By the way, its worth mentioning that if such State protection was granted, Milt would probably have to put away his tool belt. He would only be allowed to repair and preserve the place. But not change it. (And to that point, all the changes that have been made to the building over all these years probably works against the Castle and any notion of making it a protected, historic landmark.)

Dustin

[Dustin Stinett]

The Magic Castle is now listed.

KCAL 9, a local Los Angeles station (affiliated with, but not the actual local affiliate of CBS), reported this afternoon that the Castle, Yamashiro, and its 10.25 acres are listed on a CB Ellis website. No price is listed (but if you have to ask, you cant afford it).

Click HERE to see the listing.

The last sentence of the listing is hopeful, but hardly binding (remember, the designation as a historic landmark is mostly symbolic from a practical sense).

The zoning map (which under redevelopment has it listed as high medium residential) notes that the property at 7001 Franklin does not have a Mills Act contract (in other words, theres no tax break for prospective owners who maintain it as a historic landmark).

Dustin

[Guest]

Is anybody out there familiar with this type of deal?

What would be a "normal" time for the purchase offer, due diligence, etc?

If, say the land were sold in the next 60 days, what would be the best & worst case scenario's for the life of the Magic Castle?

[Dustin Stinett]

The worst case scenario is that the AMA has a lease through December 31, 2008 that a new owner has to honor.

Dustin

[Guest]

Thank you Dustin.

Let's all hope for the "best case" scenario........whatever that may be.

[Guest]

Thank you Dustin, you are again proven to be correct. I do want to point out the property is shaped like a snail and thus is bad luck to any buyers that want to tear down clubs or anything of that nature.

[Dustin Stinett]

The report on the evening news included an interview with the LA Councilman for the district. His rhetoric was very pro-Magic Castle (as well as Yamashiro). My worry is that this is politics as usual, because in reality this guy knows full well that the property tax revenue for that property will go up substantially with an ownership change and he has dollar signs in his eyes. And while he says hed like to see the Castle stay, its unlikely that the Magic Castle could generate the revenue needed just to pay those taxes and Ill wager he knows that as well.

The entire report was very upbeat and pressed the fact that the Castle is a world famous landmark. It included comments from TV star Robert Wagner and Johnny Grant, Hollywoods honorary mayor. There was also a brief comment from Andy Ulloa (via cell phone) who is the head of Magic Food and Beverage and a Glover family member who expressed his wishes that a new owner keep things as they are.

In my mind, the best case scenariofor the AMA and the Magic Castleis that the property does not sell. This, however, is not the best case for the ownership group who wishes to maximize the financial potential of their property. As a dyed-in-the-wool capitalist, its hard for me to blame them. Try as I might, I cannot foresee a realistic scenario that accomplishes this with the Magic Castle remaining as it is today. I hope Im wrong.

Dustin

[Richard Kaufman]

The opportunities for moving the AMA to another location are very limited. During the negotiations with the Glover family before the new lease was signed several years ago, and the AMA was looking for other premises, they discovered that their rent would at a minimum quadruple for the lesser sites they found, and increase much beyond that for the better sites.

[Guest]

The end of an era? Lets hope not.

As Dustin says, the listing is sympathetic to the Castle. Depending on how sensitive the seller is to the potential plight of the Castle, the seller could certainly sell on the condition that the Castle remained there and had a new lease. But of course, that might affect the selling price.

To briefly address Randy Gastreichs questions about due diligence, etc., for a deal like this and assuming the seller places no conditions on the sale that are protective of the Castle, I would not be surprised to see a due diligence period of 6-9 months, or longer. Unless the seller is prepared to leave much of the propertys development upside on the table, no savvy buyer is going to purchase the property without being fairly sure of its development prospects. In other words, I doubt that the selling price the Glovers would accept is merely based on the capitalization of the current income for the property.

Is there a chance of survival for the Castle if a new owner comes in and says, Id like you to stay, but youll have to pay a more market-based rent? From what others have said, it sounds like the answer is no if the Castle insists on operating as it has in the past. So, under such a new owner scenario, the question quite possibly boils down to this: how much of the Castles exclusivity are the members willing to sacrifice to keep it there? If some compromise were made on this issue, perhaps some significant profitability could be gained by opening up the Castle to the general public a few days a week. Setting aside for the moment whatever criticisms there may be regarding the quality of the magic performances offered at the Castle, the fact is that the experience offered by the Castle for an evenings entertainment is unique. $50 per person for admittance sounds very reasonable for an evenings worth of entertainment, just to throw out a number. Add to that dinner revenues for a properly managed restaurant, and of course bar profits.

If the Castle were faced with dramatically increased rent, I suspect that, short of skyrocketing membership dues, opening the Castle up to the public may be the only viable option.

Clay

P.S. If the AMA considers opening the Castle to the public, they should talk with those who manage The Magic Circles headquarters. Believe it or not, members of The Magic Circle can only use their headquarters once a week! The other days the facilities are rented out for private parties, etc.

[Richard Kaufman]

I took my wife and daughter to the circus a few weeks ago: tickets were almost $100 each for the two-hour show.

You can buy a ticket to Disneyland for an entire day for just over $60.

A ticket to a Broadway show costs over $100.

And the door charge for non-members at the Magic Castle is ... $20? $25?

Draw your own conclusions.