Financial Crisis May Force Closure of Variety Arts; Larsen Seeks $200,000 Loan to Keep It Open 60 Days

It’s been a juggling act over at the Society for the Preservation of Variety Arts (SPVA) for the last eight years, but the magic--literal and figurative--may no longer do the trick.

Milt Larsen’s Variety Arts Center, housed in the historic Friday Morning Club building at 940 S. Figueroa St. (and appraised at $8 million two years ago), is facing a major financial crisis. Lack of adequate operating funds, a management history that some have characterized as haphazard and substantial monthly deficits may force the closure of this club/restaurant/entertainment and archival center.

Larsen, trying to forestall the closure, has requested an interim operating loan of $200,000 from the Community Redevelopment Agency (one of his chief supporters) to enable the center to stay open for another 60 days.

“The CRA has suggested that the businesslike thing to do was to close, regroup and possibly reopen when we were able to turn it around,” Larsen said Monday. “I’m adamantly opposed to that.”

Closing at all, he believes, could deal a fatal blow to the organization housing one of the nation’s largest collections of burlesque and vaudeville scripts, among other precious show-business artifacts that he and others have salvaged over a lifetime.

If Larsen doesn’t go along with the CRA suggestion, however, the agency could recall its most recent $800,000 loan, which would mean automatic foreclosure.

“This place has always been kind of a 60,000-square-foot impossible dream,” Larsen said, acknowledging that “poor” management resulted in costly mistakes. Major among them was the center’s failure to pay $143,000 in withholding taxes, he said,which resulted in the Internal Revenue Service demanding payment in 1984.

To help Larsen out of the fix, the CRA purchased the adjoining parking lot for $1.7 million. This enabled the center to clear its debt with the IRS, repay the CRA for a previous loan (in the amount of $800,000), pay off overdue county taxes (about $60,000) and pay off its mortgage (just over $500,000).

“And we still had operational problems,” Larsen explained. “There was no funding for back payroll and other business bills, so CRA at that time agreed to loan us another $800,000 using the building’s air rights as collateral.”

The loan was made on condition that Variety Arts bring in a director of finance and administration to clean up its fiscal act. With CRA approval, Janet Allyn was hired in January. She had been finance manager for the Olympic Arts Festival and had worked for the Westwood Playhouse and the L.A. Stage Co.

What Allyn found was not encouraging. Debts and problems had accumulated.

“There were no accounting procedures, no records to speak of, no operating figures, “ Allyn said Monday. “I had to reconstruct them. Within a month I could see that our expenses far outstripped our income. Costs run about $100,000 a month. Last month we took in $40,000.

“We also had come to the end of our operating reserve by the end of March. It was time to apprise the CRA of the situation.”

That’s when the CRA suggested closing the operation. Patricia Sterne, deputy administrator for the downtown area of the CRA, put it this way:

“Contrary to our expectations, the SPVA is not solvent. Larsen has requested an additional $200,000. He needs it immediately. And we feel that the more he stays open, the more the problems intensify. We are well aware of the archival value of the collections that are housed in there and we want to do everything we can to preserve them, but we have to take a good hard look at the situation before making a recommendation to our board.”

Sterne emphasized that it is unlikely any action on this matter can be taken before Monday, when the CRA board meets.

“We’re not anxious to shut the place down,” she reiterated. “We want to assist and support in every way we can. What we need to see is a plan for making it work.”

Larsen claims he has one.

“We want to sell the historical building to a group of investors and arrange for a low-cost leaseback,” he said. “It would be run by a new management company, not by me. I would look forward to spending more of my time in research and display.

“In the meantime, we’ve rallied our own people together. Harry Anderson, an SPVA life member and star of ‘Night Court,’ will come in as headliner for a two-week benefit of ‘Hats Off’ (the current show) from Wednesday to May 7.”

Why didn’t Larsen put out this effort earlier?

“One of my problems in life,” he said, “is that I’m an optimist. Everyone told me the Magic Castle couldn’t be done, the Mayfair Theatre couldn’t be done and now the SPVA, yet I did them and they’re all there. But I’ve got to start changing my thinking a bit.

“I have to allow experts to take over in the areas of fund raising, historic building management, restaurant management.”

Said Allyn: “If we brought in an independent restaurateur who’d pay rent and run his own show, and if we subleased the theater to a major booker, it would go a long way toward solving the problem.

“This is a wonderful old theater with 699 new seats with 90-foot grid, a computerized board, a new sound system and a special production contract that could turn a profit. It would have been the perfect house for a show like ‘Little Shop of Horrors.’

“The CRA doesn’t want the building to close,” Allyn continued. “They have nothing to lose by granting Milt (Larsen) an extension. If he cannot sell the building, they get the building. Their losses are covered.”

Added Larsen: “A couple of times I tried to donate some collections, and libraries really didn’t want anything of that type--the old burlesque and vaudeville scripts. There’s a big difference between legit theater and entertainers and performers. Like Rodney Dangerfield, they don’t get no respect. I decided to show them some respect. I did it because I feel a great need to thank the past.”