Toronto Underground Cinema up for sale after financial collapse
November 20, 2012
Sedwick Hill admits the Toronto Underground Cinema, one of the city’s last repertory houses, crumbled under a load of personal financial troubles.
Like a passionate but ill-fated movie romance, the Toronto financier’s labour of love turned quickly to heartbreak after he bought the downtown theatre space – located in the basement of a condominium building on Spadina Ave., near Queen St. W. – in 2008. The cinema opened two years later.
Hill’s million-dollar debts to the Ontario Securities Commission were only exacerbated by more than three years of costly litigation with the condo’s corporation board over unpaid maintenance fees.
Last September, the Underground Cinema was shuttered. The reason, according to Hill: “We were never capitalized properly from the start.”
But nearly two months after the Underground Cinema screened its final film, Hill has put the 706-seat theatre back on the market for $1.629 million, almost double his $726,000 purchase price.
The ambitious price revaluation, suggests there is hope the theatre can be reborn after a short history marred by financial ruin, said former manager Alex Woodside.
Hill, a 54-year-old financial adviser and investor, had become enamoured with show business in the mid-2000s after a successful run promoting a musical set in apartheid-era South Africa, called Umoja. He wanted his own venue.
“I tend to be someone who, if I see an opportunity, I go for it and try to figure it out later,” he said of buying the theatre. “I was optimistic I would come up with the money.”
But at the time, Hill was well on his way to insolvency – he and two business partners were running afoul of the Ontario Securities Commission, a regulatory body that protects investors from fraud.
In March 2012, the commission banned Hill from securities trading for “engaging in fraudulent conduct” and ordered him to repay millions of dollars he took from investors while operating the Prosporex Investment Club, according to a sanctions decision.
According to the commission, Hill and his Prosporex partners acquired roughly $29 million from more than 1,700 Ontario investors between 2007 and 2008. The outfit then traded the funds on foreign currency markets.
The commission found that more than $14 million of the investments was illicitly stored in offshore accounts or pocketed by the partners, including $3.4 million by Hill.
Hill, who admits to a role in Prosporex but denies illegal behaviour, blames the theatre’s failure on the commissionâ€™s ruling.
“My income got cut off because of the OSC issue . . . Whatever funds I made at the cinema, I was using them to try and solve my other issues, my home expenses,” he said. “The OSC thing has totally messed me up completely.”
In March 2010, with the theatre sitting empty, Hill contracted Woodside and two others to kick-start the Underground Cinema. That same month, however, the condoâ€™s corporation board, Metropolitan Toronto Condominium Corp. 713, initiated a lawsuit, claiming Hillâ€™s company owed them more than $40,000 in unpaid expenses, according to a notice of application filed in Ontario Superior Court.
Hill later settled the suit with the condo board. The board, which now maintains a lien on the property, declined to comment, citing provisions under the Condominium Act.
Woodside, 26, said he and the other managers were aware of Hillâ€™s financial woes, but, optimistic as they were, made the gamble to get involved.
Despite the lack of capital, the trio grew the cinema into a downtown attraction, screening offbeat documentaries, sci-fi B-movies and hosting the Toronto Independent Film Festival.
“We thought we had the balls to get through that stuff,” Woodside said of the condo board’s lawsuit. “We just really wanted to see the space operating.”
But by May, the cinema was cash-poor. The managers weren’t receiving a salary and Hill’s rocky financial history “made it really impossible to bring in new investors or people to stabilize the business – it was an impossible sell,” Woodside said.
Hill, who said he is selling the property reluctantly, still hopes to recapitalize the theatre as the Toronto Underground Cinema.
“My hope,” he said, “is to turn it around.”
Source: Toronto Star