Small-business owners across the country are finding themselves increasingly at odds with commercial landlords over rent and other matters of leasing space. The recent case of a Houston dance community stalwart raises some hard questions.
After Hurricane Harvey devastated Houston two years ago, as the operator of the city’s second-largest dance school (Houston Ballet runs the largest) METdance shared something tangible. Its 11,000-square-foot facility with four studios became a temporary godsend for the displaced Houston Ballet, whose own center flooded.
METdance moved into its impressive space six years ago, spending about $800,000 on the build-out and signing a 10-year lease in a new commercial structure that also houses offices and a popular restaurant. The deal looked manageable at the time.
But by February of this year, METdance was struggling to make ends meet. In May, the landlord terminated its lease. The organization ended up with 15 days to vacate, just before the start of its busy summer sessions. Considered a rock in its community for 24 years, METdance suddenly found itself homeless.
With a $1.1 million annual operating budget, the nonprofit METdance had a full-time professional company of nine dancers in recent seasons, who performed locally and toured. Its school was training about 750 students a year, including children, teens and adults. It also earned income by renting its studios to independent choreographers, smaller troupes and touring companies.
But in the wake of the hurricane, school attendance and public support dropped. According to Cecilia Winters-Morris, the METdance board treasurer, the center’s government and foundation grants have fallen more than 50 percent during the past two years—a loss of more than $100,000.
Meanwhile, the center paid full rent and got no relief from rising common-area fees that were not written into its lease, allowing the landlord to raise them at will. Covering taxes, parking and the use of shared entries and halls, those fees added about 30 percent to the base rent in the beginning. By this year, they added 90 percent, effectively doubling the rent to about $17,000 a month.
The METdance board knew those fees would rise, but the landlord’s seven-year projection turned out to be unrealistic. Actual expenses were far more than what METdance was led to expect, especially after the building was sold in August 2018.
Expenses weren’t the only issue. The new landlord reconfigured the entrance, effectively taking away METdance’s front door. He also instituted valet parking and left the center only three unreserved slots.
A persistent water leak destroyed a $100,000 walnut floor in the tap studio and caused a potential, ongoing mold problem. In spite of full insurance coverage, the center also was not reimbursed when a fire in the restaurant ruined its air conditioner.
“So many things were not in our best interest,” says executive director Michelle Smith.
METdance’s case is by no means isolated. Across the U.S., dance businesses have been struggling with rent for some time. Even stalwart, hometown dance retailers are not immune, competing for sales (like all other brick-and-mortar entities) with internet behemoths.
Owning a commercial space can bring a business an element of financial stability over the long term, with more predictable costs (and hopefully a growing asset), instead of being subject to a landlord’s agenda. However, that’s not always feasible for smaller businesses—and rents are increasingly onerous. Commercial rents in Midtown Houston, where METdance was located, currently average around $25 per square foot. METdance was paying a fraction of that—about $1.50 per square foot—yet left its space still owing the landlord $38,000.
“Yes, it would be better to own,” says board president Anne Sears. “There are tax benefits and protections for nonprofits that go along with owning, and you can’t get them if you lease.”
Before building out their center, the center had spent years in a decrepit Museum District space, drawing up plans to build their own home but ultimately compromising. That option is not off the table, but it’s now farther down the road.
“We’re probably looking at a temporary, three-year space to regroup, get everything moving and assess when we can do a campaign and build,” Smith says. “That whole mind-set is a big deal.”
In late July, 2019, Smith was still scouring Midtown with a real estate broker, looking for a miracle. “We’re going into the next one totally differently,” she says. She now expects more clarity from a landlord: “Not only projections of rent, but of all the additional costs.”
Smith knows she could find cheaper rent farther afield, but METdance launched a partnership last year with the nearby University of St. Thomas that gives students in a new BA program credit for METdance classes. Moving to a suburb would be a hardship for them, given Houston’s lean public transportation system.
This year the METdance summer intensive programs were held at Kinder High School for the Performing and Visual Arts and the University of Houston. The regular schedule of teen and adult classes moved to the Midtown Arts and Theater Center Houston, known as MATCH—a three-year-old space built as a safety net for the city’s small- and medium-sized performing arts groups. The MATCH has four theaters at various scales, plus rehearsal space, a gallery and affordable offices.
Chuck Still, the MATCH executive director, peers longingly at adjacent lots his organization could have bought a few years ago. “When this property was built, nobody knew if the MATCH would work,” he says. Now Still has to turn groups away. “I could fill two more spaces, easily.”
METdance’s classes at the MATCH went well, with no attendance losses. “They’ve loved having us there,” Smith says. “On Thursday evenings, especially, when there are also performances, it’s a very alive space.”
METdance canceled its children’s program for the summer; and Smith was holding her breath about reviving it. “We have put together a full class schedule and have the kids’ registration ready to go,” she says. “We’ve planned options A, B and C.”
In the interim, Smith has networked like crazy with Houston’s other midsize performing arts companies. “Leases are up, and costs are escalating,” she says. “We’re all trying to figure out our next steps.”
In some ways, the funding crisis seems more solvable than rising rents. The grant market “comes and goes, and always changes shape,” Smith says. “I go, OK, what shape is it now, and how can we fit into it?”
METdance receives about 30 percent of its funds from public and private sources—primarily the Texas Commission on the Arts, the Houston Arts Alliance and the Houston Endowment.
Collaborations with classical music groups, including the Houston Symphony, enabled METdance to expand its footprint in recent seasons. Smith also envisions a shared studio space. Funders liked METdance’s previous center, because it provided the community with rental space and training.
“They were the hub, and the most generous studio renters in town,” choreographer Jane Weiner says. “They wanted everybody to succeed.”
Weiner closed her own Hope Stone Studio five years ago. She eventually revived Hope Stone as a more nomadic, project-based organization, and she taught classes at METdance in trade for using the studios for her rehearsals.
Smith has approached City of Houston officials about seeking solutions within the planning and development system. “Maybe they create incentives for developers who lease to nonprofits,” she says. “A lot of them are scared to rent to us, because right now, it’s not a good thing.”
Sears added several additional board members, including a financial advisor to the METdance board over the last year. “We want to keep the organization true to its mission and goals…and also make sure decisions we make will allow us to stay financially viable,” she says.
In early August, 2019, after the resignation of artistic director Marlana Doyle, the board disbanded METdance’s professional company. “Dwindling revenue from performances and foundations versus increasing costs for personnel and performance expenses were creating a significant drain on the organization’s resources,” Winters-Morris says. “We will now be able to grow the class offerings and youth programs and continue our educational outreach programming without fiscal constraints.”
Smith describes it as a return to the organization’s roots. “As we move forward, we will always be on the lookout for ways to collaborate with and support other Houston dance organizations,” she says.
Molly Glentzer, a senior writer and arts critic at the Houston Chronicle, has covered Houston’s dance scene for more than 20 years.