Regular 3.
City Council Regular Business Meeting
- Meeting Date:
- 04/27/2026
- TITLE
- Public Hearing - Babcock Purchase and Sell Agreement
- PRESENTED BY:
- Tricia Mae
- Department:
- City Hall Administration
Presentation:
Yes
Legal Review:
Yes
Project Number:
N/A
RECOMMENDATION
Council hold a public hearing and receive public comment concerning the Purchase and Sell Agreement (PSA). Staff recommends Council approve the PSA provided for the disposition of City-owned Unit 1A (Babcock Theater), located at 2810½ 2nd Avenue North.
EXECUTIVE SUMMARY
The proposed agreement facilitates the transfer of the Babcock Theater (Unit 1A) to Art House Management LLC for a nominal purchase price of $1. The transaction is structured to support continued arts and cultural use of the facility while resolving outstanding lease and insurance matters.
Key elements include:
Termination of the existing 2018 Babcock Theater lease at closing
Assignment of all insurance claim proceeds to the buyer
City contribution of $100,000 at closing in lieu of deductible obligations
Buyer's assumption of future operational responsibility and potential capital improvements
Closing is anticipated to be as soon as possible once all parties agree
Legal ads were posted on 04/10, 4/17, & 4/24, 2026
Property Posted on 04/14/2026
Key elements include:
Termination of the existing 2018 Babcock Theater lease at closing
Assignment of all insurance claim proceeds to the buyer
City contribution of $100,000 at closing in lieu of deductible obligations
Buyer's assumption of future operational responsibility and potential capital improvements
Closing is anticipated to be as soon as possible once all parties agree
Legal ads were posted on 04/10, 4/17, & 4/24, 2026
Property Posted on 04/14/2026
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
The Babcock Theater (Unit 1A) is a City-owned condominium unit within a multi-unit structure, with adjacent units under separate ownership and governed by condominium declarations, bylaws, and shared easement agreements. The facility has historically been operated by a nonprofit arts organization under a lease agreement executed in 2018.
The proposed transaction is intended to transition the property from City ownership to nonprofit ownership to ensure long-term operational stability and continued use as a performing arts and community venue. The agreement terminates the existing lease at closing and consolidates ownership and operational control under Art House Management LLC.
This action also addresses outstanding issues stemming from the May 28, 2025 loss event, including assignment of insurance proceeds and clarification of financial responsibilities between the parties. As part of the agreement, the City will assign all rights to insurance proceeds to the buyer and provide $100,000 at closing in lieu of deductible obligations, allowing the buyer to complete repairs and improvements.
From a policy standpoint, the transaction aligns with the City’s authority under its self-governing powers to dispose of real property when it is no longer required for direct municipal use or when disposal serves a broader public interest. In this case, continued cultural and economic activation of the downtown core, combined with the elimination of ongoing City maintenance and capital obligations, supports that finding.
The proposed sale follows the City’s established two-step disposition process:
Resolution of Intent – public notice (including on-site posting), public hearing, and Council determination that the property is no longer needed or that disposal serves the public interest, City Council Approval on April 13, 2026
Final Approval – second public notice, second public hearing, and final Council action on the sale
Upon completion, the City will exit ownership while maintaining indirect public benefit through continued arts programming, downtown activity, and potential future reinvestment in the property by the new owner.
The proposed transaction is intended to transition the property from City ownership to nonprofit ownership to ensure long-term operational stability and continued use as a performing arts and community venue. The agreement terminates the existing lease at closing and consolidates ownership and operational control under Art House Management LLC.
This action also addresses outstanding issues stemming from the May 28, 2025 loss event, including assignment of insurance proceeds and clarification of financial responsibilities between the parties. As part of the agreement, the City will assign all rights to insurance proceeds to the buyer and provide $100,000 at closing in lieu of deductible obligations, allowing the buyer to complete repairs and improvements.
From a policy standpoint, the transaction aligns with the City’s authority under its self-governing powers to dispose of real property when it is no longer required for direct municipal use or when disposal serves a broader public interest. In this case, continued cultural and economic activation of the downtown core, combined with the elimination of ongoing City maintenance and capital obligations, supports that finding.
The proposed sale follows the City’s established two-step disposition process:
Resolution of Intent – public notice (including on-site posting), public hearing, and Council determination that the property is no longer needed or that disposal serves the public interest, City Council Approval on April 13, 2026
Final Approval – second public notice, second public hearing, and final Council action on the sale
Upon completion, the City will exit ownership while maintaining indirect public benefit through continued arts programming, downtown activity, and potential future reinvestment in the property by the new owner.
FISCAL EFFECTS
Immediate Cost: $100,000 payment to buyer at closing (insurance deductible equivalent)
Revenue: Nominal ($1 purchase price)
Avoided Costs:
Ongoing maintenance and capital obligations
Future insurance and operational liabilities
Future Considerations:
Potential TIF funding requests for improvements (no current obligation)
Revenue: Nominal ($1 purchase price)
Avoided Costs:
Ongoing maintenance and capital obligations
Future insurance and operational liabilities
Future Considerations:
Potential TIF funding requests for improvements (no current obligation)
STAKEHOLDERS
Art House Management LLC (buyer/operator)
Arts and cultural community
Downtown businesses and patrons
City of Billings taxpayers
Arts and cultural community
Downtown businesses and patrons
City of Billings taxpayers
ALTERNATIVES
Approve the Agreement (Recommended)
Authorizes the sale and transition of the Babcock Theater to Art House Management LLC
Resolves lease and insurance matters
Eliminates ongoing City maintenance and capital obligations while maintaining community use
Do Not Approve the Agreement
City retains ownership and responsibility for operations, maintenance, and future capital investment
Continued exposure to financial and operational risk
Renegotiate Terms
May improve specific deal points but could delay closing and create uncertainty for ongoing operations and repairs
Market the Property for Sale
Potential to generate higher financial return
Risk of loss of cultural use and uncertainty regarding future ownership and operations
Authorizes the sale and transition of the Babcock Theater to Art House Management LLC
Resolves lease and insurance matters
Eliminates ongoing City maintenance and capital obligations while maintaining community use
Do Not Approve the Agreement
City retains ownership and responsibility for operations, maintenance, and future capital investment
Continued exposure to financial and operational risk
Renegotiate Terms
May improve specific deal points but could delay closing and create uncertainty for ongoing operations and repairs
Market the Property for Sale
Potential to generate higher financial return
Risk of loss of cultural use and uncertainty regarding future ownership and operations