Second-Beach Study Finds Event Space Not Economically Feasible

At Monday night’s Middletown Town Council meeting, an economic planning and real estate consultant presented the findings of a three-month study on market factors pertinent to a new Second Beach Pavilion, and the surprising punchline was that an event facility — even given the desirable location — would not make money.

“Demand is not the problem,” RKG Associates principal Darren J.A. Mochrie told the council. “The challenges are the regulatory hurdles and costs to build the space, and the short season.”

For years, there have been discussions among town officials about the need to update the facilities at Second Beach — for the town’s beach operation, and also possibly to include event space for weddings, conferences, or other revenue-generating activities. The council commissioned RKG in August to look at the business considerations of a new Second Beach Pavilion.

Mochrie described his process as including site analysis, market indicators, competitive analysis, and financial factors. The Second Beach site covers 36 acres, includes 1,177 parking spaces, and the existing beach pavilion is 5,000 square feet. Market indicators show a strong demand for a reasonably priced wedding space with an ocean view, as existing venues in the area that offer a view rent for as much as $7,500 and more. The peak season is approximately 21 weeks, from May 1 to Oct. 1, and a 200-person capacity would be desirable.

Given those factors, RKG did conceptual plans for a pavilion that includes two wings, one for event space, and one for beach operation. The event space included a function room that accommodates 150 to 175 people, as well as bridal and catering areas, and a connection to the beach via a deck. Mochrie said construction costs for the event portion were estimated at $2.9-$3.5 million, with an additional $2.6-$3.4 million for the beach-operation portion, for a total estimated cost of $5.5-$7 million.

Mochrie pointed out that the town would have to overcome significant regulatory hurdles, given that Second Beach’s barrier designation by Rhode Island’s Coastal Resources Management Council (CRMC) means expansion is limited to a 25 percent increase, or a 6,000-square-foot maximum. With the setting in a flood plain, there is also the stipulation that new construction must be 12 feet above grade, with a maximum building height of 30 feet, per town code.

“Based on average market rents, we assumed a $5,000-per-event weekend rental fee, and a $2,000 weekday rental fee, with two rentals every weekend, plus one weekday rental,” explained Mochrie. “We projected $226,000 in [event] revenue the first year, up to $260,000 by Year 10, but when you factor in the bond payment [to cover construction] of $285,000 starting Year One, the net cash flow is negative, and even at Year 10, it’s still negative.”

At the conclusion of the RKG presentation, council members expressed the need to continue with plans for upgrading the Second Beach facility for the beach operation alone. “The important thing to keep in mind is that the beach facility is functionally obsolete, and even though the numbers aren’t working for an event pavilion, we still need to do something,” said Councilor Chris Semonelli.

“Now that we have this information, if Town Council wants to continue to pursue this, we can look at replacement of the existing space or renovation and addition,” said Town Administrator Shawn Brown. “You now know you’re not going to ‘wedding’ yourself into a free building, so we need to look at what kind of facility meets the needs. One positive is that we are seeing the same number for a new facility, around $3 million, that the Beach Commission had given us, so we know what number we’re dealing with.”

The limitations of the existing beach operation facility include inadequate bathrooms, changing rooms, and concessions for the public, and only one shower for the staff of more than 30 lifeguards. In recent years, the beach operation has grown to generate more than a million dollars in annual revenue for the town.