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Houdini's magic theater never materialized, but the idea did not go entirely unrealized. In 1935, Hardeen opened "Houdini's Temple of Mystery" in Atlantic City, which may have been modeled on Houdini original magic theater plans. Unfortunately, Houdini's Temple of Mystery only latest a few short years.
You can read more about the Houdini-Hardeen Temple of Mystery at Dean Carnegie's Magic Detective.