Once you hit sequence 3 you will unlock the Cafe Theatre which is where you will be able to watch a play. I found I was only able to do this once I had fully renovated the theatre and completed the five missions in the theatre although some of my friends playing this were able to unlock it as soon as they unlocked this area.
You need to stand by the railings while a play is being performed and the trophy should pop once the play is finished. Not all acts on stage seem to count, below is a video from when I unlocked the trophy and it took a few different stage performers before it unlocked during the last performer.
There won't be any plays running if you go there at night or when it is raining from my experience.