Wednesday, April 28, 2010
On the Auction Block
By Dan Mayfield
Copyright © 2010 Albuquerque Journal
Journal Staff Writer
Albuquerque's premiere movie studios may soon have new owners.
The ownership interest in Albuquerque Studios is scheduled to be sold on the courthouse steps in Albuquerque next month after a default on a major loan, according to its creditors.
Pacifica Mesa LLC, the parent company of Albuquerque Studios — the 168,000-square-foot studio that plays a starring role in the local film industry — has defaulted on its loan from Workers Realty Trust II LP of Chicago, according to Workers Realty.
The auction is set to take place on the steps of the Bernalillo County Courthouse at 10 a.m. May 14, according to a legal notice published in the Journal. The notice said Pacifica Mesa owed $21,480,642.
But Hal Katersky, chairman of the board of parent company Pacifica Ventures, said he found out about the foreclosure sale just last week and has not been able to contact loan representatives at Workers Realty Trust.
"We're perplexed by the actions," he said. "We know of no payments that are due to Commonwealth ... the company that runs Workers Trust."
The studios were built in two phases in 2007 and 2008 for a total of $91 million, all with private money. Major films like "Terminator Salvation" and "Book of Eli," were filmed at the studios.
Workers Realty Trust is the junior partner in the studio's loan. The senior loan partner is Amalgamated Bank of New York City, which holds the construction loan for Albuquerque Studios.
"It's a public sale of the ownership interest in Pacific Mesa Studios LLC," said Mark Nora, an attorney with Polsinelli Shughart PC of Chicago, which represents creditor Workers Realty Trust.
"The collateral is the ownership interest in the company that holds title to Albuquerque Studios," he said. "The bottom line is there is a notice of sale. On May 14, there will be a public sale. The highest bidder will acquire the ownership interests in Pacific Mesa Studios."
The buyer will get Pacifica Mesa, which is basically Albuquerque Studios, along with its contracts and debt. The legal notice stated that any prospective purchaser must show evidence that it plans to use it as its own investment and not for resale or distribution.
The Journal's phone calls to Workers Realty Trust, which is a subsidiary of New Vista Investment Group, were not returned Tuesday.
"I can't figure out what the motivations of New Vista are," Katersky said in a telephone interview. "We've put a lot into it. We're very proud of the studio. We think it has a terrific future, and we're seeing a huge uptick in business."
Lisa Strout, head of the New Mexico Film Office, said she was aware of the legal notice but does not know any details about the pending sale.
"We all know Albuquerque Studios is an enormous asset to the industry in this state and the industry at large," she said. "We're very hopeful that this is going to get worked out, and it's important to get all the facts in the situation."
It's no secret business has been hurt by the recent recession. Albuquerque Studios, which was 100 percent booked just two years ago, has only one production filming there right now on its eight soundstages.
"The whole movie industry hasn't been going very well," Katersky said. "Very few movies have been made."
"Scoundrels," a drama/comedy for ABC is filming at Albuquerque Studios now, and the hit show "Breaking Bad" is expected to return for its fourth season later this year.
Regardless, the foreclosure sale looks like it will happen as planned.
"If somebody comes in and bids $28 million, they'd get it (the business interest)," attorney Nora said.
The pending sale comes in the midst of a lawsuit filed by Pacifica Mesa Studios LLC in Los Angeles on Friday against the studios' former operators Nick Smerigan and brothers Jeremy and Jason Hariton.
The lawsuit alleges Smerigan and the Haritons breached their duties while managing Albuquerque Studios and caused the studio to lose business by funneling business to competitors, and wrongfully using Pacifica's name, resources and confidential information. The lawsuit says Pacifica lost $50,000 in business.
Gail Smerigan, Nick's wife and former publicist at Albuquerque Studios, had no comment Tuesday on the lawsuit or the foreclosure action.
The Smerigans shocked the local film community when they left the studios in February.
Albuquerque Studios could be facing competition from Santa Fe Studios, a planned complex just south of Santa Fe. Santa Fe Studios is receiving a $10 million state loan and about $2.5 million in assistance from Santa Fe County to start construction soon.
Unlike the Smerigans, Katersky supports the new studio in Santa Fe and has met with its developer, Jason Hool.
"The more filmmakers that have more alternatives, the more will come to New Mexico," Katersky said. "The industry has left California. It's too expensive."
Local film insiders are hoping for the best. Jon Hendry, head of the state's filmworkers union, said he was aware of the legal notice but did not know any details.
"I think (Albuquerque Studios) has been a victim of poor economic circumstances, and it looks like there will be a way to continue to have the premier studios operate," he said. "We're happy that the banks and others are working to ensure continued operations."