A proposed $50 million digital media production facility to be built on 11 acres of the old Burlington Northern Santa Fe railyards in Albuquerque is a year, or maybe longer, off.

February 21, 2005

By Dennis Domrzalski – New Mexico Business Weekly

It’ll take 10 months to a year for Build New Mexico, the nonprofit agency that is buying the 11 acres for approximately $4 million, to do its due diligence and close on the property, the parties involved in the deal say.

And, the 27-acre parcel of land that houses the old railroad repair shop facilities that were built in 1920 is mired in a federal court lawsuit and several cross-claims that could further complicate the deal. Several individuals and entities are claiming an interest in the property, and thus, any money that would result from its sale.

The Urban Council of Albuquerque Inc., which owns the 27-acre parcel, has defaulted on its $2.5 million loan from Los Alamos National Bank, and an Ohio businessman who wanted to develop the site is suing for more than $1 million he says the Urban Council owes him. The businessman, Richard Maron, also has asked a judge to enjoin the Urban Council from selling any of the land until the legalities can be resolved.

If the deal does go through, the land that Digital Media Group intends to build its studio on will be owned by Build New Mexico, the nonprofit economic development arm of New Mexico’s 14 building trade unions. Build New Mexico, which is financed by union pension funds, has invested $164.3 million in 84 New Mexico construction projects since 1988.

Albuquerque Mayor Martin Chavez says the legal problems will be cleared up quickly and that the Digital Media Group will build its studio, complete with two 20,000-square-foot sound stages, on schedule. And Elliott Lewitt, co-CEO of Digital Media Group, says he already has financing lined up for the project.

“They are buying out all of the lawsuits. That is a precondition of the deal,” Chavez says.

“This is not a surprise,” Lewitt says of the legal battles. “Everything has been addressed contractually, and all the lawyers are very happy with what we have.”

But the man who is now working to develop the property says the legal battles could be an obstacle to the development of the site.

“It impedes it, and that is why we have got to get it fixed and resolved,” says Ed Casebier, president of Renaissance Development Company, Inc., the Fort Worth, Texas firm that is trying to buy the 27 acres from the Urban Council and develop the property into a complex that includes an exposition center, transportation museum, hotels, shops and restaurants.

In an effort to untangle the property’s legal and financial difficulties, Casebier’s company is trying to restructure the Urban Council’s finances. To that end, Renaissance, and Urban Council Development, Inc., a for-profit arm of the Urban Council, formed Old Locomotive Shops LLC, a company that has loaned the Urban Council $4.75 million, according to federal court documents.

Renaissance also is in the process of buying the 27-acre railyards from the Urban Council, Casebier says. It is Renaissance that will sell the 11 acres to Build New Mexico for the digital media studio.

Battle begins
The battle over the property started in 2000 after the Urban Council, with the help of the Wheels Museum Inc., a non-profit that wants to put a transportation museum on the site, bought the land and the shuttered steam locomotive repair facilities from the Burlington Northern Santa Fe Railroad. The Urban Council took out a $2.5 million mortgage on the property with Los Alamos National Bank. That mortgage was guaranteed by a group of private investors, court records show.

Urban Council board members disagreed on how to develop the property. One faction wanted it for a Wheels Museum, while another thought it should be the site of an exposition center and hotels, Casebier says.

In the intervening years, the lawsuit and counter claims allege, the Urban Council borrowed money, defaulted on the mortgage, Maron reneged on a development deal and the Urban Council kept $250,000 of his money. The Urban Council mortgaged the railyards property three more times, according to court documents. Those mortgages include a $680,000 note on Sept. 5, 2003 to Maron’s company, MRN Limited Partnership, a $30,000 note on June 1, 2004 to Renaissance Development Corp., and a $4.7 million note on July 2, 2004 to Old Locomotive Shops LLC.

First lawsuit
The legal battle was launched on April 28, 2004 when Maron filed a breach of contract lawsuit against the Urban Council and others involved in the deal in U.S. District Court. The suit claims, among other things, that Maron bought out the original underwriters of Los Alamos National Bank’s mortgage to the Urban Council and that he is owed $1.1 million in connection with the Urban Council’s default.

The lawsuit also says that the Urban Council reneged on a Sept. 5, 2003 agreement with Maron to buy the 27 acres and that the Urban Council improperly kept the $250,000 payment that Maron and his company, MRN Limited Partnership, made as a first installment on the purchase agreement.

The Urban Council’s court documents say that Maron failed to close on the property and that the organization legally kept his $250,000.

In addition, the lawsuit says that Maron made three other loans totaling $160,000 to the Urban Council that the organization has not repaid. The complaint seeks $1.5 million in damages from the Urban Council.

Casebier says that after Maron bought out the original underwriters to the Urban Council’s $2.5 million mortgage with Los Alamos National Bank, he had the right of first refusal on the property. But when Renaissance offered to buy the land from the Urban Council in 2004, Maron refused to exercise that right and instead filed a lawsuit. Maron is apparently hoping to recover the $250,000 from the Urban Council, Casebier says

“He did this, in our opinion, because he heard of the pending transaction with Digital Media Group,” Casebier says. “Instead of waiving his right of first refusal or accepting a substitute purchase on the property, he filed suit for what he was legitimately owed under the underwriters agreement, and also for various money that he forfeited when he failed to close, plus other claims that we assert have no validity.”

Maron’s attorney, William Keleher, says he had no comment on the court battles or on Casebier’s comments.

Counterclaims
Shortly after Maron filed his suit, the counterclaims started flying. Los Alamos National Bank charges in its court documents that it has first position in the line of creditors to whom the Urban Council owes money. It also says that the Council violated the original mortgage agreement by incurring other debts without the bank’s approval.

“Under the agreement, Urban Council covenanted to Los Alamos that it would not ‘create, assume, or incur any indebtedness’ regarding the property without approval in writing from Los Alamos,” the bank’s counterclaim says. The “Urban Council incurred debts and liens against the property without Los Alamos’ approval, to Renaissance and Old Locomotive.”

Urban Council President Ron Ashcraft did not return phone calls seeking comments for the story.

Renaissance Development Company and Old Locomotive Shops filed a counterclaim against some of the original underwriters of the Urban Council’s $2.5 million loan, claiming that it has a valid lien against the property by virtue of the $30,000 loan it made to the Urban Council on June 1, 2004, and of the $4.7 million line of credit that it has given the Urban Council under a financial restructuring agreement. That line of credit was secured with a mortgage on the railyard property. Old Locomotive has advanced the Urban Council $175,000 under that line of credit, court filings say.

The Urban Council is in default on both of those loans, court documents say.

Casebier says that Renaissance has unsuccessfully tried to settle the case with Maron. But even if Maron’s lawsuit doesn’t disappear, Renaissance can still move forward with plans to buy and develop the property, Casebier says.

“We would just post with the court a bond in the amount that he claims he is owed,” Casebier says. “We can either resolve Maron’s claim or bond around it.”

ddomrzalski@bizjournals.com | 348-8322.