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Eastland developer: Some successes, but untested on massive projects

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  • Movie studio company has seen delays, other problems

    The company Bert Hesse chose to develop a movie studio complex on the Eastland Mall site operates the $100 million Albuquerque Studios in New Mexico. The complex plays host to the hit TV drama “Breaking Bad” and staged the 2012 blockbuster film “The Avengers.”

    Dana Arnold, Pacifica’s CEO, said the firm’s $37 million facility outside Philadelphia played host to actor Will Smith’s 2013 film “After Earth.”

    All Pacifica’s studios operate at a profit, he said. The Albuquerque-based studio’s parent company did file for bankruptcy in 2010 amid reports of unpaid loans and other problems.

    Arnold described it as “more of a refinancing” made necessary by the bad economy. The studios emerged from bankruptcy debt-free, he added.

    Pacifica hopes to begin construction within 60 days on CT Studios outside Hartford, Conn., costing more than $50 million. The project was originally announced in 2008, but construction hasn’t started.

    Former South Windsor, Conn., Mayor Cary Prague grew so frustrated with delays last year that he spoke of “the developers that cried wolf.” He said in an interview last week that the economic downturn hurt the project badly.

    Financing became difficult, he said, and developers had to downsize the project. He’s expecting construction to start this fall or in the early spring of 2014.

    “I used to joke it was a house of cards,” Prague said, “or a house of credits, and it could come tumbling down one day, but it didn’t. They got it done right.”

    Arnold said the climate for such projects has improved.

    “We foresee on almost all the projects we’re working on now that the problems we’ve experienced in the past few years are in our rearview mirror.” Eric Frazier

  • Want to go?

    The Charlotte City Council will consider Bert Hesse’s proposal for the Eastland Mall site Monday. The meeting begins at 6:30 p.m. in the meeting chamber at the Charlotte Mecklenburg Government Center, 600 E. Fourth Street.

The man who wants the city of Charlotte to hand him the keys to the abandoned Eastland Mall property has had success building companies, but his film industry track record includes no projects of the financial scale he wants to try in east Charlotte.

The California firm he picked to help him turn Eastland into a massive movie studio complex has built some ambitious projects. But the firm has suffered its own share of setbacks.

City Council members will vote Monday on whether to adopt a memorandum of understanding with entrepreneur Bert Hesse, giving both sides a six-month window to study the deal more closely.

At stake is the future of the 80-acre property that once served as the thriving commercial heart of east Charlotte – and now symbolizes its economic decline. The mall closed in 2010, and the city bought the property last year for $13.2 million.

Hesse says his project will spur the revitalization of the east side. Studio Charlotte, to be developed by Hesse’s group and Pacifica Ventures of Santa Monica, Calif., would include film production studios, a hotel, a film school, retail shops, office space and residences. Pacifica Ventures estimates it will cost at least $250 million to build.

Pacifica boasts of profitable studios in New Mexico and Pennsylvania. But its latest project, a Connecticut complex costing upward of $50 million, has suffered so many delays that one official there dubbed Pacifica and its partners “the developers that cried wolf.”

Construction on the Connecticut site is now set to start within 60 days, Pacifica says, and leaders there are feeling hopeful again.

“Honestly, they are all bumpy rides,” Pacifica CEO Dana Arnold told the Observer. “I honestly don’t believe you can build a movie studio anywhere in the world today and have it go smoothly, especially given the tough economic times we’ve all come through.”

Hesse said his resume shows his knack for spying out good business prospects and finding the right experts to develop them.

“The people we’ve been able to associate with this project, these are huge players,” he said. “And that’s why I think the city has finally said, ‘OK, this is substantial. He’s put together some heavy hitters.’ ”

It remains unclear how much taxpayer money the city is willing to spend on the project, and how much Hesse and his partners will request, if any.

“He’s a gentleman with great vision,” said James “Smuggie” Mitchell, head of the council’s economic development committee. “I think for a lot of us, it’s down now to the old saying, ‘Show us the money.’ ”

‘I’m not a developer’

Hesse’s resume makes him an unlikely figure to direct a project his own proposal describes as an ambitious exercise in “city-building.”

Originally from Tampa, Fla., he worked as a sixth-grade teacher before taking a job as a software salesman.

He took out a $25,000 second mortgage on his home to start an engineering and data processing consulting firm. He moved to Charlotte in the late 1980s. In 1990, he sold the consulting firm, Orbitron International, which had 250 employees and annual sales of more than $9 million.

He and his wife, Jeri, then built a home health company called MedCorp of America, which they sold in 1996 to Hospital Corporation of America.

As with those ventures, Hesse, 61, said he has spotted a ripe business possibility in the Eastland project and has fielded a strong team of experts to develop it.

Earlier this month, Hesse’s group was left as the last developer standing after Charlotte-based ARK Ventures pulled out, shelving its plan for a 40,000-square-foot artificial ski slope and park.

“I’ve never developed anything,” Hesse said. “I’m not a developer. But I have people and groups that are very, very confident in doing this, and have done it in the past. This is nothing new to them.”

Disputes over pay for film crew

The Eastland project wouldn’t be Hesse’s first foray into the movie industry. Not long after moving to Charlotte, he started a digital media firm. He merged it with a similar company run by Tony Elwood and Paul Barrett, both aspiring movie makers.

They called their new company Indievision.

Hesse got interested in movies, too, and the trio began working on productions under a company they called Synthetic Fur.

They made a 2005 movie, “Cold Storage,” directed by Elwood, with Barrett as a producer and Hesse as executive producer. Lionsgate picked it up for national DVD release in 2010.

Hesse also worked on a documentary about Nobel laureate Elie Wiesel, and on “Hope’s Wish,” a film about the life and 2004 death of Hope Stout. The Weddington girl, a bone cancer patient, made headlines with a touching last wish: to grant the wishes of all 155 children on the Make-A-Wish Foundation’s waiting list.

The producers raised money, with a planned release date of December 2009. But in early 2009, Hesse shut down a filming session at Bank of America Stadium after producers failed to come up with enough money to pay the crew.

Crew members said about $220,000 was owed to up to 45 workers, the Charlotte Business Journal reported at the time.

At least seven people filed wage and hour complaints with the N.C. Department of Labor, an official there said Friday.

But the cases were closed without being investigated after state officials learned the workers were employed under a union contract, meaning the state couldn’t rule on the dispute.

It remained unclear late last week whether the workers ever got paid. Hesse said he was one of four executive producers but wasn’t involved with arranging the financing or paying the crew.

Stuart Stout, who has been closely involved with the film project on his daughter’s life, said in an email that Hesse told him the payment issues “were all resolved.”

Hesse said Friday that he didn’t specifically recall telling Stout that. He added that he could have been relaying what he’d heard from one of the other producers who dealt with the money.

The two other principals Hesse mentioned couldn’t be reached late last week.

Hesse has since passed the project to a West Coast producer. The movie has a bigger budget and A-list screenwriters now, Stout said, and should start filming next spring.

“I think the world of Bert,” Stout said. Hesse “pulled the sled as far as he could, and it takes a big guy to say, ‘I can only take it so far.’ ”

Lawsuit over Hope Stout movie

The Stout movie also turned up in 2005 litigation in which Matt Wackerhagen, a minority partner in Indievision, sued Hesse, Elwood and Barrett.

Wackerhagen’s lawsuit alleged that Indievision’s assets and income were being wrongly diverted to movie projects.

Court papers filed by Hesse and the other defendants said Wackerhagen had been fired.

The lawsuit was settled in 2006.

Wackerhagen said he couldn’t talk about the dispute because of a confidentiality agreement, but said he admired Hesse’s “go-getter” attitude and people skills.

Still, he suggested the city is wise to study the Eastland plan carefully.

“The city’s got its (due diligence) processes,” Wackerhagen said. “I think those are good to have.”

Film incentives in question

The prospects for the Eastland project could dim dramatically if the state legislature doesn’t extend film tax incentives set to expire in December 2014.

The state’s tax credit gives studios a rebate of up to 25 percent of their expenses. Some lawmakers have expressed opposition; Commerce Secretary Sharon Decker has said she’d like to find a way to keep some film incentives in place.

“I think there’s no question it would have a very negative impact on the project” if the incentives dried up, said Arnold, of Pacifica.

Even if the film incentives stay and the city approves the plan, it would take years for the massive project to unfold.

“The people on the east side, they are so excited about this. They are so pumped up,” Hesse said. “They want this, and they believe this can happen here. And so do we.”

City Council member John Autry, who represents the east side and has edited films, worked as an editor on commercials with Indievision.

Autry said he has no current business connections to Hesse but expressed confidence in Hesse’s abilities.

Autry compared the complex proposal to getting married – not everything turns out as you’d expect.

“That’s where we have to be flexible and understand that some of the things before us may not end up in the final project,” he said. “That’s a lot of what this next six months is going to tell us.” Staff researcher Maria David contributed.

Frazier: 704-358-5145; @Ericfraz on Twitter
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