Highest bidder takes on lobster plant with troubled history

The Live Lobster Co. processing plant in Prospect Harbor, shuttered since early spring, is now owned by Garbo Lobster, a Connecticut-based lobster distribution firm. A sister property in Stonington was sold for $1.6 million to Granites of America, a Rhode Island company owned by Tony Ramos.

The new owner of the Prospect Harbor property bid $900,000 at the Sept. 26 foreclosure auction in Gouldsboro overseen by Thomas Saturley, president of the Portland-based Tranzon Auction Properties. The auction was ordered by TD Bank, which had filed a lawsuit this spring claiming Live Lobster owed it $3.4 million.

In the Sept. 27 foreclosure auction of Live Lobster's lease on a pier in Phippsburg, Saturley said a "local gentleman" submitted a winning bid of $215,000 among six bidders. Citing auctioneering rules, Saturley said he could not disclose the buyer's name without his permission.

The combined sales' total of $2.7 million, Saturley said, was a fair reflection of the market value ... given the number and makeup of the bidders present at the three auctions.

Saturley, a lawyer who moved over to the real estate auction business in the 1990s, in a one-hour interview at his Portland office, shared with Mainebiz how his real estate auction company prepared for the high-stakes auction. The following is an edited transcript of that interview.

Mainebiz: Your company is handling the auction of the three Live Lobster waterfront properties — in Prospect Harbor, Stonington and Phippsburg — a sale ordered by the lender, TD Bank. How did that come about?

Saturley: This is a foreclosure sale: A foreclosure auction marketing campaign. Therefore, under the state of Maine's rules, regulations and laws, it is appropriate to follow certain steps in order to make sure the legal process is followed correctly. To a certain extent, the real estate auction portion is the culmination of the legal process. So the legal process is fairly specific with regard to the number of ads that need to be run, where they can be run, the number of days it takes to run the ads, the number of days between the ads and when the auction can be held.

What a professional real estate auction company does is not only follow those steps and those rules as laid out by the statute and the Legislature, we supplement it and bring it into the modern world of 2012.

Such as marketing via email?

As we all have come to appreciate, technology is a wonderful thing. The individuals that should be interested in these properties — whether it be the processing plant in Prospect Harbor or one of the buying stations in Stonington or Phippsburg — might not necessarily be a neighbor in that county. They could be a specialty purchaser — for example, a chain of restaurants that wants to make sure they have a lobster supply for the future and want to be purchasing it on a direct basis from the lobstermen themselves. It might be a company that's already in the food-processing industry but not necessarily in the lobster portion, which decides: "Boy, that will fit strategically within our plan." Our job, as professional real estate marketers, is to make sure those individuals are at least aware of what we're offering and what the terms and the conditions of the sale are.

Let's talk about the Prospect Harbor property in Gouldsboro.

The Prospect Harbor property is a processing facility, with a wharf, located in Gouldsboro. It's been used for a variety of things over the years and it has been an important part of that community, with regard to the work force. The Gouldsboro property was refitted by Live Lobster to be a lobster-processing facility, using the modern techniques with regard to equipment and business plan. The facility there is able to do things with that equipment that in years past would not have been available. And that's all very positive.

But it's a 'specialty' property: Not everyone's interested in a lobster-processing facility. That's not the kind of thing that folks as a general nature are going to invest in. You obviously need to understand the lobster industry, you need to have the ability to have not only access to the inventory, you need to have access to the work force, you need to have access to the markets where you will sell the product. And not everyone knows how to do that in the lobster industry.

[I think the property's] time has come. As we all know here in Maine, lobster processing has become crucial, given the integral part it plays in the lobster industry.

If we have a greater capacity to process lobsters in Maine, as opposed to shipping them out to Canada, we're more in control of our destiny selling Maine lobsters?

That's clearly the position of the governor. And the governor has made it very clear that this is something that's exceedingly important to his administration to support the lobster industry. We are all aware of the challenges that took place in Canada this summer — the blockade and what was happening with regards to the processing plants in Canada that were trying to service not only the Maine lobster industry but also addressing the fears that some of the Canadian lobstermen had regarding the value of their catch. Therefore, to a certain extent, to try to control our own destiny we need to have lobster processing in Maine — which was the governor's point.

At what point did you start the marketing effort for these properties?

Generally speaking, the public portion of the campaign for a real estate auction of this magnitude is something like six weeks. But what we try to do is be prepared on Day 1 of that six-week drill. So weeks beforehand we started to do our research with regard to zoning, what's there and what's not there; but the public portion is generally a six-week campaign prior to the auction itself.

Your campaign roughly coincides with the news that was dominating the newspapers this summer concerning the volatility of the lobster industry. Was there a feeling of "Uh-oh?" Or was there a feeling of "This is an opportunity that might enhance our auction options?"

All of us have been challenged by what's taken place in the lobster industry. It's been a tough time to be in the lobster industry, whether you are a lobsterman or whether you are a processor or whether you are a broker, etc. So on the one hand, the timing was challenging.

On the other hand, as it became clear that one of the things that would potentially assist the lobster industry is to have modern available processing facilities, it became more of a positive. Again, as we all appreciate here in the state of Maine, not only is timing important; location is important too. You know, you've got to be able to make that Prospect Harbor plant work for you in Gouldsboro, and where it's located is not going to fit for everybody.

Could you describe the physical attributes of the Gouldsboro property and how they would make that a viable location for a lobster processor? It has six parcels, 91 acres, 1,480 feet of shore frontage, a pier… there's a lot there.

Yes. It clearly is a significant facility located right there in the village of Prospect Harbor. With a number of different buildings and land, with a beautiful view and the wharf itself. There has been a retrofit of that processing plant there, with very state-of-the-art equipment, that makes the lobster processing very viable. And what you have there is located in a part of the state where the lobster inventory is readily available.

Stonington has some intrinsic assets, then, because it's so important as a fishing port?

Clearly. Stonington is a very important part of Down East Maine. And this particular property, which includes a lobster-holding facility and a buying station as well as a commercial wharf, is a special property. It is very possible that an individual or individuals would see this from a strategic plan to be a standalone, or an addition to what they already have. Could one see a strategic plan to keep all three properties together? Absolutely. Could one see a strategic plan to keep Gouldsboro and Stonington together? Absolutely. Similarly, could you see all of them standing alone and going to different buyers? Absolutely.

Has there been any direct contact from existing lobster processors or local fishermen who are seeing this as a way to control their own destiny? What interest in the Prospect Harbor property has been shown by the stakeholder lobstering community?

It is varied and it's very positive from our perspective — meaning this is a well-known event. That's not surprising to me. I've had the opportunity to sell lobster pounds and buying stations in my career as a real estate auction professional and what I've come to appreciate with regard to the lobster community is that it is tight-knit.

They don't need the Internet … the information is already out there?

That's the truth. As far as these buying stations in Stonington and Phippsburg and this processing plant in Prospect Harbor, they knew about the auction before I did, quite frankly. (Laughing).

Those are important stakeholders: They're important to the asset we're selling, because many of them either are providing the inventory and the product necessary to make these properties successful. But they're also really very strong prospects — quoting you — of being able to control their own destiny.

Other stakeholders are involved as we alluded to earlier: Folks from further away that either are in the industry or want to be. Another stakeholder important to the foreclosure process, obviously, is the borrower. We have an obligation as part of our process to make sure we are doing everything we possibly can to maximize the value of the collateral that was used in buying these properties.

The borrower being Live Lobster? And their Massachusetts parent company?

That is correct.

So that's a stakeholder that obviously cares deeply about our success. Needless to say the lender [TD Bank] is another important stakeholder. Not only is it important that we follow the process necessary as we've talked about, but they care deeply about the collateral that was used for the loan and that we maximize dollars to the best of our abilities.

These are also important properties in those towns as taxpaying entities. It's important, then, that we use the marketing and use the process to find a viable and hopefully successful owner of the properties. Our mission, if you will, is to find a viable owner of these properties so that we minimize their downtime. We live in the state of Maine and winter is coming and it's important that these properties be protected and that they be preserved and hopefully enhanced for the viability of the neighborhood, the community and the towns in which they're located.

Similarly, and this is significant with respect to Gouldsboro and Prospect Harbor, there's a work force that is a significant stakeholder with regard to this property. Those folks, some for more than one generation, worked at that plant. And that work force needs to have success so they can go back to work. You and I both know there aren't enough jobs in this country, and clearly that's true in Prospect Harbor. So we need to help get those folks back to work.

… I think when you shutter manufacturing — whether it be a food-processing or a widget factory or steel or paper — when we close those down we lose the expertise of the work force. We lose business relationships that plant had produced and was serving. And we lose whatever technological advances that might have taken place with respect to the equipment that's there.

Is it fair to say you probably already know some of the interested buyers? Can you identify any of them before the sale, if not their names, at least the kind of entities who might be in that audience?

Yes and no: I'm a lawyer, so there's always a 'yes' and a 'no.'

So the 'yes' part: We have talked or otherwise had communication with prospective bidders. So the likelihood of somebody pulling up to Gouldsboro on the Sept. 26 at 10:30 in a black limousine and everybody is looking at them and saying 'Who's that?' is slim to none.

Needless to say, part of what we're going to do, when you call and ask, I'm going to ask who you are, and I'm going to ask what you're interest is and I'm going to try to qualify you as a purchaser. For example, if you're a developer in New York and you heard there was this fantastic property located on the ocean up in Gouldsboro, Maine, and you're thinking "Wouldn't this be great for condominiums?" I'm going to say, "Probably not."

The historic use as a working waterfront is a more important value?

Exactly.

Can you say how many parties have expressed an interest in these properties? Five to 10? Ten to 15?

It's significantly higher than that. But to answer your question: We're talking about those who've 'expressed an interest.' That's not surprising. Once the word goes out, I'm going to hear from lobstermen, town fathers, the press, neighbors … folks who thought they ought to own a commercial wharf. So there's a whole bunch of inquiries that we are now going to qualify. And that process, it's a funnel. The funnel is going to narrow down the focus to viable bidders. That's where we are in the process at this point [on Sept. 17].

You have, I assume, a certain price that must be met. Is there any chance that if that price is not met, you as an auctioneer might say, 'Sorry, we haven't met the lender's minimum price.'

We have to remember, in this particular instance we are in a foreclosure sale. It would be different if I were working for the owner of the real estate as the seller; it gives us different options.

The lender has the right to bid there, so therefore they can buy it if their reserve is not met; they can be the successful bidder. That would conclude the foreclosure process: now there is a buyer, there is a new owner with regard to the title and that's an important portion of concluding the foreclosure process. Secondly, they can sell it to a third party who has met or exceeded their 'reserve' price. Third, they can say for a variety of reasons it's appropriate today to postpone the sale. Our role, needless to say, is to do everything we can to find a third-party buyer. That's in the best interest of all.

Is there any possibility the current owner, Live Lobster, could find outside financing and be the buyer?

Yes, anything can happen. Again, to talk about a foreclosure auction: I don't know the circumstances with respect to Live Lobster and its relationship to the lender. There is always the possibility in a foreclosure process that the owner, the borrower, is able to put the finances together — through a new lender, with a new partner or any number of things — in order to pay off his debt. And that's a great thing if somebody can accomplish that task.

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