Picture Pub Pizza - Poof! 

The birth of the Cerrito led to the death of the Parkway. Now, a lawsuit may be the only way out.

Page 3 of 5

In May 2008, Kyle finally sent a letter to Treviño and Hanin admitting that not only couldn't Speakeasy pay its rent, but that after raiding their personal savings accounts, stock holdings, and children's college funds to grow the business at the city's preferred pace — an accelerated, all-at-once approach that differed from the Parkway's more organic development — he and Catherine didn't have enough money to pay the $60,000 they still owed to general contractor BBI Construction. The letter did not explicitly request a restructuring of the lease, but suggested it would help.

"It is truly difficult for me to write this letter to you," Kyle began. "Catherine and I take a great deal of pride in our business and our ability to run it profitably. ... In the ten-plus years that Speakeasy Theaters has been in operation, we have only experienced one other time that has been as challenging as the present time. We survived this difficult period through ingenuity, creativity and gall." But now, Kyle continued, he and his wife were backed into a corner and could no longer rely on their autonomy. "We are open to suggestions," his letter concluded. "We are going to keep fighting regardless but we have run out of our personal resources."

Both Speakeasy Theaters and El Cerrito were in a tough spot, but Kyle's announcement set in motion a concerted effort to make things better. In her reply, Treviño offered consolation: "Although we have some limitations, we want to do what we can to support you in this." It was music to the Fischers' ears.

First, the city needed a better picture of Speakeasy's position. So the city council ordered a complete financial review. This didn't begin in earnest until August and wasn't complete until the end of September, leaving a span of four months in which the Cerrito continued to lose money while nonetheless improving its business. Treviño blamed the delay on the state of the company's books. "Their record-keeping was poor," she said. "The accountants that we hired had to reconstruct a lot of it."

The audit found that operations at the Cerrito had improved so much that it lost less than $25,000 in the first nine months of 2008. It would prove profitable by the end of the year, save for the hundreds of thousands of dollars of startup debt it still carried. The Parkway's fortunes, however, had significantly worsened, and it was now losing money monthly — a fact the Fischers attributed to a declining economy; deteriorating relationships with film studios due to late payments; legal struggles and extended lease negotiations with the theater's landlord; and, ironically, business lost to the increasingly popular Cerrito Theater.

The results of the financial review were presented to the city council in October, and in November the Fischers and city staff sat down to hammer out a solution. "Everyone felt good about it," Catherine said. They simply had to present the proposal to the city council and serve notice to the public. Catherine expected an amended lease and additional funds to be approved by February.

But instead of a resolution, the Fischers got a letter from redevelopment agency chairman Bill Jones requesting more information — namely, a new business plan modeled with the proposed relief. The agency appointed a two-person subcommittee to oversee this final step. "The intention of the Agency Board is to continue the relationship possibly by revisiting the Cerrito Theater Lease Agreement," the letter closed. "We are optimistic that the relationship will be successful for years to come."

Another month put further pressure on Speakeasy, and the company was steadily incurring additional debt by paying its accountant throughout the negotiations. "At this point I was saying every other day to them that we're running out of money from a cash-flow standpoint," Kyle said. With little money available to pay movie studios for films, Speakeasy had begun to enter a death spiral as it continued to await action by the City of El Cerrito.

Meanwhile, the Parkway's situation had gone from bad to irreconcilable. On Friday, March 19, Kyle Fischer released an e-mail blast announcing the Parkway's closure that Sunday. It came with no warning, shocking fans and employees alike. Due to the company's suffocating debt and debilitating battle to save the Cerrito, Speakeasy Theaters had become so cash-poor that it couldn't pay the Parkway's new rent of $10,000, nearly doubled in July 2008 when its lease expired.

The landlord, who Kyle says was unwilling to negotiate, had issued an eviction notice. But Kyle misread the date and failed to take immediate action. "That was definitely my mistake," he said. A few weeks later, he reread the eviction notice and realized the deadline was nearly upon him. "I expected the sheriff to show up the next day and lock the place down." So he did what he felt he had to: close the theater before someone else could.

By then the El Cerrito City Council had decided not to endorse the modified Cerrito lease and loan terms that city staff and the Fischers had agreed to back in November, and began working on a draft of its own. At an April 6 joint meeting of the redevelopment agency and city council, the council finally presented its offer, a package that addressed many aspects of Speakeasy's finances, including rebates for $120,000 in previous lease payments, an additional $50,000 loan, and a laddered approach to future rent payments that began with only $2,000 per month in 2010. It was prepared to present its offer the very next day and sign it into action by May 4, a full year after the process had begun with Kyle's letter.

Tragically, just hours before its long-anticipated rescue was slated to be announced by the city council and posted for public comment, Kyle suggested to Lori Treviño in an email titled "winding up" that the theater had run out of money. "I will be sending out a press release in the next week or so indicting that Speakeasy Theaters will be leaving the Cerrito Theater," he wrote. "We have held out as long as we could."

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