Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 1, 1994 TAG: 9402010261
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: SANDRA BROWN KELLY STAFF WRITER
DATELINE: LENGTH: Long
Krisch Realty Associates, which owns seven hotels, including Roanoke's Sheraton Airport Inn and the Holiday Inn in Salem, on Monday filed for financial reorganization under Chapter 11 bankruptcy protection.
Also seeking protection from creditors were three affiliated companies: Krisch Hotels Inc., a hotel management company; Krisch American Inns Inc., a publicly traded company that has no current operations; and K R Associates Inc., a corporation which owns 70 percent of Krisch Realty.
Samuel J. Krisch II is president of the companies, which operate from headquarters on Franklin Road Southwest.
Krisch said Monday that operations at the 13 hotels managed by Krisch Hotels, which include four Holiday Inns in Western Virginia, will not be affected by the filing.
Chapter 11 filings allow the companies to operate without interference from creditors and frees them from having to pay current bills while they are reorganizing.
The bankruptcy request was timed to protect the companies from foreclosure likely when they are unable to pay a $13 million loan coming due July 1, a spokesman said.
The $13 million loan was secured by a blanket lien on the seven hotels owned by the Krisch companies. It was part of the terms of a restructuring agreement made 18 months ago between lenders and Krisch.
Krisch attributed the companies' financial woes to a weak real estate market, less profitable hotel operations and the failure to work out a long-term agreement with lenders.
The four companies listed total debt of some $43 million, all but $1 million secured by properties. The $1 million in unsecured debt is owed to more than 300 creditors, said Carter Magee Jr., the lawyer handling the bankruptcy.
Among the unsecured creditors are Central Fidelity Bank, which is owed $333,333, and a variety of suppliers, including Appalachian Power Co., which is owed $21,783.
Magee said the secured debt is owned to Aetna Insurance Co. and LW-SP2 L.P., a consortium of lenders including Lehman Brothers of New York, Westinghouse Corp. and Lennar Corp., a publicly traded real estate company based in Miami.
Magee said the companies could meet their loan debt but could not get the money needed for refurbishing its properties.
He said $1.5 million to $2 million is needed to update the motels.
Monday's action followed a collapse of negotiations with lenders and was another in a series of misfortunes to strike the Krisch operations in recent months.
In October, Krisch American Inns Inc., which once had interest in a dozen hotels, lost its last property when it was forced to deed its 49 percent interest in the Sugar Bay Plantation Resort hotel in St. Thomas, U.S. Virgin Islands, to LW-SP2.
LW-SP2 is a Delaware limited partnership set up by Lehman Brothers, a New York investment broker controlling the investor group that holds the loan on Sugar Bay.
Sugar Bay is a 300-room hotel, valued at $52.5 million, franchised as a Holiday Inn Crowne Plaza resort when it opened in September 1992.
There were about 1,200 stockholders in Krisch American Inns, including many from the Roanoke Valley.
The current Krisch companies are the offspring of a hotel business begun in the 1950s by Samuel Krisch's father, Joel Krisch, and his brother, Adolph Krisch.
Adolph Krisch, who died in 1990, and Joel Krisch built their first motel, a Holiday Inn at Hollins, in 1956.
A year later, they built a Holiday Inn in Charlotte, N.C., then another in nearby Gastonia. In the early 1960s, they were given the chain's franchise in the Baltimore area.
Over the next 25 years, the Krisches owned and operated more than 50 Holiday Inns and other motels under the corporate name of American Motor Inns in Roanoke. The company reported $18.4 million in earnings for 1983, the year before it was sold.
In 1984, the Krisch brothers and their sister, Rosalie Shaftman, sold a $27 million share of AMI to Prime Motor Inns, and that New Jersey firm went on to buy the remaining publicly held stock.
The total buyout of 51 motels for $350 million was the largest ever for a Roanoke company. However, less than a year later, the Krisch family organized a private company, Krisch Hotels, which bought back 23 motels from Prime Motor Inns.
Adolph Krisch retired in July 1987 as board chairman of Krisch Hotels and Krisch Motor Inns, and his brother, Joel, succeeded him. Joel's son, Samuel J. Krisch II, moved up to president. Joel Krisch recently resigned as chairman, citing health reasons.
In 1990, Krisch Hotels had a Roanoke Valley work force of about 700. Its current employment is somewhere between 300 and 350.
The company headquarters on Franklin Road are in back of what is now a Ramada Inn, but until December was a Holiday Inn that a Krisch company managed.
\ KRISCH COMPANIES SEEK BANKRUPTCY PROTECTION\ \ Krisch Realty Associates L.P., a Virginia limited partnership established in 1985. It owns Holiday Inns in Covington, Lexington, Marion and Salem and in Dortches, N.C., the Sheraton Airport Inn in Roanoke and the Sheraton Airport Plaza Hotel in Charlotte.\ \ Krisch Hotels Inc. is this company's general partner. Krisch Hotels Inc., set up in 1985, manages 13 hotels in Virginia, North Carolina and Tennessee, including the seven owned by Krisch Realty. It also operates Valley Catering and Krisch Printing.\ \ Krisch American Inns Inc., a publicly traded company begun in 1986, has no operating assets after losing its interest in a resort in St. Thomas, U.S. Virgin Islands, in October.\ \ K R Associates Inc., a corporation which owns 70 percent of Krisch Realty Associates L.P.
\ Source: Petitions filed in U.S. Bankruptcy Court
by CNB