Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 19, 1995 TAG: 9503200006
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: SANDRA BROWN KELLY STAFF WRITER
DATELINE: LENGTH: Long
It was 1957 when Joel and Adolph Krisch and their sister and her husband, Rosalie and Sidney Shaftman, borrowed $30,000 and built their first motel on Williamson Road near its intersection with Peters Creek Road.
It had 51 rooms, and they furnished them on credit from Thalhimers in Richmond.
From that start grew an empire - one that included more than 50 motels in the mid-1980s and made fortunes for the Krisch family. Their company had a national reputation as an industry leader.
This month, the remains of the empire - seven motels - were disbursed in U.S. Bankruptcy Court.
Presiding over the liquidation was Joel's 36-year-old son, Samuel Krisch II.
Sam Krisch says he wanted to build a second Krisch hotel empire; what he's doing now ``feels like a closure'' to that possibility.
Now it's back to just one motel - a Ramada Inn in Wytheville.
``There has been a lot of heartache,'' Sam Krisch said.
Sam Krisch has passed ownership of Holiday Inns in Salem; Covington; Lexington; Marion; and Dortches, N.C., and Sheraton Inns in Roanoke and Charlotte, N.C., to a company that has a "Star Wars"-like name, LW-SSP2. Krisch owed $38 million on the hotels; the transfer was a final step to closing out a web of companies that filed for bankruptcy a year ago.
Sam Krisch is president of Krisch Realty Associates, Krisch Hotels Inc. and KR Associates, which now are in Chapter 11 reorganization, and of the publicly traded Krisch American Inns, which is being liquidated. These were second-generation businesses formed after the $300 million sale of an earlier motel and communications empire, American Motor Inns.
The Krisches' portion from the sale of AMI was about $50 million. Family members have other business holdings, including valuable commercial property near the Roanoke Regional Airport, and Eldercare Inc., which has more than 500 nursing home beds in four Virginia locations.
Money is not an issue for the Krisches, although Sam Krisch contends he doesn't have enough to quit work. He will take a year to continue graduate studies at Hollins College, but says he expects to be back in a business after that.
The demise of the businesses Sam Krisch and his father, Joel Krisch, ran since the mid-1980s has been painful for the entire family, says Fred Krisch Shaftman, a cousin.
``Any people that are used to winning don't like to lose,'' said Fred Shaftman, who runs Bell South Communications Systems, a $450 million business that is the descendant of a Krisch company.
Southern by choice
The Krisch family had its beginnings in Roanoke when Samuel and Mariam Krisch moved from New York in 1920 to open United Pawnshop. Samuel Krisch was a native New Yorker, but his Richmond-born wife didn't like that city.
``Daddy always said he was a Southerner by choice,'' said Rosalie Krisch Shaftman, who at 73 is mostly retired from such civic involvements as the Society for the Prevention of Cruelty to Animals and the Roanoke River Foundation.
Rosalie, Adolph and Joel graduated from Jefferson High School, but chose different colleges: Rosalie went to the University of Alabama; Joel, Virginia Tech; Adolph, the University of Virginia. They then settled back in Roanoke and joined the family business.
They and Rosalie Shaftman's husband, Sidney Shaftman, were running the pawnshop when they built their first motel.
They expanded the business through building motels and buying existing ones until they owned more than 50 and were the largest Holiday Inn franchiser in the country.
Adolph found the locations for the motels they built, and Joel found the money, Rosalie Shaftman says.
``My role was as guru. I'd patch them up when they'd fight,'' she said. ``Joel would call and say, 'Adolph's crazy,' and then Adolph would call and say, 'Joel's a pain.' I'd get them together.''
The brothers were inseparable, though, and carried each other's power of attorney. If one made a decision in the absence of the other, there was no second-guessing, business acquaintances say.
The siblings and Sidney Shaftman were all ``partners,'' Rosalie said.
Adolph Krisch died in 1990, willing Joel, his ``beloved brother,'' his guns, wearing apparel, jewelry and ``other personal effects particularly suitable for a male's use'' and $10,000 with the suggestion that it be spent on ``liquid refreshment.''
He gave his ``beloved sister'' $10,000 and suggested it be used to buy ``jewels.''
The bequests were examples of the spirit and keen sense of humor that friends and family attribute to both brothers. Rosalie Shaftman still has difficulty speaking about Adolph.
She believes Adolph, who suffered from chronic back pain and took his life at age 73, delayed his suicide until she could return from a trip and he could spend time with her one last time.
``He kept asking me, `When are you coming back?''' she recalled.
She and Joel are equally close, she said, and meet for lunch each Saturday.
Joel Krisch, 71, must use a wheelchair because of a debilitating neurological disorder; yet he comes every day to the company offices behind a motel on Franklin Road, and he's a regular at Mill Mountain Coffee, which is a block down Campbell Avenue from where his family once ran the pawnshop.
Rosalie remains close to Adolph's widow, Heidi, now married to developer Jack Loeb. Loeb previously was married to one of Joel Krisch's daughters, making him Heidi Krisch's nephew by marriage at that time.
``Heidi is like a daughter to me,'' Rosalie said. ``She and Adolph had 23 years, and we're just glad that she is happy now.''
In his will, Adolph Krisch provided that, if revenue from a trust left for his widow wasn't enough to maintain the standard of living she had when he was alive, she was to be paid some of the principal.
The Krisches' lifestyles were inconspicuous, although Adolph was more public than his brother or sister. After a divorce from his first wife, and before he married German-born Heidi Feller, he occupied what may have been Roanoke's only penthouse, atop an office building on McClanahan Avenue in South Roanoke.
Adolph and Heidi, who met when she came to work at one of the Krisch Holiday Inns in Baltimore, were wed in 1966.
Heidi Krisch emerged as the most visible Krisch family member. She has leadership roles with United Way and the Red Cross, and is on the board of Roanoke Memorial Hospital and president of the Roanoke Symphony Society. She is an alumna of Roanoke College.
She declined to be interviewed, except to say that she ``couldn't have been embraced by a more wonderful family.''
Rosalie said the family was not happy about having a newspaper story done about them, but she also said the family was proud of its success.
``We worked hard, and we earned everything we made.''
`Nobody got mad'
In 1957, when the family built its first motel, Adolph ran it and Joel continued in the pawnshop. The business grew rapidly: By 1965, they had 24 motels and had outgrown the quarters over the pawnshop. By the time the family sold the business properties along with a communications business they had set up to supply phone systems for their hotels, the Krisches and Shaftmans had amassed a reputation as leaders in the hotel industry. In 1983, a year before it was sold, American Motor Inns posted earnings of $18.4 million.
The Krisches got national attention, including a story in Business Week magazine, when they successfully sued Holiday Inns in 1973 after the franchiser refused to let them build a Holiday Inn at the Newark airport and also refused to let them build any other brand of motel there.
In a story in a 1978 trade publication, American Motor Inns was depicted as forward-thinking in everything from technology to employee relations. Hourly workers were encouraged to take leadership roles, and women held 40 percent of the company's general manager, innkeeper and restaurant manager jobs, the publication said.
When American Motor Inns opened the Frenchman's Reef Holiday Inn in St. Thomas, U.S. Virgin Islands, in the early 1970s, Carroll Holland, a black Roanoker, trained as an innkeeper and spent two years on the island getting the inn established.
When Holland returned to Roanoke, the Krisches sent him on the road working with personnel managers at AMI inns.
``I knew the Krisches before they had an inn,'' said Holland, now 77. ``They thought I was part of the family.''
Howard Feiertag, a Virginia Tech professor who also worked for the Krisches' AMI business, said, ``Adolph and Joel had foresight.''
When Feiertag left in 1983 after 16 years to join a Florida hotel company, the Krisches threw him a ``wonderful party, gave me a watch and let me keep the company car, an Oldsmobile Delta 88.''
``It was exceptional that they treated people very well,'' Feiertag said. ``They were sensitive to people's feelings. When they were on the road, they actually went into housekeeping to talk with maids working in the laundry.''
The Krisches were extremely close-knit, Feiertag said. Sometimes, though, the strong wills clashed.
``They would really take on each other about an issue in the operation,'' Feiertag said. ``They'd scream, and sometimes you kind of put your tail between your legs and ran.
``But nobody got mad. There would be a lot of stomping out of the room, but five minutes later, it would be over, and they'd go out together to lunch.''
Adolph Krisch was the ``front man,'' out ``glad-handing'' the public and serving as president of Holiday Inn International, Feiertag said. Joel was ``laid-back, quieter.''
The Krisches didn't like to ``call attention to themselves,'' so the community didn't know how successful or how philanthropic they were, Feiertag says.
``I think people were jealous that they were so successful. An awful lot of people made money on them.''
It was hard to get fired from a Krisch company, Feiertag said. ``People would leave, and they'd take them back. Some of us in operations, we gritted our teeth. Joel and Adolph gave a lot of people opportunities to train and go elsewhere.''
Many never left. The skeleton staff that remained in the company headquarters to the end included Dorothy Roe, who became secretary to the Krisch brothers 33 years ago and was secretary of the Krisch companies; Ben Richardson, general counsel and senior vice president, who has been with the company since 1962; and John Poff, who was the first employee the Krisches hired in the motel business. Poff began as a night clerk and now is senior vice president.
Sam Krisch has been out of sight in the Roanoke Valley in recent years. In 1989, when he was in line to become president of Holiday Inn International, which required a lot of travel, he began to scale back on local commitments. At one time, he was involved with Mill Mountain Theatre, United Way and the Roanoke Valley Speech and Hearing Clinic, either serving on boards or working in some other capacity.
He says he might be ``open'' to more community involvement after the company closings are complete. This includes selling the one-story building the Krisches put up in the early '70s when they moved their headquarters from downtown Roanoke to behind what was then Holiday Inn South.
The inn in front of it is now a Ramada and was sold last year. The Airport, Orange Avenue and Tanglewood Holiday Inns have belonged to other owners for some time.
The headquarters building once bustled with more than 100 employees, but for months most of it has been dark; the handful of staff who stayed to close out were expected to be gone by last week.
A lot of excitement used to exist in the now-unused areas, says Willis ``Red'' Rowsey, who at one time was comptroller of the companies and oversaw 75 accounting workers.
Rowsey is a creditor of the bankrupt companies, seeking $60,000 for the final two years of a consulting contract.
Even though it's hard to separate the first Krisch companies from the current ones, Rowsey says they were quite different. ``Some people will say the new business happened at the wrong time; other people will say different,'' he said.
The brothers didn't have any hobby, except ``making money,'' said Richardson, who, in addition to being the Krisches' attorney, grew up with them in South Roanoke.
That was one reason for the ``buyback,'' he said. A year after the Krisches sold American Motors Inns, they bought back 24 of the motels they had just sold, to start the second-generation motel company.
When the Krisches sold American Motor Inns in 1984, they had become disenchanted with the motel business, which was more competitive, and with franchisers who were making greater and greater demands on owners to change and upgrade properties.
``It was a constant fight to make a profit,'' Richardson said. ``At the point they sold, they got large dollars and a good profit for the shareholders, so why not?''
The terms of the sale called for the Krisch management team to continue to operate the properties it sold to Prime Motor Inns, so life would continue as usual at headquarters. But that's not what happened after the Fairfield, N.J., owner took over, Richardson says.
``From the time Prime took control in September 1984, they never called [Joel] to ask him anything.''
Adolph was ready to scale back his business involvement, but Joel couldn't stand having nothing to do, Richardson says.
To pass the time, the management group oversaw the building of Timberline condominiums in Southwest Roanoke County, an apartment complex, and several nursing homes. But those were ``passive'' things, and ``Joel wanted action,'' Richardson said.
That's when they began talking about the buyback.
Richardson recalls ``a whole lot of discussion'' and that it was ``extremely difficult'' to arrange financing.
The new company, Krisch American Inns, was formed and struck a deal with Westinghouse Credit Corp. to borrow $118 million at 10.5 percent interest that would increase half a percentage point a year until it reached 14 percent.
``We never got over 10.5 percent before we had to go hat in hand to Westinghouse,'' Richardson said.
Just after the buyback, the upward trend in the hotel business leveled off and then began to plunge. The 1,200 or so stockholders who bought KAI stock at $3 a share never saw any profit. One person, who asked to not be identified, says some people believed that the management team for the second-generation company was paid too much, that the executives started at the salary level they'd been at with the previous, successful AMI.
Richardson disputes that. He says management took small salary cuts at first and then more severe ones by 1989 when it became obvious that the business was in deep trouble. He says he personally lost $100,000 in the KAI deal.
It took 3 1/2 years to recognize how bad the business was getting, he says.
``Joel was a master of finance, and we kept thinking he'd be able to get refinancing at a reasonable rate,'' Richardson said. ``But when you'd call up a lender and say anything about a motel, the lender got nauseous.''
Westinghouse, which had a 30-year lending history with the Krisches, stuck by the new company and even gave it additional financing when it went over budget on the Sugar Bay Resort it was developing on St. Thomas. But Westinghouse got in trouble because it had so much bad debt and was sold to Lehman Brothers, which is the genesis of the LW part of the LW-SSP2 company that now owns the Krisch properties.
Working with the Krisches meant ``lots of action, lots of excitement,'' Richardson said. ``I got to do things few lawyers get to do.''
`Pay me or get out'
Sam Krisch also got a lot of experience at an earlier age than most people.
At age 13, he was doing doorman duties at family inns. When he joined the family business, after graduating from North Cross School in Roanoke County and getting a degree in history from Harvard University, he visited all the AMI properties and worked almost every hotel job. He spent six months at AMI's Frenchman's Reef Holiday Inn, which overlooked the harbor in St. Thomas, and two months at Holiday Inn International headquarters in Memphis, Tenn.
Sam was senior vice president of the family businesses when the buyback was announced. ``I thought it was a good opportunity to build a second successful business,'' he said.
``It was exciting. You would have had to be a very wise person to have seen what was coming.''
Ralph H. Deckelbaum, president of Markdeck Ltd., a Rockville, Md., hotel management company, has known the Krisches since the 1950s. He said Sam and Joel Krisch were ``victims of circumstance.''
``Sam, his father and his uncle had established a personal relationship with lending institutions, but in the past several years there has been no such thing as a relationship,'' Deckelbaum said. ``It's pay me or get out.''
The syndication of hotels in the mid-1980s attracted investors looking for tax benefits, not hotel projects. That made it easy to borrow money, but it also drove up the value of properties, Deckelbaum says. When the interest in hotel financing came to a stop because investors lost the tax benefits, companies were left with properties that weren't worth the loans against them.
That was the case with the Krisch hotels, which were mortgaged for about $13 million above market value.
In hindsight, Deckelbaum says, the Krisch buyback ``was not a smart deal,'' but he understands why Sam Krisch held onto it so long.
Setting up Krisch American Inns was Joel's way of keeping the Krisch hotel business alive, and ``he was doing something for Sam,'' Deckelbaum said.
The new Krisch companies were in a downward spiral for several years, but the end began to come more rapidly with a restructuring in 1992.
Last October, the Krisch company that had a 49 percent interest in the Sugar Bay Plantation Resort hotel in St. Thomas had to forfeit that interest. In late summer, the management company lost its last contract.
In December, Sam Krisch announced that he was quitting the fight to reorganize the companies.
``I had a real desire to try to make things better, to try to provide a good place to work,'' he said. ``Even though my title might be president, there have been a lot of people who put out extra efforts. They feel as great a loss as me.
``We knew how to run hotels, but we were not the sort of wheeler-dealers that a lot of hotel companies have become.''
The Krisch hotels were mid-market properties and got ``nibbled'' from the top by the more upscale places and from below by the economy ones, he says.
The deal Krisch struck with the lenders frees his companies of debt, and leaves it with $1.3 million. Of that, $877,500 is owed for operations, and the remainder will be available to pay other creditors and to offset tax liability that 10 company employee-owners will incur in the transaction.
Ending the businesses was the ``rational decision,'' Krisch said. ``Winning is relative. You could [win] and have a company that still wouldn't be a viable business.
``It's bittersweet.''
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