Nendels Everett Partnership Faces Motel's Foreclosure

EVERETT

The Nendels Everett Associates partnership hasn't met the terms of a $3 million mortgage loan and faces foreclosure on its Everett hotel, according to a lawsuit filed recently by First Savings Bank of Washington, a Walla Walla-based institution. But a last-minute refinancing effort could stave off the sale.

The lawsuit states that the partnership owes $3.2 million, including $112,000 in accrued interest on the debt.

The bank's lawsuit seeks foreclosure and the appointment of a receiver to take control of the Everett Nendels Motor Inn during the legal action.

Meanwhile, James Kim, who says he purchased the property on Jan. 8, hopes to save the hotel from being sold at auction by refinancing the debt. Kim says he is negotiating with First Savings Bank of Washington to stall a foreclosure until he can refinance. He would not disclose how much he paid for the property.

Attorney James Hayner, who represents the First Savings Bank of Washington, says the bank was not told that Kim officially owned the property. Nonetheless, he says the foreclosure action was filed, because no satisfactory financial arrangements has been reached.

Hayner says a court-appointed receiver could take control of the hotel operations despite Kim's ownership.

The purchase by Kim also causes other problems for Nendels Everett Associates, Hayner says.

According to the lawsuit, the partnership struck a lease/purchase-option agreement with Kim on Oct. 1, 1990.

Hayner says the agreement and the subsequent purchase was not disclosed to the bank as required by the mortgage agreement.

Joyce Ebert, a partner in Nendels Everett Associates, said she was unaware of the lawsuit, and that ownership had been transferred to Kim.

The Everett hotel is part of the Nendels chain, a franchise operation. The lawsuit does not involve or affect the corporation, says Cheri Libby, a Nendels' spokeswoman. Seattle-based Nendels licenses the use of its name and access to its computer-reservations system to franchisees.

All franchised properties are owned and managed independently, Libby says. The publicly held corporation has 70 franchises in eight Western states and British Columbia.

Libby says Nendels Corp. is happy with Kim's purchase of the Everett property. "We see this a positive for (Nendels). We have had other experience with Dr. Kim and hope he will purchase other properties in the future," Libby says. Kim owns two other Nendels properties in Washington, Libby says.

This summer, Nendels Corp. raised $1.5 million in an initial public offering to begin a major expansion effort. The hotel-franchising company planned to grow from 66 franchises to 700 by 1996 and move into Europe and Asia.

But the organization's expansion plans have foundered. Nendels reported a $422,000 loss for fiscal 1991, ended June 30. The loss was attributed to heavy marketing costs associated with attracting new franchisees.

For the quarter ended Sept. 30, the company reported a $154,000 loss. Besides high marketing expenses, the financial report indicated that revenue from existing franchisees dropped 23 percent from a year earlier.

Figures from the latest quarter ending December 30, have not yet been reported, Libby says.