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Karcher Money Woes Extend to Real Estate : Entrepreneur: The fast-food chain founder has sought court action to protect his stake in a San Bernardino County home builder.

September 17, 1993|GREG JOHNSON and DEBORA VRANA | TIMES STAFF WRITERS

ANAHEIM — Carl N. Karcher, fighting for control of the Carl's Jr. fast-food chain, is also battling to protect his stake in a San Bernardino County home-building firm in which he has invested at least $13 million, court records show.

Karcher, 76, has said little about his finances other than that he has defaulted on $30 million in personal bank loans and might be forced to sell some of the 6.1 million shares he holds in Carl Karcher Enterprises Inc., the restaurant chain's parent company.

But court files in San Bernardino show that Karcher is a partner and investor in Monnig Development Inc., which has built single-family homes across the Inland Empire. And, like big-time developers, Karcher has been stung by a declining demand and falling prices for new homes.

Monnig Development has built about 1,700 modestly priced houses in Riverside and San Bernardino counties since the late 1970s, including about 1,000 in which Karcher was an investor, said founder Maurice Monnig, a longtime Karcher acquaintance.

But the ongoing real estate slump has hurt the small company. In July, a Superior Court judge agreed to Karcher's request that Monnig be replaced by a court-appointed receiver.

Monnig Development's projects included 233 homes and a 374-unit apartment building in San Bernardino County, as well as a retail center in Long Beach, according to court records.

The company has several lawsuits pending against it in San Bernardino County, including a complaint by 21 homeowners who allege faulty construction.

Closer to home, Karcher has pumped his own money into a project that was designed to restore the blighted Chevy Chase neighborhood near Karcher Enterprises' corporate headquarters on Harbor Boulevard in Anaheim. Financing for the 392-unit, low- and medium-income apartment complex included $20 million in tax-exempt bonds issued by the city's redevelopment agency.

Karcher and a partner invested in the project partly because they wanted to make it a "showcase as far as what you can do to revitalize the neighborhood," Karcher spokesman Edward Pasquale said.

Rand Sperry, a partner with the Sperry Van Ness brokerage in Newport Beach, said: "Karcher went in there and basically did a major renovation, spending a lot of money on it."

"Would he have done it again if he had to do over?" Sperry asked. "Probably not. But that's true of a lot of the deals in the past five years."

Karcher continues to remain silent on details of his personal financial difficulties, which came to light when he threatened a proxy fight to regain control of the company he founded 52 years ago. "If Carl wanted to disclose all his personal finances, we'd go out and rent a billboard," Pasquale said.

Karcher's problems mirror those of many wealthy Southern Californians who invested in real estate and speculative stocks, Pasquale said. "The general economy does affect previously existing projects. . . . That happens whenever the market gets soft."

The major financial problem facing Karcher, who owns 34% of Karcher Enterprises' shares, is the low price of that stock, Pasquale said. If its value increases, he said, "it helps not only Carl but every other shareholder."

Karcher is at odds with management over a marketing plan that he maintains would boost the company's revenue and profit, which have stalled. If successful, Karcher argues, his proposal would raise the stock price, thus reducing the number of shares he would have to sell to put his personal finances in order.

His plan is to test-market Anaheim-based GB Foods' Mexican-style food products at several Carl's Jr. locations.

A majority of Karcher Enterprises directors maintain that the founder wants the GB Foods test because, as part of the deal, he would get financial help from GB Foods Chairman William Theisen. Karcher's spokesmen, however, say no strings would be attached to the test.

Local real estate experts say they know little about Karcher's real estate dealings.

"He was more of a mover and a shaker in the philanthropic world, not known as a player in the real estate world," said George Spragins, district manager for Grubb & Ellis Inc. brokerage in Newport Beach. "Maybe he was a silent partner in some projects, but real estate-wise he was not a player here."

Maurice Monnig would not comment on the litigation against him initiated by Karcher.

"Carl and I always had a good relationship which was built on tremendous mutual respect over the years," Monnig said. "It's too bad that . . . our relationships, both personal and business, have to be affected like they are now. We are both being affected by forces from the outside."

In court documents filed in San Bernardino on June 25, Karcher asked the judge to dissolve the Monnig partnerships, inspect company records, appoint a receiver for the partnerships and reimburse funds.

The fast-food magnate alleges in the filing that Monnig Development and its partnerships "continue to divert rents, profits and income from the limited partnerships to other non-related entities"--actions that damage the partnerships. The filing also alleges that Monnig and its related companies are now insolvent and not able to make payments on loans guaranteed by the Carl N. and Margaret M. Karcher Trust, which holds the couple's personal fortune.

"Because the Karcher Trust has guaranteed so much of the debt of many of these limited partnerships, every day that the general partners fail to pay creditors, the Karcher Trust's liability increases," the filing states.

Times correspondent Terry Spencer contributed to this report.

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