LENOX — A U.S. Bankruptcy Court judge has granted Kemble Inn owner Scott Shortt a 60-day reprieve to keep operating the historic nine-room boutique hotel and its restaurant, Table Six, pending an expected sale to Shared Estates Asset Fund for $3.2 million.
Judge Elizabeth Katz of the Worcester-based court approved the emergency plan allowing Shortt to use payments from guests this summer as cash collateral to prevent a shutdown of the inn ahead of the sale. The deal is expected to close in 90 to 120 days.
Her ruling came during a brief telephone conference Thursday with attorneys for Shortt’s company, The Frederick, LLC; Shared Estates founder Daniel Dus; mortgage-holder MA Opportunity Investments, LLC; and others involved in the bankruptcy filing.
The Colonial Revival estate was built in 1881 as a seasonal home for Frederick Frelinghuysen, secretary of state under President Chester A. Arthur. The Great Estates mansion, totaling 15,000 square feet is in a residential zone adjacent to the downtown village’s business district.
Attorney Andrea O’Connor, representing Shortt’s company, pointed out that the inn was closed for most of last year because of the COVID-19 pandemic. The revenue for 2020 cratered to $127,000 from $921,000 the previous year.
Shortt, who acquired the inn for $1.6 million in 2010 and spent $2.7 million on renovations, had defaulted on a nearly $2.6 million mortgage this spring. That prompted a foreclosure legal notice by MA Opportunity Investments and an auction scheduled for Wednesday that was canceled after O’Connor filed the bankruptcy petition Monday.
Shortt entered a purchase-and-sale agreement with Dus’ Shared Estates Fund in June, O’Connor explained. She told the court that Shortt’s company needs the cash generated by guest bookings this summer to keep the 1881 Gilded Age property up and running. O’Connor presented a line-item budget to the court covering the next 60 days of operations.
Katz, the bankruptcy court judge, posed several questions, including the absence of a line item covering room occupancy and meals taxes that would be owed to the town and state. The restaurant is only operating for the inn’s guests, O’Connor replied, adding that she would seek further details on the lodging tax question in time for the next hearing.
O’Connor also noted that the budget listed a “site fee” for at least one wedding in September involving a short-term “buyout” of the property.
No objections were voiced by the half dozen attorneys attending the hearing to using guest payments to keep the inn operating. Katz approved the plan “on an interim basis to avoid irreparable harm to this debtor,” she stated, referring to Shortt’s company. A followup hearing Is set for Aug. 12 at 10:30 a.m. and then a status conference in early September.
Dus, the managing director for Shared Estates Assets Fund, told The Eagle last week that he could not disclose specific financing arrangements for the inn’s purchase, pending filings with the Securities and Exchange Commission.
He has used crowdsourced investor funding for his two previous projects, The Playhouse at Foxhollow in Lee, which he sold last November for $1.3 million after a six-year renovation, and for The Freeman Berkshires in Egremont. That estate is under restoration following Dus’ $1.6 million purchase based on seller financing and $890,000 from 141 investors who hold equity in the property and will be able to rent rooms there in the future at a 15- to 20-percent discount.
Dus predicted a mix of investor funding and a minority share of bank financing to seal the deal.