High-stakes real estate swindler Edward H. Okun was sentenced last week in a Virginia courtroom to 100 years in prison for absconding with about $126 million in funds entrusted to his qualified intermediary company by 1031 exchange investors. Meanwhile, back on the corner of Westheimer and Highway 6, one of his former properties went up for sale.
Okun’s Investment Properties of America bought the West Oaks Mall for $110 million in 2005. The sellers of the bankrupt property might expect to get $20 million for the million-sq.-ft. mall today, reports Globe St.’s Amy Wolff Sorter:
The mall’s anchors include Dillard’s and Macy’s, which own their own space, and Sears, which is on a lease. [Holliday Fenoglio Fowler's Robert] Williamson says the Sears lease is up in 2010, but negotiations are underway to keep the retailer in place.
When Okun bought the mall from Somera Capital and CoastWood Capital a little less than four years ago, the asset was 95% leased, and sported $10 million worth of exterior and interior improvements. IPA had even larger plans for even more renovations on the 33-acre site, Williamson says.
Less than a year later, the owner was able to secure $86 million of permanent financing for the mall. Yet by late 2007, IPA had filed for bankruptcy protection to stave off foreclosure. Okun’s troubles and a failing economy dropped the mall’s occupancy to a little less than 70%.
What’s a struggling mall to do these days? How about turning off the air conditioning . . . and hosting a comic-book convention! Robert W. Boyd reports from the scene:
Despite a great location [on Highway 6 between Westheimer and Richmond] and not bad interior, West Oaks Mall is plagued with vacancies. And unlike malls like Memorial City Mall, West Oaks is not able to hide the gaps. . . .
West Oaks needed to occupy its empty stores (even if temporarily), or at least cover them up. And it needed to get people in the mall who could at least potentially patronize the remaining stores. So that’s where Comicpalooza came in.
“[Edward H. Okun] has been in jail since he was arrested by the Feds March 17, 2008. This week he was convicted in a Richmond, Va. Federal Court of 23 counts of conspiracy to commit wire fraud, money laundering, bulk cash smuggling and perjury the maximum sentence for which is 400 years so ‘Fast Eddie’ will die in a federal prison. All those charges related to his having ‘borrowed’ $126 million in 1031 exchange funds he was holding in escrow for 350 clients across the country. His cohorts and co-conspirators had previously pleaded guilty 10 years (Lara Coleman) and 5 years (David Field and Richard Simring) — all former employees (CCO, CFO and Counsel to) IPofA, Okun’s supposed real estate investment company. His defense tried to describe him as a business man with a plan that failed. West Oaks Mall would be just one example of Okun’s brilliant investment acumen. More indictments likely to follow.” [E. H. Callanan, commenting on JCPenney at West Oaks Mall: To the Bank]
Buyers didn’t show up for the latest sale at the old JCPenney building next to West Oaks Mall. So Wachovia Bank will foreclose on the property soon, the CoStar Group reports.
The bankruptcy trustee for the collapsed financial empire of Edward H. Okun had listed the vacant building, which Okun’s 1031 Tax Group had bought for $4 million. But no buyers were willing to pay even the amount of the financing, which was $3 million.
The Houston JCPenney building and a mall in Salina, Kansas — also now facing foreclosure — are Okun’s last remaining properties.
The high point of River Oaks Examiner reporter Rusty Graham’s tour of Project Brays, where flood control is measured in Astrodomes: sheep — on an actual hill — overlooking Brays Bayou flood-reduction projects at the Eldridge Road basin.
The group arrives at the Eldridge detention basin, at the end of Westpark. Harris County Precinct 3 is developing Archbishop Joseph A. Fiorenza Park at the facility, which is about 45 percent complete.
Eldridge is the largest of the four basins, with a total area of 337 acres. Eldridge will hold 1.5 billion gallons of stormwater when complete, or nearly three Astrodomes.
One of the highlights of the trip is seeing the sheep on a large hill on the west side of the Eldridge basin. The 60-foot hill is built from dirt excavated on site.
The sheep lived in the area before the site was purchased, says Heather Saucier, spokeswoman for the flood district. They’re tended by an area resident, although on this day they seem to be doing well enough on their own.
The hill’s summit offers a commanding view of the area, and is especially impressive looking back towards the Uptown area to the east.
Here’s another chance to clean up some of the wreckage left by mysterious investor Edward Okun: “West Oaks Mall in Houston . . . has $81.3 million in delinquent debt attached to it in the form of commercial mortgage-backed securities. Joseph Luzinski, the federally appointed bankruptcy trustee for West Oaks Mall, said he hopes to sell the mall by year’s end, though store closures continue to hamper its value. [The mall] . . . is about 80% occupied, having lost a J.C. Penney, Linens ‘n Things and Whitehall Jewelers. The mall recently cut a deal to keep its Steve & Barry’s LLC store open amid that retailer’s bankruptcy. The special servicer for the mall’s debt, LNR Partners Inc., attempted to foreclose in September 2007, but Mr. Okun forestalled the move by putting the mall into Chapter 11 bankruptcy protection the next month. A federal grand jury indicted Mr. Okun on fraud charges last March after his 1031 Tax Group LLP, a company that helped facilitate tax-free real-estate deals for small investors, collapsed into bankruptcy and didn’t return $132 million of investors’ money.” [Wall St. Journal; previously]
Noting that the site is “relatively maintained and free of vandalism and graffiti,” Robert Kimberly reports back from his recent pilgrimage to Ashford Point Dr., where he got the apparently-still-empty Chong Hua Sheng Mu Holy Palace to smile for the camera.
A few more highlights from the photo session, below:
One highlight of David Beebe and John Nova Lomax’s Richmond Ave. walking tourmentioned here last week was Lomax’s description of this strange vision on the #25 bus route to Mission Bend:
Towards the end of the line, the bus turned left off Richmond and into a weird suburban residential neighborhood. Ashford Point, the street we were on, was bisected by a greenspace in which there was a sunken trail, which ducked under the streets in little tunnels.
And then there was… this thing, this sprawling empty complex, this five-story square building topped by a 40-foot golden geodesic dome, flanked by two smaller domes. Two exterior staircases flanked these orbs – the overall effect was something like a sawed-off Mayan temple of the sun.
The whole compound was ringed by an iron fence, and then there was another huge fence around the entry to the building. The vast parking lot was empty, and there were no signs nor apparently even a mailbox. It was completely surreal. Neither Beebe nor I had a clue what it was – Beebe thought it might be the private residence of a very weird Arab sheik. I thought at first that it might be a mosque, but it didn’t look much like one closer up.
Pedestrian scribe John Lomax and Marfa City Council candidate David Beebe have, by this time, earned the right to make a few sweeping statements about various Houston neighborhoods. And Lomax exercises that right in his chronicle of the pair’s latest adventure on foot, along Richmond Avenue from Mission Bend to Midtown:
. . . the epicenter of H-Town cheese is the corner of Fountainview and Richmond. A four-story, day-glo, red, white, turquoise, and tan building looms over the southeastern corner there, and it houses a Sprint shop, a little downstairs bar with the godawful name Identity, a scalper’s office, a massage therapist, and a huge Darque Tan outlet.
Sure, Westheimer’s got some cheese, and is a little tattered around the edges in spots, but there’s a veneer of gentility as expressed by old-line businesses like Christie’s Seafood. Richmond, by contrast, used to have that sub-Landry’s fried seafood emporium King Fish Market, which despite the incessant awful commercials that polluted local airwaves circa 1999, is now out of business and practically in ruins. The whole lot of it is a great vat of rancid Velveeta.
As is much of the Richmond Strip. That giant sax outside of Billy Blues is looking more and more like the torch sticking out of the sand at the end of Planet of the Apes.
Are you an architectural renderer struggling to bring life to yetanother vast Houston shopping-center parking lot in the drawings developers have commissioned you to create? This video should bring you inspiration! Go ahead and draw in that parade — that street festival — that touching moment of parking-lot excitement. You won’t be faking anything!
Today’s baton-twirling parking-lot-parade marshal was photographed by Jason of the Around Town Houston blog — as he waited in the drive-thru at Burger King on Westheimer, just east of Highway 6, just around the corner from the West Oaks Mall.
An update on the 1031-exchange debacle surrounding the West Oaks Mall: In March, the mysterious Edward Okun — the mall’s owner — was indicted by a Virginia grand jury on charges of mail fraud, for misappropriating $132 million invested in his 1031 exchange company, 1031 Tax Group — along with bulk cash smuggling and related charges. Days later, Okun was arrested in his home on Hibiscus Island in Miami Beach.
To the 340 investors who had trusted $150 million of their 1031-exchange funds to supposedly-qualified intermediaries controlled by Okun, this was good news. But it doesn’t necessarily mean they’ll get their money back — or find a way around the huge tax liability now associated with their failed exchanges.
The 1031-exchange investors in Okun’s 1031 Tax Group had hoped to recoup some of their missing funds by raiding Okun’s other assets — including the West Oaks Mall. But the Okun-controlled companies that owned the mall declared Chapter 11 bankruptcy in October.
Today, the Costar Group reports that the freestanding building formerly known as JCPenney at the West Oaks Mall has been put up for sale, along with a mall in Salina, Kansas. The trustee in the bankruptcy case has hired Keen Realty, the new real estate division of KPMG Corporate Finance, to market both properties.
So much excitement at the West Oaks Mall! Don’t worry, it likely won’t be foreclosed on—because the owners of the super-regional mall at Westheimer and Highway 6 have now declared bankruptcy. This is bad news for about 340 investors who were hoping to recoup 1031-exchange funds that went missing in the middle of their transactions. They’ll likely lose more than $150 million dollars . . . and possibly be required to pay taxes on the gains they made (and were hoping to shield with the 1031 exchange) . . . before they lost them.
Their money was to be held in escrow accounts for when they came back to conclude the back-end purchase of their tax-free exchange. When that time came, the money was gone.
Now, one of the largest of those assets that creditors had hoped could be used to recoup some of their money is untouchable.
IPofA West Oaks Mall LP, IPofA West Oaks LeaseCo LP and IPofA WOM Master LeaseCo LP (collectively, the “West Oaks Debtors”), filed voluntary petitions under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, last week.
The West Oaks Debtors are directly and/or indirectly owned and/or controlled by Edward H. Okun, a controversial investor who also controls several 1031 qualified intermediaries under the umbrella firm of The 1031 Tax Group LLC that are also currently tied up in bankruptcy proceedings.
Swamplot covers real estate, home design and renovation, architecture, and the landscape of Houston, Texas. Swamplot did not flood during Allison — or Ike! Honest! Read more
Comment of the Day: Former West Oaks Mall Owner To Retire in New Home
“[Edward H. Okun] has been in jail since he was arrested by the Feds March 17, 2008. This week he was convicted in a Richmond, Va. Federal Court of 23 counts of conspiracy to commit wire fraud, money laundering, bulk cash smuggling and perjury the maximum sentence for which is 400 years so ‘Fast Eddie’ will die in a federal prison. All those charges related to his having ‘borrowed’ $126 million in 1031 exchange funds he was holding in escrow for 350 clients across the country. His cohorts and co-conspirators had previously pleaded guilty 10 years (Lara Coleman) and 5 years (David Field and Richard Simring) — all former employees (CCO, CFO and Counsel to) IPofA, Okun’s supposed real estate investment company. His defense tried to describe him as a business man with a plan that failed. West Oaks Mall would be just one example of Okun’s brilliant investment acumen. More indictments likely to follow.” [E. H. Callanan, commenting on JCPenney at West Oaks Mall: To the Bank]