COMMENT OF THE DAY: THE PHANTOM TOLLBOOTHS OF I-10 “Ahe yes, the technology of the HOT lane. I had the opportunity to reverse communte I10 last week all week and every day I was the only car to correctly stay in the toll lane as I went past the toll gate rather than seamlessly merging into the high occupancy lane [and then] merging back out after skipping the toll. It looked like a peloton of single occupant cars as we sped along. Do they actuially intend to enforce the high occupancy part of this system somehow at some point[?]” [Jimbo, commenting on Paying Tolls on I-45, 290, and 59]
COMMENT OF THE DAY: I WAS A SCHMUCK FOR MICHAEL B. SMUCK “. . . We, as managers, were forced to lie to residents about repairs as no company would sell us supplies. We had numerous occassions where trash service and water were stopped due to non-paynment. New residents were moved into dirty apartments with shoddy repairs, old uncleaned carpet and were expected to deal with it. All ‘extras’ tenents had come to expect were discontinued when MBS took over. I was also employed when our christmas paychecks bounced, although it didn’t happen at all properties. Forget a refund on your deposit as well. Even if the apartment was left in perfect condition we were forcefully told to find something to charge them for to keep all their money. Keep in mind all of what I experienced happened before Katrina — I was long gone by then. Working for those people made me leave the apartment industry for good.” [Laura, commenting on The Lodge at Baybrook: Smuck Survivor]
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%.
How’s the mall looking these days?
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Jerry and Wynonne Hart are scheduled to be sentenced today for “misapplication of fiduciary property” in the operation of their auction business at the Hart Galleries. In return for the couple’s guilty plea, prosecutors dropped charges of theft and money laundering.
11 News reporter Dave Fehling spoke to several former Hart Galleries customers:
The auction house thrived for years. The Harts enjoyed a sterling reputation among the rich and not so rich who all trusted the Harts to sell their valuables. But around 2003, something strange began happening . . .
. . . the Harts auctioned furniture and antiques for John Zielinski and his wife.
They were expecting to get $20,000.
“And I said, ‘where’s our money?’ And they said, ‘we’re having difficulty collecting some of the checks,’” said Zielinski.
The next thing Harts’ customers learned was that the couple was bankrupt.
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Just how did a group of Israeli investors get stuck with 114 condo units in this quaint converted apartment complex in League City? And why are they now suing the project’s developer and property manager?
The Galveston County Daily News‘s Laura Elder explains:
The investors never intended to live in the units but instead were seeking to generate income by renting them to others, according to the lawsuit. Through agreements, the units owned by the investors were put in a rental pool managed by the defendants, according to the lawsuit.
But while Westcorp Management Group, of which Roni Amid is vice chairman, had been collecting rent from tenants, it failed to pay proceeds to the mortgage company or the investors for some units, according to the lawsuit.
Without rental income, some of the investors are unable to pay their mortgages, leading lenders to begin foreclosure proceedings on at least 30 units in the complex, said Danny Sheena, a Houston attorney representing investors.
The suit also claims the defendants used the investors’ units at the Fairways at South Shore as collateral for a $23 million loan from Deutsche Bank obtained behind their backs last August. Which means, the suit claims, the investors can’t sell their units.
And that Israeli connection? Looks like it’s all in the family:
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COMMENT OF THE DAY: THE LANDLORD RACKET “I commented to my wife the other day that, in light of foreclosures on rentals, if we decide to rent a house instead of an apartment we will have to demand the right to a credit report on the landlord. I guess we’ll want a criminal background check also :)” [MikeRG, commenting on Serial Renter Meets His Match]
SERIAL RENTER MEETS HIS MATCH There was something fishy about that home on Shady Canyon, Amber Rogers found out. She gave a $2500 deposit to Jonathan Soto, but it turns out he was renting out the same property to other people too. Cut to dual-renter ambush in Stone Gate subdivision: “Rogers says she hid in the garage and called 911. She came out right when Soto was giving his sales pitch. ‘When he turned around and saw me, I could have sworn he thought he saw a ghost. It almost knocked him off his feet. It was hilarious,’ Rogers said. Rogers says he tried to escape through a window. ‘I was the closest one to him. I grabbed him and I threw him into the wall,’ Rogers said. . . . Rogers says it was a good thing the police arrived when they did. Soto was carrying a gun, and according to her, he appeared to be reaching for it.” [11 News]
From the New York Times website this morning:
Shortly after 10 a.m. Central time, about 40 police officers and other law enforcement officials simultaneously entered Stanford Group’s two office buildings in Houston. Many of the law enforcement personnel carried large black briefcases. Stanford group’s headquarters are in two offices in Houston, one within a tower of the Houston Galleria shopping mall, and the other across the street.
Photo of Stanford Financial Group Offices, 5050 Westheimer: Stanford Financial Group
Late last night city officials were able to get an emergency court order allowing a trustee to take over the La Casita Apartments at 313 Sunnyside near Northline. And MGC Mortgage, the company left holding onto the foreclosed property, has “transferred oversight” of the 600-unit complex behind Gallery Furniture to a new management company. The agreements, along with other interventions by the city, mean the more than 1,000 residents of the all-bills-paid apartments will not be evicted, have their water or electricity shut off, or lose credit for the monthly rent they just paid:
Residents of the La Casita Apartments already felt neglected by managers who let buildings run down, even before Hurricane Ike broke windows and tore patches off roofs. But instead of starting on repairs to make the apartments livable after the storm, management skipped town, keeping the rent money and leaving the bills unpaid.
The apparent owner of La Casita is an Indiana company named Briarwood Houston LP. The complex failed a Houston Housing Authority inspection last month. Police officials are investigating the management company’s handling of the payments.
DELINQUENT DEBT: WEST OAKS MALL SALE! 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]
On the lot at the shuttered Bill Heard Chevrolet off the Southwest Freeway in Sugar Land Saturday: a couple of armed security guards, hired by GM to make sure nothing leaves the lot.
Inside the dealership’s main offices it looks as though the entire showroom floor was frozen in time. Deflated balloons hang off of cubicle corners and showroom models. A loan application sits on a desk, unfinished. A framed picture of a family going down a roller coaster at Sea World hangs above an uncleared desk, one of many family photos that indicate the suddenness of the announcement.
If you’re to believe one of the managers of this particular dealership, the employees stayed late into the night helping customers get their plates processed and out the door. Contradicting this is an article from Wednesday in the Houston Chronicle in which the operations manager of Bill Heard Sugar Land, Linda Patterson, claimed they were selling vehicles into the night and would continue to stay in business. But by the next morning it was announced they would be closing, possibly for good.
After the jump: More on Bill Heard’s collapse, plus photos from Jalopnik’s (how’d they get?) behind-the-scenes report!
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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.
[youtube:http://www.youtube.com/watch?v=iLqkHr77N0U 400 330]
So the actors aren’t likely to win any awards, but this new video posted to YouTube by Tremont Tower owner-victim-gadfly Heather Mickelson is notable for it’s uh . . . stirring illustration of the connection between construction-quality complaints and foreclosure train wrecks.
The Tremont is colorfully renamed “LemonTree Tower” in the video reenactment. If you’re new to the story, you’ll find better introductions to the sordid Montrose condo tale elsewhere. But if you’ve ever wondered why foreclosures seem to gather like flies around new developments that feature questionable levels of quality (and, say, water-tightness), this will make pretty good internet theater. No, the mortgage defaults aren’t the work of the millions of mold spores and the grim reaper, who together make cameo appearances in the video; they’re the ultimate result of the surefire sales techniques employed for undesirable properties — made so much easier, of course, by the subprime-mortgage boom.
Here’s the formula: Building with bad enclosure + poor disclosure = lots of foreclosure. Or just watch the video. At just over seven minutes, it’s still a lot shorter than Glengarry Glen Ross.
Here’s another example of the importance of loyalty and reputation in the Houston residential real-estate biz. The Houston Press‘s Richard Connelly catches up with the ex-partner of formerly ubiquitous Houston real estate agent Mike Spear, whose ubiquity has been a bit challenged since he began serving a two-year sentence in federal prison for income-tax evasion earlier this year.
. . . even though Spear himself might be behind bars, his spirit lives on: If you’re looking to buy or sell a house here these days, you might be forgiven for thinking you’re doing business with the well-known realtor.
Before the two joined Prudential Gary Greene in 2005, Spear and Realtor Ray Allison ran Montrose mainstay AllisonSpear Realtors. Allison explains to Connelly:
There’s a group of professionals within Prudential Gary Greene that are organized as the Mike Spear Team, but it is not the official name of this company.
Mr. Spear did work with this firm. He is no longer with this firm. The Mike Spear Team does continue. It is appropriate for it to continue . . .
There’s more: Spear’s admissions from the July 2007 plea agreement, featuring shell corporations and a Mercedes Benz.
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One detail glossed over delicately in Lisa Gray’s colorful tale of the decline of Meyerland’s Carousel House, featured in today’s Chronicle: The abandoned home’s apparent awful stench. From a few would-be visitors, posting on HAIF:
The owner told me that everyone he’s taken in there has gotten sick soon after coming out. Apparently it is REALLY nasty in there. I may swing by and get some new filters for my mask.
i could smell “the smell” just standing in the driveway
But hey, the interior shots from just a few short years ago make the house look super fab! Built in 1964 by owner Robert Cohen, the Modern gem merited a Texas magazine feature story in 2003. Just four years, one ultra-rich attorney, one shady personal assistant, countless hookers, umpteen heroin hazes, and a couple of dozen missing exotic cars later, the house on the corner of Moonlight Dr. and Braesheather appears headed for an almost-certain but certainly difficult demolition. (15,000 pounds of steel, anyone?)
After the jump, highlights of the home from its heyday, excerpts from the sordid and fetid tale of its fall from Modern grace, and a photo of the far more up-to-date carousel that just might be built in its place!
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