1031 Tax Group Reorganization Plans Stymied: West Oaks Mall Files for Bankruptcy Protection Leaving Investors Reeling

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A Houston, Texas super mall has just filed for bankruptcy protection in order to guard against foreclosure proceedings. The “rest of the story” as the great Paul Harvey used to say, is that the West Oaks Mall, a 1.1 million sq ft complex, was the centerpiece of Edward Okun’s assets that are now under attack by investors seeking to recover their lost monies in the 1031 Tax Group mess.

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Mark Heschmeyer of CoStar Group wrote a fantastic probe, in his ongoing investigative series, on the current state of the 1031 Tax Group-Ed Okun proceedings. Heschmeyer’s article “Mall Bankruptcy Complicates 1031 Investors’ Problems” provides a grim picture of the domino effect of the West Oak Mall bankruptcy filing.

The results of this filing is that one of the largest assets “owned” by the 1031 Tax Group, that investors pinned their hopes on liquidating to recover their lost monies, is now deemed untouchable.

The following paragraph “strike through” is the result of new information provided by JPS Capital Partners LLC principle Joel Shapiro. Mr. Shapiro’s information is featured in my Oct 29 article “JPS Answers the Bell: Finally Some Good News for Okun Investors, A Lesson for deansguide.” Please disregard my misimpressions in the strike through paragraph below For the correct information reference “JPS Answers the Bell: Finally Some Good News for Okun Investors, A Lesson for deansguide.”

According to CoStar sources, JPS, the investment firm providing the loan to Okun in order to complete the reorganization deal and repay investors, has made the decision to back out of the deal altogether. These same sources claim that JPS’s decision was made prior to any knowledge of the West Oaks Mall bankruptcy filing.

These turn of events have left the proceedings up in the air, the 1031 Tax Group scrambling for a new plan, and poor investors livid and frustrated.

Swampalot’s “West Oaks Mall: Your Exchanges are No Good Here” piece provides a beautiful picture of West Oaks Mall as well as a nice accompanying article.

As one investor interviewed for Heschmeyer’s story related: “Okun’s toys and assets are continuing to get diluted.” The sad fact of these developments are that investors will most likely see fewer and fewer dollars coming back to them in their settlement.

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2 thoughts on “1031 Tax Group Reorganization Plans Stymied: West Oaks Mall Files for Bankruptcy Protection Leaving Investors Reeling

  1. Having read your October 26, 2007 article on the 1031 Tax Group Reorganization, we want to contact you to correct any misimpression that you have with respect to JPS Capital Partners role in this transaction. We would ask that you update your story to reflect the statement below:

    “JPS issued a $300 million Term Sheet to Edward Okun on June 20, 2007 based upon representations made by Mr. Okun as to the value of his assets. After performing due diligence it became apparent that the values represented to JPS could not be verified. Based on the values that we were able to verify, JPS issued a commitment to Okun for $148,625,000 on October 8, 2007. This commitment provided Okun, and by extension the creditors, with $20 million at closing and with the ability to receive up to an additional $125 million over the ensuing 24 months, through profit participation as the assets are liquidated.

    This is a plan designed to maximize value for the Estate and its creditors, given the values of the underlying collateral.”

    Joel G. Shapiro
    Principal
    JPS Capital Partners LLC
    200 West 57 Street
    Suite 303
    New York NY 10019
    212-790-6714
    jshapiro@jpscap.com

  2. Mr. Shapiro,

    Thanks for the correction. I wrote a new piece on this new information and I placed a correction of my initial impression in the above article.

    Thank you for your help. This is the type of news the investors need to hear!

    dean

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