Tag Archives: retail

Proof We’re in a Recession

Here’s proof that we’re in a recession: Starbucks is closing 600 stores.

According to the New York Times, “Starbucks said Tuesday that it planned to close another 500 underperforming stores and eliminate as many as 12,000 full- and part-time positions. The company, which now plans to close a total of 600 underperforming stores, will take related charges totaling more than $325 million. Most of the stores, which are company owned, will be closed by the end of the first half of its fiscal year, which ends September 2009, the company said. Starbucks estimated that total pretax charges associated with the closures, including costs associated with severance, would be $328 million to $348 million. The nation’s largest coffee chain said 70 percent of the stores targeted for closure have been open since the beginning of fiscal 2006. The job losses would represent about 7 percent of the company’s global work force.”

These closings are clearly fallout from the housing bust.  As the Times noted, Starbucks had “aggressively opened stores in areas like California and Florida, which have been hardest hit by the housing downturn. ”

The next time economists get together to discuss whether we’re really in a recession, they may have to meet somewhere other than the local Starbucks. 

It might be closed.

 

Property of 1031 Exchange Scammer Ed Okun Goes on Sale

High-end retail complex properties in Kansas and Texas owned by the notorious Edward H. Okun have been put up for sale by a federal bankruptcy trustee.

The properties are the 1.1 million square foot West Oaks Mall in Houston, Texas, and the 587,512 square foot Salina Central Mall in Salina, Kansas.

Okun is alleged to be behind the 1031 exchange scam run by The 1031 Tax Group (1031TG) that defrauded thousands of people out of millions of dollars.

Okun was arrested in Miami, Florida, last month and charged with mail fraud, bulk cash smuggling, false statements, and forfeiture from a scheme to defraud and obtain millions of dollars in client funds held by The 1031 Tax Group. 

Those who were defrauded by Okun’s 1031 Tax Group had hoped to recoup some of their missing funds from Okun’s remaining assets — including the West Oaks Mall and the Salina Central Mall — which were purchased from monies allegedly taken from victims in the 1031 exchange scam.

But the Okun-controlled companies that owned the malls declared Chapter 11 bankruptcy in October. 

It is now unclear whether the proceeds from the sale of the properties would go Okun’s 1031 exchange scam victims.

Both properties apparently have a long line of creditors.

The trustee in the bankruptcy case has hired Keen Consultants, the new real estate division of KPMG Corporate Finance, to market both properties.

You can read our earlier post on Okun and his 1031 exchange scam here.

 

 

Bascom Group Expands Reach for Distressed Real Estate

Another major player has expanded its participation in the distressed real estate market.

Bascom Group, an Irvine, California, real estate (apartment) investment and asset management firm, has announced a new joint venture called Bascom Portfolio Advisors (BPA) that will target distressed multi-family, office, industrial and retail properties in markets throughout the nation,  including broken condo deals.

According to the Bascom Portfolio Advisors’ press release, “In anticipation of looming credit problems stemming from impending loan maturities, potential capital imbalances and decreasing property values, BPA offers workout expertise. Through a range of consulting services, BPA will evaluate distressed assets, identifying financial, operational and market driven issues and present effective solutions to optimize asset values and minimize losses. BPA has resources in place to implement work out solutions, including, asset management/oversight, new capital infusion, and assistance with liquidation.”

Bascom Group has previously engaged in several other join ventures in the distressed property market, including a 2006 joint venture with the private equity firm Warburg Pincus Real Estate I, L.P. to invest up to $200 million in non-performing loans and distressed multi-family properties and both non-performing and sub-performing loans by investing in the underlying senior and mezzanine debt instruments.

We noted in a recent post that major investors, fueled by domestic and foreign investment groups, wealthy individuals, endowments and pension funds, are about to spend billions of dollars buying distressed debt and real estate.

We think that Bascom Group’s announcement is further evidence that there is currently no hotter market than distressed real estate, and that major investors are ready to scoop up distressed properties with significant equity or which they believe to have been mismanaged.