Oklahoma real estate magnates Lew McGinnis and Jennifer Price are going to court in Oklahoma City today in an attempt to regain control of their apartment empire.
The husband and wife own six apartment complexes in Wichita, plus much other commercial property in Oklahoma City and Tulsa — 27 properties in all, valued at $131 million, according to a filing by Price.
Their company, Macco Properties, owns Cedar Lakes, the Chalet, Holly Park, Madison Park, Riverpark Plaza and Villa Del Mar apartment complexes in Wichita, with a combined 1,952 units,
Last week, bankruptcy trustee Michael Deeba named Receivership Services Corp., a division of Wichita's Martens Cos., to oversee the day-to-day management of the Wichita apartment complexes. Company president Steve Martens is a witnesses who may testify today as to the condition of the Wichita complexes.
The presence of McGinnis and Price in Wichita has been controversial since they began buying property five or six years ago.
Macco owes $2.3 million in back property taxes on the Wichita properties, Deeba said in one filing.
A lawsuit filed by a group of investors who bought the Linwood Apartments, 2008 S. Hydraulic, from Macco in 2010 allege that Macco understated the complex's maintenance needs and overstated its revenue, profits and occupancy.
Cynthia Branch, president of Wichita property management business Paramount Management, said she has seen McGinnis use those practices in at least two Wichita complexes she took over after new owners bought them from McGinnis. His representations about their occupancy and condition just weren't true, she said.
"What he does is slap some paint on it and gives away free rent for three or four months to move people in without screening them," she said. "I've had to kick most of those people out."
Larry Pinkerton, a lawyer representing Price, called the suit by the buyers of the Linwood Apartment, as well as two others lawsuits "copy cats." Two of those suits have been settled for far less than they originally sought.
At least one former tenant said his Macco-owned apartment complex wasn't run well.
John Hunt lived at Riverpark Plaza for 29 years. He decided to leave in October after a long series of maintenance complaints, ever more troublesome neighbors, and news that the management was in trouble.
"It was just getting to be a bad place," he said. "They had people in back of us raising hell so you couldn't sleep."
Hunt asked for his original $100 deposit when he left. Managers said they would send him $50, but he never got it.
He has filed a claim with the bankruptcy court but hasn't heard whether he will get his money back.
Macco Properties sought bankruptcy in November, but just why is a matter of opinion.
In the July 7 motion to lift the bankruptcy, Price said they sought protection because of a cash flow problem posed by the slow sale of one apartment complex, although the company otherwise was profitable and running smoothly.
The couple continued to operate the company in bankruptcy until May 31, when the court appointed Deeba as trustee.
Deeba's job is to oversee the company's finances and operations. Almost immediately they started butting heads.
In a series of memos put into the court filings to support their motion, McGinnis pleads with increasing desperation for Deeba to pay various bills, including paying one creditor to avoid a $100,000 payment.
"I can't understand how this can happen in America; this has to be a classic case of legal murder (of) a corporation especially when the corporation has cash in the bank," McGinnis wrote on June 28.
On July 18, Deeba fired back in his answer. Under the management of McGinnis and Price, Macco has been sued 15 times over the past two years for breach of contract, foreclosure, fraud and breach of fiduciary duty.
Contrary to Price's assertion that Macco's management had everything under control until an "incompetent" trustee intervened, Deeba wrote:
"Macco and five affiliated entities were placed in voluntary bankruptcy by management, failed to pay millions of dollars in taxes, continually faced termination of utility services by late payments, incurred hundreds of thousands of dollars in pre-petition unsecured claims, failed to meet post-petition obligations, faced foreclosure on several of their properties and blatantly failed to follow the legal requirements of a debtor-in-possession and yet blame all of their problems on the Trustee."
Pinkerton said he didn't know when to expect the court's ruling.