Wespac Investors Trust II Seeks Chapter 11 Protection From Creditors

Wespac Investors Trust II, a Newport Beach real estate investment trust, has filed for protection from creditors under Chapter 11 of the federal bankruptcy code.

Wespac specialized in investing in the Sun Belt states and began experiencing financial problems about four years ago as the worsening oil industry slump slowed the economies of such energy-dependent states as Texas and Colorado to a crawl.

The bankruptcy petition was filed late Friday in U.S. Bankruptcy Court in Santa Ana.

In a Chapter 11 filing, a company seeks relief from creditors’ claims while it devises a financial and operational reorganization plan that must be approved by its largest creditors as well as by the court.

Wespac II, as the trust is called, owns an apartment complex in Dallas, strip shopping centers in Aurora, Colo., and Ardmore, Okla., and a shopping mall in West Palm Beach, Fla. Currently, only the Florida mall is financially sound, said Evelyn Burk, director of marketing and the trust’s corporate secretary.

She said that property values in Texas, Oklahoma and Colorado have plummeted in recent years and that the trust’s properties in those states cannot be sold for anywhere near their original purchase prices.

The bankruptcy petition lists assets of $51.2 million--down from $82 million reported in September--and liabilities of $38.5 million.

Wespac II, which is traded in the over-the-counter market, has about 5,000 shareholders. The trust raised $45 million in its initial offering in 1982, with some investors paying as much as $10 per share.

Most recently, the stock was trading for about 37 cents a share and the trust’s book value--the value of its net assets less depreciation--was about $2.78 per share. There has been virtually no trading in the trust’s stock in recent months.

In a recent effort to straighten out its finances, Wespac II participated with a sister trust, Wespac Investors Trust III, in securing a $1.5-million line of credit from a Los Angeles-based company, U.S. Real Estate Advisors Inc. As part of that financing deal, the Los Angeles company replaced four Wespac II trustees with its own representatives on the trust’s board.

To date, Burk said Monday, Wespac II has used only $180,000 of the U.S. Real Estate funding.

Wespac III was started with $60 million in investors’ funds in 1983 and does not share Wespac II’s investments or financial problems, Burk said.

The initial Wespac Investors Trust was founded in 1974. It was separated from Wespac II and Wespac III by its trustees in September, 1985, and on May 20, 1987, was purchased by Southmark Corp., the Dallas real estate development company.

Wespac II has 17 employees, all of whom also work for Wespac III, and the bankruptcy filing is not expected to affect any jobs, Burk said.