2 Lindsay Real Estate Firms File Chapter 11

Lindsay Enterprises and LEI Properties Inc., two local real estate limited partnership investment firms with hundreds of clients and property under management worth about $80 million, on Friday filed for Chapter 11 reorganization bankruptcy.

The two companies are headed by John R. Lindsay, a real estate industry syndicator who has been in business since 1974. The bankruptcies apply only to the companies and not to the properties themselves, according to sources familiar with the bankruptcy.

Lindsay Enterprises listed total assets of $2 million and total liabilities of $2.4 million, while LEI Properties reported assets of $24,500 and liabilities of $2.4 million.

Neither Lindsay nor his attorney, Tim Kelly, returned a reporter’s phone calls Monday.

Investors on Monday received a letter from Lindsay explaining that he had filed for Chapter 11 reorganization bankruptcy and claiming that he had canceled his firm’s contract with J&M; Management as property manager for his 72 projects, most of which are apartment buildings.

The properties are worth about $80 million, according to one Lindsay associate.

Lindsay wrote that he had retained Management Facilities Corp., a subsidiary of BJD Development Ltd. of Chicago, to manage his properties. BJD manages more than 10,000 units and has a staff of more than 200 people, the letter says.

But J&M; Management President Jack Mitchell on Monday protested Lindsay’s action.

“We haven’t accepted termination,” Mitchell said. “We can say we’re not going to quit (and) he doesn’t have a right to terminate us.”

J&M; has managed Lindsay’s properties since February, Mitchell said.

Lindsay’s problems began in early 1983, according to sources close to him, when Santa Ana-based Westlands Bank “pulled out” of a deal to finance nearly half of the 65 condominium units Lindsay had built in three projects in Austin, Tex. The deal fell apart “the day escrow was ready to close,” recalled one associate.

Lindsay ultimately lost the $3-million project to foreclosure. He was out $1.1 million in hard cash on the project and $1 million to $1.8 million in lost profits, according to one source familiar with the deal.

The largest single creditor is the Federal Savings & Loan Insurance Corp., which took over San Marino Savings & Loan in December. Lindsay’s company, which borrowed money from San Marino, lists the FSLIC as a creditor for $748,801.

Lindsay ran into financial problems because “he bought property in a highly inflationary time and leveraged it, showing a high return on investors’ money,” said one source close to Lindsay. “Then, all of a sudden, with low inflation, the rents on those highly leveraged properties aren’t accelerating as fast as he thought, so the positive cash flow that was supposed to happen isn’t.”

The source said that he didn’t think funds from the limited partnerships were commingled, meaning that money from one partnership was used to fund another.

“Lindsay . . . could have walked away from this a long time ago, but he’s doing everything he can to try to get people’s money back,” one colleague said. “There’re enough assets there to make sure everyone is whole.”