Friday, June 5, 2009

Richmond Builder - Prospect Homes Files Bankruptcy

Prospect Homes of Richmond Inc., one of the area's largest builders, has filed for bankruptcy protection.

"This is a reflection of the market," said Roy M. Terry Jr. of DurretteBradshaw law firm in Richmond, which is representing the Henrico County-based home builder.
Sales of newly built homes are just beginning to inch up after hitting new lows in January, according to the National Association of Home Builders.

Prospect Homes, which has been in business for 26 years, was the sixth-largest builder in the Richmond area last year, according to the Home Building Association of Richmond. The company built 114 residential units and had nearly $36 million in sales in 2008.
The petition, filed Tuesday with the U.S. Bankruptcy Court in Richmond, lists assets of between $50 million and $100 million as well as debts of $50 million to $100 million. Specific details are not yet available.

The builder's largest creditor is SunTrust Bank, which is owed $6.1 million, including $3.8 million secured by real estate or equipment, according to the bankruptcy petition.
Nine of the 20 largest creditors are banks, including local community banks such as First Market Bank, Franklin Federal Bank, C&F Bank, Virginia Commonwealth Bank and Village Bank.
The banks are owed about $30.3 million, of which $21.6 million is secured by real estate.
David Reel, spokesman for the local building association, said the market for new homes isn't robust by any stretch.

"You hate to see any builder file for bankruptcy, but it's a double hit when it's a local builder."
Reel said the credit crunch is severe. Builders are having trouble getting loans, making it difficult to move on to the next project, he said.

"When the building industry across the board is frozen out of the credit market, that may be an underlying reason why the industry is hurting," Reel said.

Prospect Homes' bankruptcy could be an isolated situation or symptomatic of a bigger problem, he said. "Time will tell."
Terry, the builder's attorney, said the goal is for Prospect Homes to emerge from bankruptcy and build homes again.
He said he did not know how many people are employed at Prospect Homes. "It has been a changing number."

Prospect President Joseph R. Audi or other officials with the company were unavailable for comment.
The company has projects in various stages of completion, from property not yet divided into lots to houses that are nearly complete, Terry said.

Monday, June 1, 2009

J.O. Clark Building Group in Tennessee Files Bankruptcy

Clark's company has built more than 1,000 homes in the mid-state. But the I-Team found dozens of liens from subcontractors who said they weren't paid as Clark's empire grew. Liens were passed on to stunned homeowners.

"I was just in shock," said homeowner Lynn Thomas. "(I) kind of went into a panic."
A filing for Chapter 11 bankruptcy reads that J.O. Clark Building Group owes millions to creditors, ranging from several subcontractors to banks.

Chapter 11 means Clark wants to rearrange his debts in an attempt to stay in business.
"Ordinarily, a company that has an operating business wants to use Chapter 11 in order to be able to have some time to prepare a plan to pay back its creditors," said Marc McNamee, a bankruptcy attorney.

According to the bankruptcy filing, Clark owes the most to subcontractors, ranging from carpet companies to excavators.

Regions Bank is owed more than $50,000. Walter Plumbing is owed close to $100,000. But bankruptcy specialists said how much J.O. Clark owes and how much it has in assets must be examined, and that's where there may be a problem. The bankruptcy filing shows $10 million to $50 million is owed. The company has less than $50,000 in assets.

"It does not present a very good picture or prospect for repayment," said McNamee. "The critical point is whether the company can continue to operate."
Experts said Clarks will have to liquidate his assets and spread out what's left if he can't settle his debts.

Neither Clark nor his attorney returned calls for comment.
In an earlier investigation, Clark said, "We are struggling, as many building companies are today."

Colorado Builder - McStain Neighborhoods files McBankruptcy

McStain Enterprises Inc., one of Colorado’s first “green” homebuilders, voluntarily filed Chapter 11 bankruptcy reorganization on Friday, according to bankruptcy court records.

The Louisville-based company declared $10 million to $50 million in assets, and the same range in liabilities. McStain -- which does business as McStain Neighborhoods -- has told customers it plans to sell its finished homes and complete those that are under construction. The filing does not affect the Indian Peaks South neighborhood because of a separate ownership structure.

In February of this year, McStain told customers on its website that “we have been assured by our bankers and other professional associates that we are healthier than most of the private builders they deal with. … To paraphrase Mark Twain: ‘The rumors of our demise have been greatly exaggerated.’ Rumors that we filed for bankruptcy are simply not true.”

Other Colorado builders to declare Chapter 11 recently include Village Homes of Colorado in Greenwood Village, which had last year’s largest local bankruptcy reorganization with $138.4 million in debt, and Tousa Inc., the Florida-based parent of Colorado’s Engle Homes Inc.
John Laing Homes of Irvine, Calif., which was active in metro Denver, filed Chapter 11 early this year.

McStain’s largest unsecured creditors include Scheer’s Inc. of Illinois (which is owed $10.85 million), Key Bank ($3 million), CRE400 Centennial LLC-Crestone ($2 million) and William and Associates of Boulder ($1.54 million), according to the bankruptcy filing.

Other unsecured creditors include First National Bank, GE Capital, Namaste Solar Electric Inc., Guy’s Floor Service Inc. and the City and County of Denver (sales tax).

McStain has taken significant steps to cut costs and shore up its flagging business in the last year.
The builder’s former president and CEO, Eric Wittenberg, voluntarily left the company in late summer 2008 to save money, and was replaced by McStain co-founder Tom Hoyt. Hoyt took the titles president and board chairman.

McStain Enterprises also closed its physical headquarters operation in Louisville last November. At that time, McStain had 21 employees, down from 75 people early last fall and from a peak of 115 a few years ago. Remaining employees were to create a virtual office, using cell phones and computers.

Tom and Caroline Hoyt, with their friend David Stainton, started McStain in 1966, when they bought a small Boulder custom builder called Horizon Building Co. Over the years, the partners built the company from a simple custom builder to a designer and developer of master-planned communities such as Indian Peaks in Lafayette and MeadowView in Longmont. They also moved into sustainable, energy-efficient housing.
McStain has worked on several urban infill projects, as well, including ones in Denver’s Lowry and Stapleton neighborhoods and Belmar in Lakewood.

Ginn Company Sued by Homebuyers - Employees Posing as Competing Buyers!?

A group of buyers in communities built by The Ginn Co. — including grandiose Tesoro in Port St. Lucie — are claiming the developer and its affiliates fraudulently inflated real estate prices.
A class-action lawsuit filed late last month in U.S. District Court in Jacksonville targets Celebration-based Ginn, its sister companies, financing partner Lubert-Adler and banks that worked with Ginn, including SunTrust, Fifth Third Bancorp and Wachovia Bank.

The suit alleges Ginn led a scheme to bloat prices at every step of the process — from lavish sales launches to manipulated appraisals. Among the claims: Ginn staffers posed as competing buyers to pressure people to sign a sale contract.

The misdeeds happened in more than a dozen Ginn developments, starting as early as the late 1990s, according to the suit.

Some properties are now worth as little as 10 percent of their appraised value, “a phenomenon that absolutely cannot be explained by mere market downturn,” the suit states.
Buyers from as far as England and as near as Boca Raton are parties. They are seeking class certification.

“We will vigorously defend against this litigation and any other false allegation brought against our company,” Ginn spokesman Ryan Julison said.