L told me this morning that the rumor mill had it that Brown Family Communities, a Tempe-based homebuilder had closed their doors. I just found the story from the East Valley Tribune: [Thanks L!]
Citing the toughest lending environment he has seen in his 33 years in the homebuilding business, Dave Brown said Monday he has closed his Tempe-based company, Brown Family Communities.
"The banks have called in all my loans," he said, adding that after paying off most of his bills, "I’ve been left with nothing."
Brown said he has laid off about 55 employees. He also said he has been able to pay refunds to buyers who made down payments on houses that can’t be completed because financing is no longer available.
Brown said there are 31 partially completed houses dotting his neighborhoods. He expects that they will be taken over by lenders and remain in an unfinished state until the value of the properties rises and lenders can sell them at a profit.
The situation shows that the massive bailout of the financial industry engineered by the Bush administration has not yet filtered down to borrowers, he said.
Federal officials "are giving $700 billion to the banks, but nothing is coming out," he said.
Brown expressed bitterness that his lenders will no longer support him, even though he has survived several market downturns in the past. The difference this time is "the lending environment," he said.
According to the Arizona Republic:
Company founder Dave Brown said he was forced to cease operation and lay off all 60 employees because the company’s construction lender, which he didn’t want to name, was unwilling to extend additional credit to build new homes or finish homes under construction.
Brown said that means customers currently in the process of buying a Brown Family home would not be allowed to close the deal.
Instead, the bank will keep those homes as collateral. Brown said that he would refund every customer’s deposit.
The builder’s problems escalated early this year when the bank reappraised Brown’s land assets at a lower value and ordered the company to pay back a portion of money it had loaned, he said.
Brown said he had been trying to negotiate a compromise for months, and in the meantime the bank began keeping all of the proceeds from every home sale, cutting off Brown’s ability to generate revenue.
"They sucked every nickel out of the company," he said. "I went through the company’s money and my own money."
If you think that the actions of the past few weeks have "unfrozen" the credit market, think again.
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Didn’t they have a large investment in land/houses in Maricopa, AZ? I wonder if they got into land purchases out there after the boom started. It’s interesting to see houses out there where sellers would have been asking, and possibly getting, $200,000+ in 2004 and 2005 are now being listed for $70,000 – $80,000. And they’re still not really moving at these prices…
HD-
Brown’s website is down, but I was able to find it courtesy the "Wayback Machine". In 2007, their website listed communities in Maricopa, Casa Grande and Goodyear- among other Valley locations- all areas that saw big drops in land values.
It’s just a rough environment to do business in.
Yes Igor, “collapse” pretty much sums it up.
Thought this one was intersting too: Pulte founder sells shares to meet margin call
My aunt lives in one of the Dave Brown houses in North Phoenix that she and my uncle bought new in the early 1990s. They found out years later that the attic space was completely uninsulated. As she spoke to others in the same subdivision, it turns out that they neglected to do this in most/possibly all the houses in the small subdivision.
Russ-
I wonder if it was the era. We used to own a 1989 Shea home in Chandler. We used to swear that squares and levels had been banned from the site. The house had “issues”.