February 17, 2006

Bank Pulls Financing On SW Florida Developer

The News Press reports on a Florida homebuilder in trouble. “The city of Cape Coral is cracking down on a major homebuilder for delays in starting dozens of homes, but the builder says its problems are largely the fault of a bank that stopped financing 380 of them. Last week, city officials stopped issuing permits for Cape-based Hansen Homes because of a backlog of permit applications that had piled up but hadn’t been picked up or paid for.”

“‘We realized they’re having financial difficulties’ and it wouldn’t be right to let them keep piling up more permits without some assurance the work will actually be done, city spokeswoman Connie Barron said, noting that Hansen had accumulated 48 permits plus an additional 169 permits that were voided for sitting unused too long.”

“Some customers say they’re upset Hansen isn’t proceeding fast enough on their houses, but Hansen consultant Duane Davis said that’s mainly because First Community Bank of Southwest Florida pulled its financing for 380 homes. Of those, 160 were already under construction and the rest were in the permitting process. Davis said the bank recently reinstated 78 of those loans for houses that are well along in the construction process.”

“Chip Black, president of First Community, said he couldn’t comment on the situation with Hansen because of bank privacy regulations. But the bank was ordered in June by the Federal Deposit Insurance Corp. to stop making construction loans to commercial builders.”

“Homebuyers who can’t recover money from a contractor any other way can apply to the state Construction Industries Recovery Fund. You must exhaust all possible remedies, i.e. court judgments. The most an individual can collect from the fund is $25,000. All payments for a specific contractor can total only $250,000. It’s first-come, first-served, based on date the fund awards a payment.”

“To collect, you must do a search to make sure you’ve uncovered all the assets of the contractor. If the contractor is in bankruptcy, you must obtain certain bankruptcy documents instead.”




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41 Comments »

Comment by TXchick57
2006-02-17 07:58:40

Man, this stuff is really happening fast now. This kind of thing was routine in the bad old days.

Phat times ahead for bankruptcy professionals.

 
Comment by Ben Jones
2006-02-17 07:59:40

Thanks to the reader who sent this in. I am reminded of the St. Joe CEOs’ statements last week regarding developers who were ‘prisoners’ of land prices bought at ‘retail prices with debt.’

 
Comment by rudekarl
2006-02-17 08:04:05

Thank goodness for the Construction Industries Recovery Fund. An individual could probably spend a couple hundred thousand dollars trying to comply with all of the requirements, and then get a whopping $25,000 maximum. Why not just say, “Homebuyers who can’t recover money from a contractor any other way ARE SCREWED.”

 
Comment by TXchick57
2006-02-17 08:06:03

Karl, take the board specialization test in bankruptcy. Really. That will be a big help very soon.

Comment by rudekarl
2006-02-17 08:23:30

I’ve never had any BK CLE, so I need 60 hours over two years before I can take the exam. What I’d like to do is get hired in an entry level position in a bankruptcy firm and get the ball rolling now. There will be plenty of work because the collapse of this thing will last quite a bit longer than two years. I’m asking some friends about firms, but do you know any good BK firms in Dallas?

Thanks

Comment by libertas
2006-02-17 08:26:30

You might check with NACBA (Nat’l Assoc of Consumer BK Attorneys)

 
Comment by TXchick57
2006-02-17 09:03:36

Send me an email

gymnastgal32@yahoo.com

Comment by Loren
2006-02-17 09:12:33

I have a niece who trains at the same gym as Carly Patterson (near Dallas).

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Comment by lato1394
2006-02-17 08:26:26

I hear rumor all over Florida that many true banks are pulling the plug (or being very selective on projects they fund) on lending for new residential, condo and condo conversion projects across the state since last year.
Developers are going through venture capitalists and other funding sources just like the good ol’ dot.com days when venture capitalists and funds were throwing money at dotcoms.

Comment by rudekarl
2006-02-17 08:36:10

Nothing like being selective on financing well after the point where they should have been selective on the financing. One would have to have their head clearly so far up one’s arse not to see the writing on the wall with this condo nonsense years ago. Dallas has so many new condo and conversion projects going on right now, I can’t count them. What objective data did these developers furnish to lending institutions to substantiate the fact that any fraction of these condos would be occupied by future residents. None, because the data does not exist. The simple answer is that everyone from the speculator, developer and lending institutions were completely motivated by greed beyond any rational thought of how this whole thing would turn out. Believe me, Dallas - and most major metropolitan areas - has enough condos at this moment to last for another 20+ years, and yet, they keep going up.

Comment by diogenes
2006-02-17 08:49:56

AHh, but you forget…….

the Baby-boomers are all getting ready to retire and will bring all their (non-existant) retirement savings to Florida (because everyone wants to live here) and BUY

 
 
 
Comment by dawnal
2006-02-17 08:28:32

“First Community Bank of Southwest Florida pulled its financing for 380 homes. Of those, 160 were already under construction and the rest were in the permitting process”
***********************************************************************************************************************

Wanna buy a house, cheap? 160 of them for sale cheap by a bank. So grab your hammer and saw and get in line.

 
Comment by lato1394
2006-02-17 08:30:02

There is also another fund that is becoming very popular here. Some folks here have been investing in “vulture funds” to snap up condos and homes out of forclosure and at discount prices from fleeing speculators and turning them into rental units. I think we might see funds like this buying up entire buildings from banks at pennies on the dollar, finishing the construction and just turning them into apartments.

Comment by TXchick57
2006-02-17 09:04:43

Yeah and you’ll lose your savings on the discounted prices in management and GP fees. No thanks. I can find that stuff myself.

Comment by Bubble Butt
2006-02-17 09:14:02

How about killing two birds with one stone? Create your own management firm and vulture fund. Get other vulture funds or investors to go to you for the management end as well?

 
 
 
Comment by dawnal
2006-02-17 08:37:17

“He said part of the reason for the backlogged permits is simply that most builders in Southwest Florida are finding it harder to finish jobs because of labor and materials shortages and hurricanes in 2004 and 2005.

Michael Reitmann, executive vice president of the Lee Building Industry Association, said the industry has been hit hard by those factors. “What used to take four to five months now takes a year to build. People sign contracts and they have to wait.”
*********************************************************************************************************************

Whoduh thunk? Takes twice as long now to get the home of your dreams. Those durn hurricanes….And now the banks are not granting construction loans. Whats a poor developer to do?

 
Comment by nnvmtgbrkr
2006-02-17 08:40:42

Hey, does anyone else smell something “fishy” with the way HB stocks are selling off this morning. I mean, I’m not the suspicious type, but why wouldn’t yesterdays so called positive report continue the HB’s rally right through into today, unless………..hmmmmmmm. Anyone else thinkin’ what I’m thinkin’?

Comment by dawnal
2006-02-17 11:25:39

Yesterday’s housing starts report probably explains the significant rise at the beginning of the day yesterday. But as the day went on, the realization that it wasn’t really good news at all, that it merely meant that housing inventory was going to balloon even further, crept in. So the sell off this morning seems logical to me. And the story in the NY Times, very prominent on the front page of the business section about the condo glut in FL might have added to the drop. Do you sense that the HBs want to drop and that they do until the “angel” comes around and gives them a boost from time to time?

 
 
Comment by BigDaddy63
2006-02-17 08:50:13

I remember about 10 years ago when the “boom” started in a hot area called the “acreage” in West Palm Beach, Fl.. At that time there were no less than 100 builders showing spec homes. MANY of them are no longer in business and filed BK. MANY of them left buyers with unfinished homes- some of them with only a slab of concrete after receiving deposits. I know of several people that lost thousands becuase they had to pay to have their homes finished by a new builder. These builders kept accepting deposits knowing IMHO that they were going under. There is very little MSM reporting about this potential catastrophe of banks pulling the plug on financing. This could very easily snowball across the state.

 
Comment by boulderbo
2006-02-17 08:55:00

have not seen headlines like this since the late 80’s. the commercial banks are the ones subject of oversight by the feds, plus they must subscribe to a “strange” law of economics, foreign to all those that participate in the mbs market, they must concern themselves with preservation of capital, not profits.

Comment by TXchick57
2006-02-17 09:05:57

Yes, I made that comment. I am astounded to see this kind of thing so early in the game. I expected it but not for a couple of years.

 
 
Comment by bottomfisherman
2006-02-17 08:56:35

I have travelled to latin america and saw many half-finished concrete frames of apt high rises. I was told the builder couldn’t get the money to finish, so it just sits there for years, a concrete skeleton, 1/2 way built up, right in the middle of downtown.

Maybe we’ll see some of these here soon?

Comment by sfbayqt
2006-02-17 16:31:16

It’s like that in Jamaica, too. From what I was told, when a house is being built, only the parts get finished that you can pay for (in $$$, not a loan that you have to pay later)…and then it sits until you get more money. So, just like in Latin America, there are a lot of concrete, or cinderblock shells all over the place. But I understood it as the way they do things there…not necessarily as the result of a housing market fiasco.

BayQT~

 
Comment by ajh
2006-02-17 22:22:47

The colloquial name in Sydney after the early 90’s bust was ‘bombsites’ (this was of course pre-9/11), and from time to time the newspapers would show aerial photographs with the sites listed along with who owned them.

I know there was pressure put on the site owners (or bankruptcy administrators) to either sell or get something (such as a parking lot) built on the sites so they wouldn’t be eyesores when the Olympics came around. (In the event, the market recovered from 1997 on, so almost all the sites got real construction on them by 2000.)

 
 
Comment by realestateblues
2006-02-17 09:08:54

I was in downtown Miami couple of times this week and I couldn’t believe the number of condo buildings that are being built. Wonder how many will actually be finished.

Comment by sfbayqt
2006-02-17 16:41:53

It may very well be most of them depending on whether they can back out of the contract or not. Or, if they want to just “give back the keys” so to speak and eat the loss. The same thing happened during the dotcom days in Silicon Valley. Hotels, office buildings, etc were going up like gangbusters. In Dublin, CA along Dublin Blvd (for those of you who know the area), there is a long corridor of vacant lots where they are now building, yes, condos, apartments and mixed-use development, and IKEA. Who knows how that’s going to work out. I’ve seen the pricing of the condos, and I hope they are not serious. But back when things were booming, the map had Cisco, Microsoft, Oracle,and so on, forecast for new buildings. Fortunately, they were able to back out. But there are at least a couple of buildings that are half empty that I know of….empty parking lots on a couple sides of the buildings.

BayQT~

 
 
Comment by Melody
2006-02-17 09:12:56

Read about Pop Goes The Real Estate Weasel (Part 2) By Wayne N. Krautkramer.

“In 1934, during the depths of the Depression, Congress passed the National Housing Act to strengthen a deeply troubled housing market. An important element of this legislation was to make mortgage funds available to more Americans by protecting lenders from the risk of default.

The bankers were already accustomed to risk free government money because of this act. In the 1970’s the Congress created the Government Sponsored Enterprise, Fannie Mae.”

 
Comment by SCProfessor
2006-02-17 09:53:43

So classic. Only difference this time is that because of the Internet and blogs like this, people will be more quickly informed about the collapse of residential construction. What will be interesting from an historical perspective, is the impact the Internet will have on this crash. I suspect the primary result will be the quickness with which construction financing dries up as construction lenders hear about problems other lenders are having and pull in their horns.

Comment by mrincomestream
2006-02-17 12:30:48

Exactly

It’s not going to take weeks and months to figure out something’s wrong in the market. It’s not going to take days. Seconds is all it takes.

I don’t think the talking heads are taking this into to consideration when they talk about soft landings, hitting the bottom in 2010. Where going to hit bottom in htis market a lot sooner than that.

 
 
Comment by need 2 leave CA
2006-02-17 09:54:24

That is right, everyone wants to come to FL - and deal with a couple of hurricanes each year. I hope that they all just get washed under in the next big Wilma or Katrina. Ciao

 
Comment by Tom
2006-02-17 10:05:25

Hey,

I’m in Tampa. I’m going down to Sarasota, Bradenton, Naples, Cape Coral. I’m going to take pictures of all the activity. Would anyone be interested in the pictures? Any personal requests of an area you’d like to see photographed??

Respond to me here or shoot an email to djtomr941@gmail.com

Thanks!

Comment by Tom
2006-02-17 10:05:46

Would anyone be interested in a Florida Bubble blog? Is there a FL bubble blog?

Comment by tampaesq
2006-02-17 10:29:34

Tom,
I would be interested in a FL bubble blog–I really enjoy reading the nationwide threads here to get the big picture, but it would be nice to have a forum dedicated to sharing local anecdotes.

 
Comment by sidney
2006-02-17 13:02:42

Yes I would most definately like to see a florida blog. Can not even think about affording in the current market, and I have a good job! There are 2 bed 1 bath 650 sq ft condo conversions for sale that I know of that were origionally listed for 396k on the market and recently reduced to 365k and still on the market. yes they have a view of the water but not much else. more condos comming onto the market soon here in Pinellas county, and most of them purchased by speculators. They can not even rent these things out for any where near what the mortgage costs. All that I know is that I live here and work here and often think that I will have to leave because of the current situation. I hold out hope that there will be a major correction and I will be able to take my savings and find a home on some investers burdon.

Comment by Jim
2006-02-18 09:03:41

Yes, a Florida bubble blog would be great.

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Comment by Robert Cote
2006-02-17 10:26:13

It is time to get used to the fact that this time events will proceed at a breakneck speed. It’s time for people to stop being surprised. What you aren’t going to find is any dive vultures this time. They (me too) are not going to snatch these pidgeons out of the air. They need to crash first. We aren’t going to eat no fresh meat. We’ll wait until the corpse is stinkin’ and no one else will touch it.

 
Comment by BigDaddy63
2006-02-17 11:06:05

Not to plug. But I have a South Florida bubble blog. SImply click on my email and it will direct you to it. thanks

 
Comment by Betamax
2006-02-17 12:19:20

Did you hear that noise? Sounded like a pig squealing, then it stopped.

 
Comment by bubcity
2006-02-17 16:56:28

I would also be interested in an Fl blog. I live in Naples and recently moved from Marco Island, which is a beauty. However, it was ground zero for speculators who pushed basic water front properties from 300k to 800k in a year and a half. It peaked in o4 and we are backing down into the low 600’s , so we have retraced about 50%. Marco Island has so much inventory, the island looks like a continuous white picket fence. There are more listings from Marco Island on the Dupont registry(300) than Tampa, Palm Beach, Naples and Orlando combined. Price reductions of $500,000 are happening on the high-end.

Comment by rudekarl
2006-02-18 06:45:01

Bubcity:

I was speaking about the job market with a friend of mine who is an attorney in SW Florida. He told me that Naples was having difficulty hiring prosecutors at $80,000/year because of the cost of housing.

Do you know what the rental market is like in Naples?

 
 
Comment by Gulf Returns
2006-02-19 20:43:29

The construction loan problems at First Community Bank of Southwest Florida stretch back to October 2005 when the FDIC halted their construction loan program.

 
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