Triangle home builders piling up liens, layoffs
Triangle Business Journal - by Amanda Jones Hoyle
APEX – The weeds and underbrush are rising faster than the unfinished homes at L’Hermitage at Beaver Creek, a high-end community where construction stopped several months ago.
Officials with L’Hermitage’s developer, Diversified Communities of Parsipanny, N.J., are not responding to calls or questions, causing observers to wonder about the future of the Olive Chapel Road property, where only a few residents have moved in.
“L’Hermitage could have been an exciting new addition to the Apex housing market,” writes Apex real estate agent Heather O’Sullivan Canney in a recent blog posting. “They had great floor plans, and tons of interest. Which is why everyone was so baffled when construction came to a halt.”
Unfinished lots and half-built homes are becoming uncomfortably common around the Triangle as home builders slash expansion plans and payrolls in an effort to quickly cut costs in response to a maddeningly slow housing market.
St. Lawrence Homes, Perry Builders, Portrait Homes, Preservation Homes, Kerr-Smith Homes & Land Co. and Venture Homes have been served with dozens of liens each over the past couple of months from contractors the companies have been doing business with for years.
Preservation Homes President Tom Bland says that he prided himself on paying his contractors on time for the past seven years but that lack of cash has crippled his company. Preservation Homes built and sold 85 homes in 2006 and in 2007, but the company has sold only 31 homes so far this year. Bland has laid off six of his 10 staff members.
“And we’ve been selling homes at cost just to make sure it gets sold,” Bland says. “Nobody saw this coming. We just ran out of money.”
Also squeezed is Portrait Homes of Burr Ridge, Ill., which has cut staff at its offices in the Triangle, Triad and Charlotte regions. Portrait still owns 45 parcels of property and a few finished homes in Wake County, but no one answers the company’s phone in Raleigh.
Perry Builders laid off about 25 employees in late October, cutting its staff to about six people, a source close to the company says. Perry still owns more than 130 parcels of land in Wake County, and contractors have filed more than 30 liens against Perry for work completed in its neighborhoods in Raleigh, Knightdale, Wake Forest, Rolesville, Morrisville and Durham. Perry Builders CEO Ryan Perry did not return calls for comment.
MacGregor Development of Cary and Mack Builders Inc. of Youngsville have filed for Chapter 11 bankruptcy protection to buy some time to reorganize their finances. “It’s been a steady downward trend for the industry,” says MacGregor Development President Mike Whitehead. “But I can tell you that misery does not love company.”
Ed Dunnavant, Triangle director for research firm Metrostudy, says there is a multiplicity of reasons why builders can’t pay their bills. “What’s happening in many cases is (home buyers) are not getting requalified at closing, and the builder is losing deals. If the builder can’t get money, the time limit (to pay contractors) expires,” Dunnavant says. “The consumer has gone in a foxhole and pulled the dirt on top of them.”
Dunnavant’s latest Metrostudy report from Nov. 12 shows that builders have slowed new construction to allow consumer demand to catch up. The Triangle market recorded 2,069 home starts in the third quarter of 2008, a 53.1 percent decline from a year ago. The third quarter also brought a 25 percent decline in the number of single-family homes sold, which dropped to 2,958.
Metrostudy data show that Triangle subdivisions that are still performing well include Carolina Preserve at Amberly in Cary, which sold 286 units in the past year; Twin Lakes in Cary, which sold 150 units in the past year; and Harmony in Cary, which sold 134 units in the past year. Others in the top 10 are Kitts Creek in Morrisville, Brighton Forest in Fuquay-Varina, Battle Ridge at Chastain in Raleigh, Highcroft Village in Cary, McCrimmon at the Park in Morrisville and Somerset Place in Raleigh.
Reporter e-mail: aljones@bizjournals.com
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