COMMENT OF THE DAY: THE ROYCE BUILDERS LEGACY “I think the real story is all the trades and other businesses who wound up getting stiffed out of tens of thousands of dollars in some cases. Royce was a poorly managed company… especially in its final year. They built an empire building houses on credit and pocketing entirely too much cash. When the loans on new starts stopped, Royce found themselves way over their heads in debt from the thousands of spec homes sitting on the ground. But the cash was in their pockets… so they walked out and left all the trades and homeowners to drown. Anyone ever stop to think how this effected small companies like Conkir Electric or all the painters and sheetrock crews who worked for pennies anyway?” [Former Royce, commenting on A Chance To Relive All the Excitement That Was Royce Builders]
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Bankruptcies
DILICK: PAY NO ATTENTION TO CHAPTER 11 A well-timed bankruptcy filing earlier this week by the entity that owns Wilshire Village did in fact prevent the almost-8-acre vacated property at West Alabama and Dunlavy from foreclosure: “Matt Dilick, whose name is listed on the Secretary of State’s web site under registered agent for Alabama & Dunlavy Ltd., said his role is that of development manager. His company, Commerce Equities, ‘is proceeding with its development plans on the property and continues to market the property,’ Dilick said. He recently told me that the property was being offered for sale, but there was a chance he’d still build something on the land.” [Prime Property; previously on Swamplot]
With its most recent achievements, the Mosaic earns its place in Houston’s spec-development record books: Last month the 29-story condo tower near Hermann Park — wedged between Almeda and 288 — scored the loan-default trifecta, having notched a bankruptcy, mass foreclosures, and an attendant bank failure to its credit all within a single calendar year.
Chicago’s Corus Bankshares, which held a $71 million loan for the Mosaic, foreclosed on all 271 unsold units (out of 394 total in the building) in September, just days before the bank itself was seized by the FDIC. A few weeks later, the federal agency sold 40 percent of the bank’s real estate loans to a team of private-equity firms calling itself Northwest Investments and led by Starwood Capital Group — for 60 cents on the dollar.
Any further fun at the Mosaic will be courtesy of the FDIC, reports Nancy Sarnoff:
NO DEAL FOR BRIDGELAND Bankrupt General Growth Properties won’t be selling its Grand Parkway-lining sprawlchild to the Caldwell Cos. after all. The $95 million deal to sell Bridgeland’s 11,400 acres is off: “Jim Graham, General Growth’s director of public affairs, released a statement on Wednesday saying all discussions have been terminated with parties interested in purchasing or investing in Bridgeland, but would not disclose any further details concerning the negotiations. Graham says the decision was made ‘very recently.’†[Houston Business Journal; previously on Swamplot]
THE FEDERAL RESERVE’S EXTENDED STAY IN HOUSTON Extended Stay Hotels, which operates 21 extended-stay hotels in Houston under the Homestead Studio Suites, StudioPLUS Deluxe Studios, Extended Stay America, and Crossland Economy Studios brands, declared Chapter 11 bankruptcy earlier this week. How is the Fed involved? “The Federal Reserve holds $744 million of various junior classes of debt and $153 million in the senior debt that the central bank assumed after the collapse of Bear Stearns, which held a sizable amount of the hotel chain’s debt. The losses are mounting for the Fed on those Bear Stearns assets, which continue to sour. Extended Stay loans were held on the Fed’s balance sheet via a company called Maiden Lane that the central bank lent $29 billion in June 2008 to purchase $30 billion of Bears’ assets.” [Deal Journal; more at Calculated Risk]
BUYING A BRIDGELAND The Caldwell Cos., possibly financed by Japan’s Sumitomo Corp., is in the process of buying all 11,400 acres of Bridgeland from bankrupt General Growth Properties for $90 to $95 million. “Caldwell notes the master-planned community will have the fourth-largest lake in Houston upon completion. The firm has spent three years moving more than 2 million [cubic] yards of dirt to create the body of water that’s large enough for boating and skiing, he says. The first part of the lake opened two weeks ago. . . . The master-planned community stretches between Katy-Hockley Road and Fry Road, south of U.S. Highway 290. The Grand Parkway will run right through the property. Construction on the roadway will begin in March 2010 with $180 million of federal stimulus money, according to The Grand Parkway Association.” [Houston Business Journal; previously in Swamplot]
Regular Swamplot readers will remember all the fun surrounding the collapse and shutdown of Royce Builders last year. What’s happened since? Chapter 7 bankruptcy! Plus now, says the Chronicle‘s Nancy Sarnoff:
Wisenbaker Builder Services, Suncoast Post Tension, Builders Mechanical and Luxury Baths by Arrow are collectively seeking to recover more than $1.1 million from the builder, according to the petition filed last month in U.S. Bankruptcy Court for the Southern District of Texas.
Thousands of home- owners could also have claims against the company.
Attorney David Jones, who is representing Royce in the bankruptcy, is compiling names of potential creditors that lists more than 12,000 people.
“Homeowners are the biggest portion,†said Jones, a partner with Porter & Hedges.
Oh, but there’s more! In a separate legal action, an educational charity that Royce owner John Speer used to promote his businesses and solicit contributions from customers is claiming that Royce failed to deliver funds raised on its behalf. A struggling charity that renamed itself the Royce Homes Foundation for Youth in 2003 — after Speer apparently promised to deliver several hundred thousand dollars a year in support — says Royce still owes it about $400K:
Jerry and Wynonne Hart are scheduled to be sentenced today for “misapplication of fiduciary property” in the operation of their auction business at the Hart Galleries. In return for the couple’s guilty plea, prosecutors dropped charges of theft and money laundering.
11 News reporter Dave Fehling spoke to several former Hart Galleries customers:
The auction house thrived for years. The Harts enjoyed a sterling reputation among the rich and not so rich who all trusted the Harts to sell their valuables. But around 2003, something strange began happening . . .
. . . the Harts auctioned furniture and antiques for John Zielinski and his wife.
They were expecting to get $20,000.
“And I said, ‘where’s our money?’ And they said, ‘we’re having difficulty collecting some of the checks,’†said Zielinski.
The next thing Harts’ customers learned was that the couple was bankrupt.
MALLS GONE BANKRUPT, PLEASE KEEP SHOPPING Deerbrook Mall and The Woodlands Mall both filed for Chapter 11 bankruptcy today along with their owner, General Growth Properties. The parent company owns more than 150 mall-like properties around the country, including Baybrook Mall, the First Colony Mall, and Willowbrook Mall. It also owns Grand Parkway booster Bridgeland and a portion of The Woodlands Operating Company. “General Growth is seeking protection from its creditors after failing to persuade a majority of its debt holders to give it more time to refinance billions of dollars in debt racked up during the housing boom. The company’s retail centers, office properties and master-planned communities ‘will be open for business as usual as the company restructures its debt,’ Thomas H Nolan Jr., General Growth president said in a conference call today. ‘Customers will see no change in the services and amenities we provide.'” [Houston Chronicle]
The Wilshire Village Apartments at Alabama and Dunlavy have been surrounded with a chain link fence topped with barbed wire since Friday, reports a Swamplot reader. And over at the Chronicle, Nancy Sarnoff confirms that the now-vacant complex is “set to be demolished.”
Swamplot readers may especially enjoy parsing this passage:
In 2005, the owner announced plans to tear it down and possibly build an upscale tower in its place.
Matt Dilick, a commercial real estate developer who controls the partnership that owns Wilshire Village, said the demolition process will start “relatively soon.â€
“The buildings are unsafe, and for numerous years prior groups have not kept the buildings maintained or the property up to city code,†he said. “The dilapidated buildings are an eyesore to the public and to the numerous homeowners and businesses in the area.â€
Helpful hint: the “owner” who announced plans to tear down the complex way back in 2005 was . . . Matt Dilick.
Extra credit: Unwrap the sequence of events Sarnoff gently suggests in this passage:
Ritz Camera, which filed for bankruptcy protection in February, will be closing more than 300 of its Ritz, Wolf Camera, and Kits Camera stores nationwide, the company announced late last week. Not surprisingly, the Wolf Camera in Sage Plaza at 5161 San Felipe — less than a quarter-mile from the Wolf Camera on S. Post Oak in the Galleria — is one of the victims. Also closing: Ritz Camera stores in the Katy Mills Mall, at 5706 Highway 6 in Missouri City, and in the Royal Oaks Shopping Center at 11691 Westheimer.
Ritz is also shutting down its entire 130-store Boater’s World chain, including the 6,000-foot location in Webster. Its Galveston store never reopened after Hurricane Ike.
- Ritz Camera closing 4 Houston-area stores [Houston Business Journal]
- Boater’s World sinks into bankruptcy [Galveston Daily News]
- Ritz Camera to Close More than 300 Stores Nationwide; Store Closing Sales Scheduled to Begin April 4 [Business Wire]
- Wolf Sheepish About Closings [Swamplot]
Photo of Wolf Camera in Baybrook Square, Webster (where the lights are staying on): David Stall
NEW MARK FOR LAYOFFS Newmark Homes, a local brand of failed Florida homebuilder TOUSA, will be laying off 156 Houston employees beginning in May, according to a filing with the Texas Workforce Commission. Another 63 employees in Austin will lose their jobs. The company, which filed for bankruptcy back in January 2008, had been trying to sell Newmark and its other local brand, Trophy Homes. “The company said in a recent statement that it would stop building new homes and focus on selling its remaining inventory of speculative homes and its land holdings.” [Houston Business Journal]
WOLF SHEEPISH ABOUT CLOSINGS No word yet from Ritz Camera on whether any of the company’s 14 Houston-area Wolf Camera locations will be closed. The company declared Chapter 11 bankruptcy on Sunday. It owes more than $40 million to Nikon and Canon alone. Ritz is the nation’s largest camera chain, with more than 1000 stores. It also owns Boater’s World, which has a store in Webster. [Washington Post]