Large SW Florida Builder Files Bankruptcy

TOUSA Inc., the Hollywood-based parent company of Engle Homes, is seeking to reorganize under federal bankruptcy laws.

The company lost 98 percent of its market value in the past year as the Florida housing market’s decline deepened.

TOUSA listed assets of $2.3 billion and debt of $1.8 billion in a Chapter 11 petition filed Tuesday in U.S. Bankruptcy Court in Fort Lauderdale. There were 37 affiliates that also filed today.

Its brands include Engle Homes, Newmark Homes, Fedrick, Harris Estate Homes, and Trophy Homes.

In Southwest Florida, it operates as Engle — projects include Marbella Lakes in Naples; Olympia Pointe in Lehigh Acres; Reflection Isles and Reflection Key in Fort Myers; and Marbella at Spanish Wells in Bonita Springs; and Cape Royal in Cape Cape Coral..

Engle attracted some attention late last year with its advertising campaign and attention-grabbing slogan — "The End is Near."

The message, on billboards and television commercials, was that the days of declining prices for homes was reaching an end.

TOUSA, the largest builder to file bankruptcy and at least the 14th since June, missed three interest payments this month as home sales and prices fell in Florida, where the company does most of its business. The builder never recovered from the August 2005 purchase of Transeastern Properties Inc., a closely held Coral Springs-based homebuilder, said Robert Curran, a managing director at Fitch Ratings in New York who covers builders.

“It was too much for TOUSA, in the midst of a major market correction — particularly bad in Florida — and the addition of Transeastern never got any traction,” Curran said.

August 2005 proved to be the peak of the market and the acquisition turned out to be a money loser because of the debt it took TOUSA to complete the transaction, Curran said.

“It’s possible we’ll see more homebuilders, both public and private, file for bankruptcy,” Curran said. “As weak as housing has been, a possible recessionary environment will weaken it further still.”

Florida realtor sales fell 29 percent last year compared with 2006, and prices of single-family homes declined 5 percent, according to the Florida Association of Realtors. In Lee County, sales fell 37 percent, from 8,518 to 5,383 in 2007. The price of an existing single-family home fell 6 percent, from $273,600 in 2006, to $257,000 in 2007.

Other homebuilders, such as Hovnanian Enterprises Inc. — which operates as First Home Builders in Lee County — have said that Florida has been a drag on earnings. Hovnanian Chief Financial Officer Larry Sorsby referred last month to a “Fort Myers effect” on the Red Bank, N.J.-based builder’s profit margins.

Sales of new homes in the United States fell to a 12-year low in December, ending the worst sales year since records began in 1963 and signaling little prospect for a recovery. Foreclosures almost doubled last month from a year earlier.

“This action is necessary to reflect the realities of today’s homebuilding market,” Antonio B. Mon, TOUSA’s chief executive officer, said in a company statement.

TOUSA said it has support from more than a majority of senior noteholders on a restructuring agreement calling for an exchange of all unsecured senior notes and other unsecured claims for “substantially all” of the new stock. Noteholders and unsecured creditors would receive anything collected by a litigation trust.

The reorganization will be financed with $150 million from Citigroup Global Markets Inc. The company said it intends to continue building and delivering homes without interruption.

The New York Stock Exchange suspended trading in TOUSA Nov. 19 because the average price was less than $1 for 30 straight trading days. TOUSA fell 1 cent to 13 cents at 12:05 p.m. New York time in over-the-counter trading. The shares reached a high of $30.43 in August 2005.

TOUSA’s bankruptcy filing is at least the fourth by a company with more than $1 billion in assets and debt since April 2007, according to data compiled by Bloomberg. New Century Financial Corp., the biggest subprime lender in bankruptcy, sought Chapter 11 protection that month, listing a total of $1.5 billion in assets and liabilities.

Homebuilders Levitt & Sons LLC, Kara Homes Inc. and Neumann Homes Inc. also sought bankruptcy protection as U.S. home sales and prices slumped. Levitt, based in Fort Lauderdale, is the second- largest U.S. homebuilder in bankruptcy. The Levitt Corp. unit filed for Chapter 11 protection on Nov. 9 with 37 affiliates, submitting schedules listing $340 million in debt.

— Bloomberg News and The News-Press staff writer Dick Hogan contributed to this report.

Home Prices in Lee County Plummet to end '07

Lee County home sales ended a horrible year with a sharp two-month drop in prices, according to a report Thursday by the Florida Association of Realtors.
Nationally, the news was grim as well: The median price of an existing single-family home fell 1.8 percent - the first year there's been a drop since the Great Depression of the 1930s.
For single-family homes in Lee County, the median price in December was $215,200, down 18 percent from $263,700 a year earlier and 10 percent off October's $239,300. November's numbers weren't available.
The year 2007 showed a median price of $257,000, off 6 percent from $273,600 in 2006.
"I've seen in the last couple of months some pretty big price declines," said Brett Ellis, an agent with Remax Realty Group. "A lot of sellers are getting caught unaware of what's happening in the market."
Overall, he said, the decline in the median price probably understates the actual drop in the market since its frenzied peak in late 2005. Since the record high of $322,300 in December 2005, the median price is off 33 percent.
Prices are still up significantly from 2000 when the median price of a home was $117,600.
"Forget the official median statistics; the market's down, in my opinion, 40 percent and some of the waterfront markets more than that: half, maybe 60 percent," Ellis said. "We've already suffered the significant price rollbacks that the rest of the country and even other parts of Florida have yet to experience."
About 1,000 homes a month are going into foreclosure, a trend Ellis said should peak in the third quarter of this year.
One homeowner trying to sell said she's still hoping to get a good price.
"I don't know. Look at the market. But we've got 2 acres. How much lower do we go?" said Jill Goodman, who with her husband Arnold is trying to sell the four-bedroom, four-bath house and guest cottage they've owned for six years on Magnolia Lane in Fort Myers for $729,000. They bought it in 2001 for $262,900.
They're trying to sell without an agent and may come down on their asking price, which they've already cut from $1.1 million when they started in June.
"There's still a little room to negotiate," Goodman said.
Falling prices have been a boon for low-end buyers trying to get into the market, said Vince Patti, vice president of Fort Myers-based First Capital Lending.
"It's a good time to buy," he said. "We have one coming across our desk for $139,000, a three-bedroom, two-bath pool house," in Cape Coral.
The same house, which the seller bought in foreclosure, would have cost at least $100,000 more two years ago, he said.
There are few houses being built and there are about 15,000 houses listed for sale by real estate agents in the county.
But Brady Starling, president of Lehigh Acres-based DSD Homes, said he thinks the market is absorbing houses quickly enough that 2008 will see the glut largely evaporate by year's end.
Already, he said dryly, "it's hard to buy from a builder" because most are not putting up houses without a pre-arranged buyer and inventories of unsold builder-owned homes are dwindling.
Including sales without real estate agents, about 1,000 single-family homes a month are selling and it's getting easier to buy as prices fall, said Starling, who builds in Lehigh, Cape Coral and Naples.
Already, he noted, two people making $8.25 an hour each can typically afford a 30-year mortgage on a $150,000 house.
It costs $170,000 to build a three-bedroom, two-bath house on a $10,000 lot, Starling said.
"Deals under that are being absorbed fast," he said.
Statewide, the number of sales dropped 31 percent, from 12,758 in December 2006 to 8,828 in December 2007. The median price dropped 13 percent, from $239,900 to $208,900.
In the country as a whole, sales of existing single-family homes plunged in 2007 by the largest amount in 25 years.
The National Association of Realtors reported Thursday that sales of single-family homes fell by 13 percent last year, the biggest decline since a 17.7 percent drop in 1982. The median price of a single-family home fell to $217,800 in 2007, down 1.8 percent from 2006.
It marked the first annual price decline on record that the Realtors have dating to 1968.— The Associated Press/Fort Myers News Press contributed to this report

Record 10,700 homes lost in ’07

A record wave of foreclosures in 2007 crested in the last three months of the year — but experts warn the worst may still be yet to come.The monthly numbers were leveling off as the year ended, but that may not last."I think that’s just the lack of productivity because of the holidays," said mortgage broker Jeff Tumbarello of Network Funding Solutions in Fort Myers. "I think there’s a glut of foreclosures; the system just can’t file them."
For the year, there were a record 10,700 in Lee County, according to statistics released Thursday by the Southwest Florida Real Estate Investors Association. That’s compared to 3,923 in 2006, according to records.December saw 1,441 foreclosures, including 433 on homes that were the primary residence for a family. For the year, there were 7,324 single-family foreclosures. That’s 4 percent of the county’s 180,305 single-family homes.
Most of the year’s foreclosures were filed since August, Tumbarello said. Prior to that, the monthly numbers were in the hundreds. Brett Ellis, a real estate agent with RE/MAX Realty Group in Fort Myers, predicted that foreclosures would peak this summer."The next five to eight months will see the bottom of the real estate market — builders have pretty much unloaded their excess supply of inventory, even at below cost,’’ he said.
Ray Kest, a business professor at Hodges University in Fort Myers who follows the local economy, said banks and other lenders are unable to process the increasing numbers of people who aren’t making their payments. "I understand they’re backed up so far, it’s a tidal wave coming."Ground zero for the foreclosure explosion was Cape Coral, where 4,858 were filed — almost half the total. Lehigh Acres was a distant second with 2,684.Home construction has come almost to a standstill in the Cape with a record-breaking low of only nine single-family permits issued in December. A year earlier, 90 permits were issued and the record was 858 in March 2005.In a way, Cape Coral was a victim of its own success as prices surged in the boom that ended in late 2005, said Bob Knight, president of the Lee Building Industry Association and co-owner of Paul Homes, which builds houses mainly in the city. "Why has Cape Coral always done a lot better than other areas? There’s nothing like this network of canals here or elsewhere in the country."The city’s waterfront lots will also help it come back when the market recovers, he said. "Water has such value.
This is when somewhere like Lehigh Acres struggles a bit. Where’s the amenity, who’s going to come out of it quicker?"But bad as it was in the Cape, things weren’t much better elsewhere in the county. Only 45 single-family permits were issued in unincorporated Lee, Bonita Springs and Fort Myers Beach, bringing the number to 2,393 for 2007 compared to 7,392 in 2006.
Today’s foreclosures could lead to tomorrow’s broader economic problems for the county, Kest said, noting that home building is the backbone of a local economy that doesn’t have a lot else going on except for tourism. "We don’t have a diversified market."Retail sales statistics from 2007 already show the area slipping into the equivalent of a recession, he said, and the owners of the county’s 248,128 occupied housing units are leaving as they find themselves unable to make enough money to live here.Factors such as higher oil prices and a soft national economy could affect the local tourism industry, which so far has been holding up, Kest said. If that happens, "We’re in for a rough ride." Courtesy Fort Myers News Press

Bundle lost in 2007 building slump

A $1.5 billion loss was the result of a dismal 2007 for residential and commercial building permits in unincorporated Lee County, Bonita Springs and Fort Myers Beach.Some 27,769 building permits, valued at nearly $2.3 billion, were issued in 2007, a steep drop from the 43,357 permits, valued at $3.8 billion in 2006.They are uncomfortable numbers for those displaced from jobs in the construction and real estate industries.
But new construction, experts say, will continue to suffer as long as the large inventory of homes exists."It's great to compare, but it had to come down drastically," said Bob Knight, vice president and co-owner of Paul Homes in Cape Coral and president of the
Lee Building Industry Association. "It couldn't sustain itself."He added buyers are starting to look for homes again."Somebody's got to sell all this," Knight said. "Is it ever going to be like 2005? Probably not. That was unsustainable. It will probably come back to the normal pace of 2000. We have to burn off some excess inventory."
December was the worst month — not only in 2007 but in 26 years — for new single-family home permits in unincorporated Lee, Bonita and Fort Myers Beach.Thirty-five permits were issued last month, compared to 292 in December 2006, said Joan LaGuardia, spokeswoman for the Lee County Department of Community Development.
The previous low for the county was 45 single-family home permits issued in November of 1981.Cape Coral had another record low month with only nine new single-family home permits issued in December, breaking November's record of 12."For as long as we've been keeping records, nine is probably the record low," said Cape Coral spokeswoman Connie Barron.
LaGuardia said county permits were issued for 2,393 single-family homes in all of 2007, compared to 7,392 in 2006."We're waiting to see if people are willing to buy the inventory, or if we're going to see another round of foreclosures that will contribute to the inventory," she said. "All of it will impact the demand for new permits."
Lee County issued permits for four duplexes and six apartment buildings in December. Permits were issued for 1,674 duplex and apartment units in 2007, compared to 3,998 in 2006.There was an increase in commercial permitting. It was valued at $551.4 million in 2007, up from $426.6 million in 2006. In December, it was valued at nearly $12.4 million.Michael Reitmann, executive director of the Lee Building Industry Association, attributes that boost to one thing: the county's increase of impact fees.
"The road impact fees tripled. Anybody who was working on anything pulled the permit before the deadline," he said, referring to the last day developers could file under the cheaper fees in January 2007.Although the fees apply to residential, they're much more expensive for larger commercial projects.
Reitmann challenged Lee County Commissioners to suspend all impact fees for one year to stimulate the economy."They're not collecting any impact fees anyhow," he said, referring to the few permits issued. "To me, it's a gesture of good faith."Knight said he's been in the Cape for 30 years and never saw permit numbers that low, even when the population was just 15,000.
New single-family home permits for 2007 in Cape Coral totaled 760. Barron said the city is feeling the slow-down more than other areas of the country because it was growing so fast."There's still so much land available for the development of homes," she said. "That's why we're optimistic we're going to come out of this in a reasonable amount of time."
Knight said the real estate cycle is a pendulum that swung far to the boom, then far to the bust, and is now working its way toward the middle."It's stabilization," he said. "It's a good time to buy or build a house, but everybody wants to wait until it hits bottom. You'll never know when it hits bottom."For new multifamily units, Cape Coral issued just one duplex permit so far in the fiscal year that began Oct. 1. Barron said land zoned for duplexes is limited in the city.
"There's been a drop-off since fiscal year 2002, when there was a record high of 171," she said.During the fiscal year from Oct. 1, 2006 to Sept. 30, 2007, the Cape had only 22 multi-family permits.
And only two commercial permits were issued in the Cape for December, valued at $1.1 million. Five were issued in November and 17 in October, for a total value of $10.5 million so far this fiscal year.But Barron said commercial permits remained strong in the Cape in fiscal year 2006 and most of 2007."Even when the housing market slowed in fiscal year '07, commercial was doing fairly well," she said. "We're keeping our fingers crossed that the market is going to rebound. We just have to be patient."

Courtesy of Fort Myers News Press