Arizona-based Brown Family Communities (website: homebfc.com — site down), founded in 1975 and a Top 100 Builder according to builderonline.com, has shut its doors as of Friday, according to Arizona Republic. From the article:
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. ...
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.
This implosion comes as a shock to many. For example, it seems that Brown Family Communities was "solid" to outside observers, including the Arizona Department of Real Estate, which is maintaining a list of "builders in financial trouble" — Brown Family wasn't on that list.
Builderonline.com also reported the shutdown. From their write-up on Brown Family Communities, they note:
But in a conversation last month with BUILDER senior editor John Caulfield, CEO David Brown did indicate that the Phoenix housing market was becoming extremely challenging. Seventeen home building companies in the area have gone bankrupt or closed, he said at the time, noting that Brown Family Communities was one of only two private builders left in the market.
One major challenge: extremely scarce buyers. "Nothing is selling, and I'm giving away $100,000 to anyone who will buy a house. I'd like to know where all of the buyers that other builders talk about are supposed to be," Brown told BUILDER.
His numbers reflect that. Brown delivered 522 homes for $156 million in 2007, but he expected to close just 225 homes this year. (In 2006, his company's peak, Brown Family Communities closed 826 homes.)
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Important: This company is on our list of builder operations that have "imploded" (see also ailing lenders). This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid declines in enterprise value; or abnormal "bail-out" by corporate parents or peers in order to continue to operate. The builders may be residential or commercial.