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Model Homes of Hilton Head - South Carolina home builder

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2009-04-21

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stories: islandpacket.com

Model Homes of Hilton Head (website: modelhomesofhiltonhead.com) filed for bankruptcy protection on April 21 after the founder "ran out of cash to keep up with combined monthly payments of about $250,000" per a May 6 article from islandpacket.com. The founder, Tom Jacoby describes the bankruptcy as a tale of buying land during the boom and being unable to unload it during the bust:

Model Homes filed for Chapter 7 bankruptcy protection last month. Founder Tom Jacoby characterized the filing as bad luck for a good builder.

He said he had borrowed about $25 million to buy about 100 lots in recent years as the island's stock of undeveloped land dwindled.

Now that property values have tumbled amid a global recession, those lots are worth about $10 million, and banks have foreclosed on all of them, Jacoby said.

"The company and the value were intertwined," Jacoby said. "It took the company down."

Throughout its 25 year history, the company built over a thousand homes on Hilton Head island.

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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.