(Source: The Pittsburgh Tribune-Review By Kim Leonard and Joe Napsha) – Maronda Homes Inc., the region’s third-largest home builder, filed for bankruptcy protection from creditors yesterday amid a national and local housing market that continues to stagnate.The Findlay-based company owes creditors as much as $100 million and hasn’t been able to renegotiate credit terms, according to documents filed in U.S. Bankruptcy Court in Pittsburgh. The company that builds houses in Florida, Georgia, Kentucky and Ohio, as well as Pennsylvania, said it wants to restructure under Chapter 11 of the bankruptcy code.
For Maronda customers, homes will be built, and closings will be held on time “with no issues whatsoever,” according to attorney Joseph F. McDonough, representing Maronda.
U.S. Bankruptcy Judge Judith Fitzgerald approved an order that closings continue, he said.
“Maronda Homes made the difficult decision to seek Chapter 11 bankruptcy protection because certain banks failed to perform their credit obligations,” a statement from the company said, noting that only three out of more than 30 Maronda companies filed for reorganization. Those filings relate only to Pennsylvania and Ohio operations, the statement said.
Family-owned Maronda has been building homes since 1972 and listed assets worth as much as $500 million in court documents. Maronda Homes lists 46 housing developments in Allegheny, Beaver, Butler, Washington and Westmoreland counties, as well as developments in 12 cities in Florida, including Daytona Beach, Jacksonville and Orlando.
CEO Ronald W. Wolf couldn’t be reached for comment.
Real estate professionals in Western Pennsylvania were surprised.
“I thought they were doing well in this area, but home builders here, like the rest of the nation, have had bad times,” said Howard W. “Hoddy” Hanna III, CEO of Howard Hanna Real Estate Services. “Apparently, the company had problems in other areas where they build, such as Florida, where they were building 1,000 homes a year. Florida has had a bad housing market the past few years.”
Bill Dietrich, vice president of construction for Coldwell Banker Real Estate Services, said, “The key is, the market is not good. We just went through the worst year of construction starts in this area, and the U.S., and we’re hoping the (housing) inventory out there gets used up and the banks start to lend some money.”
Housing starts in the Pittsburgh region fell to the lowest level in more than 16 years in 2010. There were 2,778 housing units started, down 1 percent from the year before, according to Tall Timber Group in Ross. Sales of new homes in the region were down by 9 percent in March from a year ago. There were 141 sold last month, down 9 percent from 155, according to South Side-based RealStats.
Maronda said in court documents that it was left with no option but to file for bankruptcy because it could not reach a revised financing agreement with its 14 lenders, led by Bank of America and Wells Fargo.
Maronda blamed “the recalcitrance of Huntington Bank and the refusal of the lenders to solve the stalemate and proceed with revised terms” for pushing it into bankruptcy. Maronda said all but Huntington National Bank agreed to the revised loan agreement reached in December, and the other banks would not sign the deal without all banks on board.
Huntington spokesman Bill Eiler said the bank has a policy of not commenting on litigation.
Moranda said it ran into financial problems with its lenders in March 2010 when a new financing deal raised interest rates and required substantial collateral on Maronda’s development projects. Beginning in October, Maronda said its lenders took all of the proceeds from the sale of properties. Maronda said it could not continue to operate under those terms.
Maronda asked the court to give it the right to use $7 million from sales proceeds of property financed by 13 lenders, including three in the Pittsburgh area — PNC Bank, Huntington National Bank and Fifth Third Bank.
Maronda is known in the industry as a production builder, a company that pulls home designs from a standard portfolio to offer to buyers. While some upgrades are available, designs remain standard so the homes can sell at competitive prices, said Jim Eichenlaub, executive director of the Builders Association of Metropolitan Pittsburgh.
Production builders count on large volumes of homes sold, rather than a big profit margin on each house.
“A lot of our members build 20 houses in a year. These guys,” he said, referring to Maronda and similar companies, “in a good year, they’ll build 400 houses.”
Maronda typically runs third among Western Pennsylvania’s biggest builders, behind NVR Inc., the parent of Ryan Homes, and Heartland Homes, Eichenlaub said. Last year, Maronda built 123 single-family homes and 79 multifamily units in the region, according to figures compiled by the Tribune-Review.
In March, Maronda ran third in sales. NVR sold 38 new homes, followed by Heartland with 34. Maronda sold 18 in Allegheny, Beaver, Butler, Washington and Westmoreland counties.
“A number of companies across the country have had to look to reorganize debt and look for protection under the federal bankruptcy laws,” Eichenlaub said.
Other multistate homebuilding companies have filed for protection. Pasquinelli Homebuilding LLC in Chicago filed a Chapter 7 liquidation earlier this month. Comstock Homebuilding Companies of Reston, Va., filed for Chapter 7 bankruptcy in November 2009, liquidating its Parker Chandler Homes subsidiary in Atlanta.
Maronda didn’t list how much of its debt is owed to secured creditors. Among Maronda’s unsecured creditors, DR Grading & Excavation of Grove City, Ohio, is owed the most — $128,896 — according to court documents.
The homebuilding company also has been known for its charitable arm, the Maronda Foundation, which gave more than $15 million to Catholic schools in the Pittsburgh area from 2003-07.
Maronda’s founder, William J. Wolf, was a conservative Catholic who supported Catholic schools. He died in 2008 at age 78, and the foundation’s donations to Catholic grade and high schools declined.
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Source: The Pittsburgh Tribune-Review By Kim Leonard and Joe Napsha
A service of YellowBrix, Inc. Publication date: 2011-04-19