Builder going into bankruptcyBy Katy Stech (Contact)
The Post and Courier
Wednesday, July 9, 2008
Leroy Burnell The developer of Whitney Lakes subdivision on Johns Island, John D. Lisi, says his company will be filing for bankruptcy protection in hopes the reorganization will allow the project to move forward. Struggling like many others in the real estate industry, the developer of an unfinished Johns Island subdivision is arranging to file for bankruptcy court protection. Developer John D. Lisi told residents of the Whitney Lakes subdivision that he plans to reorganize his company through a Chapter 11 bankruptcy. The company plans to file its legal papers by Aug. 1, he said. "We are working on a reorganization plan that would basically allow us to move forward with the project," he said. "We do have a very workable plan that addresses the needs of the homeowners and the payments that are due to venders (and) lenders." The bankruptcy filing would help Lisi manage his mounting business debts. Since Jan. 1, various construction-related companies have filed liens against the company totaling more than $700,000, according to Charleston County court records. After reorganizing, Lisi said, the company plans to resume building out the 160-acre community located off Murraywood Road. Construction at the project stopped in February, leaving a handful of skeletal buildings among the completed residences. The legal move would allow his company to sell completed townhomes, though it's unclear how many buyers plan to follow through with their purchase agreements, he said. Some buyers have refused to close on their units after receiving a letter from the company in late 2006 asking them to pay 18 percent more than the price they agreed to in their sales contracts. The letter cited delays in installing water mains as well as rising construction costs. Although the company has continued to landscape the completed portion of the community, residents say they've grown weary of the instability that the developer's financial hardships has created. Cameron Blazer, who moved into one of the first completed townhomes two years ago, worries that Lisi won't be able to follow through with his plans, putting the incomplete portion and proposed amenities center in jeopardy. "It makes you question what this is going to be like in a year. What's it going to be like in five years?" she said. Blazer said residents are divided over the issue of trying to take over the homeowners association, which is still in the Lisi's control and managed by a separate company. Legal disputes between the developer and residents, coupled with stalled construction and an array of rumors, have left some residents feeling glum, she said. "I can't say that I'm that excited to hang out in my neighborhood because I'm not happy about it. I think a lot of people feel that way," Blazer said. "Getting together and hanging out with a bunch of frustrated people — that doesn't sound like something I want to do." Reach Katy Stech at kstech@postandcourier.com or 937-5549. |
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Comments
This article has 7 comment(s)
Posted by Victor on July 9, 2008 at 2:41 a.m. (Suggest removal)
Bankrupcy is too good. What about when the builder made millions from 1999-2005? What happend to that money? Filing bankrupcy is a good deal for the builder and a bad deal for homeowners. The same person will be up and running again in a couple of years. The law should hold him responsible for all of his debt. He contributed to the housing boom specultation. Why does he get to walk away clean? The law should clean up all of his personal assets. He is walking away clean and with no responsability of debt.
Posted by moonpie on July 9, 2008 at 6:13 a.m. (Suggest removal)
wow what a mess. more of this to come i'm sure...i see this happening in a lot of neighborhoods real soon.
Posted by TOROGSC on July 9, 2008 at 7:53 a.m. (Suggest removal)
HE SPENT THE MONEY ON LIFE STYLE CHOICES,NOT BUSINESS
CHOICES.HE IS LIVING ON THE BACKS OF THE FOOLISH CREDITORS,
AND HIS SUB CONTRACTORS,WHO TRUSTED HIM.HIS SUBS WILL
GET NOTHING!!!!!!!!SEEN THIS MANY TIMES,TAKE HIM TO THE
WOOD SHED,WHERE HE BELONGS!!!!!
Posted by MsPiggy on July 9, 2008 at 9:10 a.m. (Suggest removal)
I feel bad for the subs. They are kinda like low man on the totem pole. Always the last to get paid.
Half a million dollars just floating around is a LOT of money!
Posted by TinaR on July 9, 2008 at 9:22 a.m. (Suggest removal)
What the article does not say is that, the letter he sent out for the 18% increase was, basically give me what I want as in the increase, or I just will not build your unit. And why should someone pay the increase when he has had their escrow money in some cases for 4+ years. His attitude from what I have heard was also basically, if you are going to flip it, even with the increase you will make money so what is the problem. This builder is the worst kind out there. What needs to happen is the land be sold to a reputable builder who can finish the project.
And why wait until August 1 to file, when letters to people with contracts went out in late May or early June.
Posted by kerwin1959 on July 9, 2008 at 1:33 p.m. (Suggest removal)
Most good construction lenders will force the builder to delay taking his profit until the loan principal is reduced based upon a strict repayment scale, or until it's paid in full. Others will allow for a construction "management" fee to be financed in the loan, which in essence is a portion of the builder's profit. It's like getting paid before you close the sale! It would be interesting to see how the loan was structured. If this was a once a VERY strong builder/developer, he may have had a line of credit he could draw on...I'd be little surprised if this is the case, based upon the size of the project.
Also, there is normally a pre-sale requirement for townhomes/condos, since the builder's source of repayment is the sale of units. I wonder how many contracts were actually qualified buyers and not those who are referred to as "straw buyers".
AND yes, he's probably living high on the hog, but he will also have HIS ASSets protected so that creditors can't get to him. Most of his assets are probably real estate(that isn't selling), so it's a vicious cycle.
If he's filing for bankruptcy protection, then the banks have either reworked the loan(s) as much as they can OR feel like they would be better off foreclosing their interest and selling the property....which is normally the LAST thing a lender wants to do.
Posted by FiscalConservative on July 9, 2008 at 8:13 p.m. (Suggest removal)
He needs the gov't to bail him out.