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WCI Turns to Bankruptcy

Written By Brian Hicks

Posted August 4, 2008



There is more bad news for the builders. 

Florida-based builder WCI Communities filed Chapter 11 today as a desperate effort to restructure $1.8 billion in debt went unfulfilled.

WCI shares dropped 60 cents on the news as the market opened to reach a new 52-week low of 66 cents before trading was halted.

Since peaking in July 2005 near $35, shares of the company have fallen 98%.

Not even Carl Icahn could save this one.

“This will be the largest homebuilder bankruptcy so far this year, and one of the biggest ever. It seems that [Carl] Icahn couldn’t pull any more rabbits out of his hat, especially after the board terminated the special company committee to consider purchase offers last month,” said Jack McCabe, CEO of Deerfield Beach-based McCabe Research & Consulting, referring to the company’s chairman.

This one, however, won’t be last….not by long shot.

By the way…

Here’s a great story on the home building business from the Wall Street Journal.

It is by Alex Roth entitled: After the Bubble, Ghost Towns Across America

“Dennis Pflueger and his wife won a rent-free year in a nice new house in an expensive subdivision not far from the headquarters of Wal-Mart Stores Inc. As part of the prize, they then have the option to buy the four-bedroom home for $452,000.

Mr. Pflueger, a telephone-cable installer who describes himself as an “old redneck,” is in the middle of his free year. But the Pfluegers are a bit lonely. Just one other family lives in any of the 28 new or unfinished houses on Foxboro Court. Up the street, a sign announcing “Elegant Homes” sits on a lot choked with weeds. The block is as quiet as an old ghost town.

Since real-estate tanked, many new planned communities across the country are half-empty, with for-sale signs outnumbering residents by a large margin.

Some of the projects abandoned by bankrupt developers are in places that were hotbeds of new housing construction: Southern California, Atlanta, Las Vegas, Phoenix. As of July, the percentage of vacant housing stock available for sale or rent stood at 4.8% nationally, the highest figure in at least 33 years, according to Zelman & Associates, a real-estate research firm.

Daily life in these developments seems a bit post-cataclysmic. Children play on elaborate but empty playgrounds. They walk their dogs past rows of shiny houses that have never been lived in. Voices echo up and down the block. Unfinished houses and vacant lots strewn with construction debris clutter the horizon.

Robert Waltenspiel lives with his wife and two daughters in a unfinished subdivision in Auburn Hills, Mich. Standing in front of his house, he can see more than 30 weed-choked lots where new houses were supposed to go. The developer halted construction more than two years ago.

“As far as working on my yard and saying, ‘Hey, neighbor, want a beer?,’ that’s not going to happen,” says Mr. Waltenspiel, an account manager for Hewlett-Packard Co.

The hot tub at the community center doesn’t work. The communal fountains are dry. Mr. Waltenspiel’s kids have no one in the subdivision to play with, so he has to take them to a nearby park for social interaction. His 4-year-old “will walk up to strange girls in the park and say, ‘Hey, will you be my friend?’ ” he says. “A, it’s adorable. B, it’s sad.”

In the past year, roughly 15% to 20% of residential developers have gone out of business, suspended operations or changed their line of work, according to an estimate by the National Association of Home Builders.”