NEW TOWN UPDATE (posted on website) Yesterday Whittaker Builders and First Bank worked out an approved order with the court to operate under chapter 11 for the next 6 months while Whittaker works on a plan to exit chapter 11.
Whittaker Builders, developer of New Town at St. Charles, the largest traditional neighborhood development (TND) in Missouri, filed papers Oct. 15 requesting Chapter 11 bankruptcy protection. The fifth-largest homebuilder in greater St. Louis, Whittaker sought to reorganize under Chapter 11 rather than get dragged down by a troubled bank that was sucking the company dry of its house-sales revenue.
Whittaker, in business since 1977, had managed to hang on through the national real estate depression, which has reduced homebuilding in the St. Louis area to about a quarter of what it was in 2003. The company, based in St. Charles, cut its work force from more than 400 employees in 2006 to a little more than 100 this fall, the St. Louis Post-Dispatch reported.
Tim Busse, vice president of Whittaker, told New Urban News, “The only reasons we filed were that the declining housing market has made it difficult to persevere and the main lender for all our projects decided this summer not to renew our loan. They said, ‘Pay all the money you owe.’ The bank was extremely hostile to us.”
Never missed a payment
That lender, First Bank, was part of a consortium of seven banks to which Whittaker owed a total of about $90 million. “We never missed a payment to the banks,” Busse emphasized. “We paid our debt down by $3 million in the last three months.” And beyond that, the company had made projections about its results, as directed by the banks, and then surpassed those projections, he said.
Nonetheless, the consortium refused to renew the loan, which Busse said was subject to review every couple of years. “Two of the seven had problems with continuing the loan,” he said. The main lender, First Bank, was owed about half of the total. Busse described First Bank as “a very troubled local bank that lost $400 million in the last 18 months. It received $290 million in TARP [Troubled Asset Relief Program] funds, has not paid any of it back, and is desperate to find cash everywhere.”
The company started to see a recovery in business in late spring and early summer of this year, and President Greg Whittaker had expressed optimism in the local press as recently as August. As of late October, the company had contracts to build 80 houses. Its cash position remained difficult, however, because the banks, led by First Bank, were requiring that the entire proceeds from real estate closings be used to pay down the loan — thus not providing Whittaker with enough money to continue operating and paying suppliers.
Through Chapter 11, Whittaker expects to be able to restructure its finances and bounce back. “We are negotiating with this hostile bank to see how much of each closing the bank receives,” Busse said. “We are maintaining control of the building of New Town. We’ll be able to continue to build and sell homes.” He expects the company will have completed its reorganization in six to 18 months.
The St. Louis Business Journal said Whittaker’s revenue plummeted from $93.3 million in 2006 to $29.2 million in 2008. Whittaker has been building at six locations in greater St. Louis. New Town, a 739-acre community that currently has 900 houses and apartments, mostly on small lots in a traditional grid, is the company’s only new urbanist project — and its best-known undertaking as well. The first house sale in New Town took place in April 2005. When completed, the development is to have 5,700 units.
“New Town has been very good to us,” Busse said. “It is our most successful project. New Town has not been the problem; it’s been our savior.” As sales in more conventional subdivisions have declined, New Town has become an increasingly important contributor to the company, accounting for half its current contracts.
At the time of this fall’s bankruptcy filing, New Town residents were quoted in the local press mostly singing their praises of the community. Greg Whittaker said he will be investing $1 million of his own money to provide capital for the company during reorganization.
In 2003, municipalities in metro St. Louis issued permits for construction of 8,191 housing units. Last year the number was 2,963. “This year, if you interpolate, it will be about 1,900 permits,” Busse said. “The downturn has been bad in St. Louis. It has been rugged for homebuilders.”