Builder roll-ups (bankruptcies, mergers and more)!

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No other American industry has been as decimated by the current “Great Recession” than the new home-building industry.  Not only did thousands of small (5 to 50 homes/year) builders go bankrupt, but many of their vendors failed too.  Those that survived contracted, terminating hundreds of thousands of workers.  Home building employment (builders plus trades contractors), reported in December 2010, now stands at 2.03 million (569,000 builders and 1.47 million in associated trades).  This places the total net job loss since the peak of 3.5 million in 2006 at 1.42 million.  This number does not include losses in businesses associated with new home building and remodeling, such as retail, finance, real estate and furniture manufacturing.  What other American Industry has lost this many jobs?  If only the new home-building industry had the political clout (and union connections) of the new car industry which, when faced with the loss of 250,000 jobs, got $75B in bailouts from the Federal Government. 

Home prices (still dropping), resurgent foreclosures (robo signing scandal is done) and the frozen credit markets continue to decimate housing. Home prices are now at 2002 levels.  Home-building stocks have plummeted 88% from their peak in 2005 until their trough in November 2008.  Analysts expect a number of distressed builders to exit the market through bankruptcy filings, mergers or fire-sales in the next year or two.  So far, about 17 of the country’s top 100 home-builders – including three publicly-traded builders – Levitt & Sons LLC, WCI Communities Inc., and Tousa Inc. – have filed for Chapter 11.

The website “The Home-Builder Implode-o-meter” (http://builder-implode.com/ ) say’s there have now been at least 88 major home-building companies “who have gone through some sort of permanent adverse change”. This does not necessarily mean 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.”  There have also been over 53 “tiny” builder implosions.

Colorado is a good example of what happened to one state’s new home-building industry.  In 2005 there were 2,841 builders who built 45,891 new homes and condos.  In 2011 the number of builders dropped to 616 and they built a mere 2,841 new homes.  Click here to learn more:
http://www.denverpost.com/business/ci_20447730/homebuilders-colorado-down-80-since-2006

Home-builders have had a very difficult time refinancing in the frozen credit markets. As a result, distressed builders, unable to meet debt calls, could be forced to sell assets or the entire company at bargain-basement prices. Many builders’ high debt makes them attractive takeover targets.  Some builders looking to consolidate are on the prowl.  The largest roll-up in builder history was made when Pulte Homes Inc. purchased $3.1B Centex Corp in 2009.  At that time, many in the industry thought that this purchase presaged the beginning of a huge builder roll-up period.

DR Horton, the nation’s largest new home builder, is looking to take advantage of the current climate and is seeking to dominate the industry.  In our experience, it was Horton that contracted its overhead the quickest in 2006.  They are nimble, not land constrained, and have plenty of cash and the desire to grow.  Click here to read more:  http://www.builderonline.com/business/dr-horton-aims-for-market-domination.aspx?cid=BBU:042412

Let’s not forget the builder banker relationship!  A recent Forbes Magazine article written by Richard Suttmeier highlights the possibility that we’re not done with the “Great Recession” quite yet, as many banks still are weak and have overexposure to Construction and Development (C&D) loans to builders.  For the Fourth Quarter of 2011 the following exposures were still very real:

  • 514 FDIC-Insured Financial Institutions are overexposed to $240 billion in Construction & Development loans (C&D).
  • Another 1,450 banks are overexposed to nonfarm, nonresidential real estate loans.
  • This means that 1,964 banks are overexposed to Commercial Real Estate loans (CRE).
  • 1,207 banks have their CRE loan commitments 100% funded, which make them “Zombie Banks.”
  • Another 2,147 banks have their CRE commitments between 80% and 100% funded when a healthy pipeline is around 60% funded.
  • This means that 3,354 banks (45.6%) still feel the stress of the “Great Credit Crunch”.

Some banks still have reluctance to loan money to builders looking to begin new residential projects, which only continues the downward spiral.  So our “Great Recession” and the housing downturn could well last another four years, until 2016.  A. Gary Shilling, a nationally known real-estate expert, also thinks that housing prices and the housing market will continue to decline – click here:  http://www.bloomberg.com/news/2012-02-23/why-renters-rule-u-s-housing-market-part-2-a-gary-shilling.html

This is depressing news, but it’s important to face the facts and the painful truth.  It’s important to not be hypnotized by the media who seem bent on distorting any small trend or “green shoot”.  It’s risky to predict the bottom of the housing market until most of the (3m to 9m) foreclosures have been absorbed, until banks stabilize and until jobs return.  A. Gary Shilling makes a further point that housing has been a “flat-line” investment for the past century and now that housing prices have been dropping for over 6 years Mr. and Mrs. Homebuyer will begin to realize that owning a home is not such a great investment after all.

This leaves builders wondering about how to survive for the next 4 years. According to the Wall Street Journal “It’s a fact that foreclosures will surge in the next couple of years, now that legal snags have largely been removed from the process. But will distress depress overall prices, or will a greater volume of normalized transactions offset the distressed effect? Jobs, household formations, consumer confidence will tell.” As Yale economist Bob Shiller asserts, “anyone who says they know the answer is lying.”

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J. David Rauch Bio

Dave Rauch is the Founder and President of ProTec Building Services (ProTec). He ensures that work quality is consistent.  Dave maintains a consistent presence within the company.  While managing the growth of ProTec, he strives to improve everything that ProTec does, especially exceeding client expectations.  At Mr. Rauch’s previous company he designed the original HOA manual and monthly building maintenance programs specific for each HOA. In 1996 Dave opened ProTec, which now provides maintenance programs to over 600 communities and other services to 2,000 communities.

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George Van Oosbree Bio

George Van Oosbree is the Senior Vice President and Director of Operations in Nevada. He has been a manager with ProTec for 17 years. He holds a California/Nevada General Contractors and painting license; as well as, certifications in Playground Safety and SWPPP. He is also a United States Green Building Counsel LEED Accredited Professional and EPA Certified Lead Renovator.  Developers rely on George’s knowledge (nearly 100 High-rise and Mid-rise Projects) and 30 years of experience to construct sustainable and maintainable projects.

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Andy Henley Bio

With over 20 years’ experience in construction management and janitorial, Andy knows what it takes to repair and maintain your largest asset, your homes and common areas at your community. Not only will Andy provide unparalleled customer service for all ProTec’s work but he will ensure that all jobs and service exceed client expectations. Call Andy and request to meet at your community. He will walk your community, detailing what maintenance and repairs are needed to keep your property values increasing.

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Candy Allen Bio

ProTec’s controller, Candy Allen, has over two decades of experience in accounting and brings a wealth of knowledge and experience to the executive team.  Candy also has extensive HR, office management and organizational skills derived from her years of experience in the service industry.  What truly sets Candy apart from her peers is her energy and zeal to get the job/challenge done correctly and immediately.  She’ll explain that her success comes from devoting herself to creating a team environment in which the company can accurately track and maintain their various business and accounting systems.  Teamwork, honesty and hard work are all core elements of Candy’s work ethic.

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Laura Swirski Bio

As ProTec’s Human Resources Manager, Laura Swirski, brings knowledge and experience in HR and Organizational Development from a variety of industries ranging from property management, non-profit, government, public utility, and hospitality.  Laura enjoys an employee focused and hands-on approach to HR.  She believes employees are a company’s most important resource.  An organization is successful when employees are in the right job and are involved, committed, and work together toward shared goals.  Laura is conscientious, a hard worker, and desires to learn, improve, and make a difference.

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Fernando Urrea Bio

Fernando Urrea began his ProTec career in 2009. After a short leave he returned to ProTec in 2014 as the San Diego Maintenance Division Manager. He holds a General Contractors License; as well as, EPA Certified Lead Renovator. Fernando worked at Standard Pacific Homes and Pacific Bay Homes in the San Diego Divisions and has over 15 years’ experience in new home construction management. While working in Military Housing for 10 years he was able get hands on experience on all trades and management skills. His new home building and maintenance knowledge are unparalleled and is what makes Fernando a great asset.

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Mark Adams Bio

Fascinated by construction from an early age, Mark developed the skills and knowledge to construct and repair any building. Prior to ProTec, Mark honed his skills at Quality Built Consulting on construction defects/diagnostics nationally. Mark is a licensed California General Contractor and a certified applicator in Excellent Coatings (Waterproof Coatings), SIKA Products (Sealants), PROTECTO Wrap (Waterproof Membranes) and Superkrete (Overlay Concrete Systems). Mark has been a manager at ProTec for 15 years and is the top HOA estimator in San Diego County. He prides himself on being able to assist HOA Boards and Community Managers resolve any type of repair or construction project.

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Lee Sterling Bio

While attending Arizona State University pursuing a degree in engineering, Lee Sterling enlisted in the United States Army prior to Desert Storm. After completing his service he began working in the property service industry. Duly licensed as a Building (B1) and Roofing (C39) contractor, Lee rose through the ranks of the industry becoming the Division Manager and acting Chief Engineer for properties in San Diego, Irvine and Brea. His commitment to quality and superior service has earned him recommendations from his peers, clients and customers.

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Cesar Ibarra Bio

Cesar Ibarra is ProTec’s Janitorial Manager and has been with the company for 8 years. He ensures that the janitorial work quality is consistent and manages the planning of large level custodial projects. He prides himself in his knowledge of janitorial services and has over 10 years of experience in the Commercial Cleaning Industry. He and his team devote themselves to our clients and provide customized janitorial services that are specifically tailored for each community or project.

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Paul Mayeski Bio

Paul oversees ProTec’s Maintenance Manuals and Inspections Division. Before joining the ProTec team in 2000, Paul spent 4 years converting his Industrial Arts education into becoming a trained cabinetmaker, followed by 13 years building custom homes and then 7 years administering building maintenance programs and overseeing maintenance manual implementations for one of San Diego’s largest community management companies.  Because of his combined experience in the building and community management industries, he is uniquely suited to ensure that our clients’ projects are successful.

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Chris McHenry Bio

Chris has over 25 years of construction experience in the residential and commercial industries. He has done everything hands on from operate heavy equipment, ro build and remodel custom homes, and commercial tenant improvements. He started working in his family’s business building custom homes during the summers in high school. He moved on as a Project Manager for an apartment maintenance construction company in Rancho Santa Margarita. He proceeded to get his contractor’s license and owned his own company for 7 years. Chris also holds the positions of superintendent on a high rise construction project and Project Manager with an industrial/commercial company.

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Sal Mendoza Bio

Salvador Mendoza is our Los Angeles regional manager for ProTec Building Services. Since starting with the Company in 2008 he has devoted himself to the challenging world of maintenance for mid and high rise buildings. Salvador’s past experiences of running his family owned construction business, along with his real estate and mortgage banking experience, provide him with a unique perspective within our industry. He has a created the company’s first Planned Maintenance Contract (PMC), which allows for a custom annual maintenance calendar of the building components for each individual building, enabling clients to plan ahead and have an annual maintenance budget

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Mirzet Velic Bio

As ProTec’s Vista Maintenance Division Manager, Mirzet brings immense experience in the HOA industry and knowledge of maintenance, repair and construction methodology. Mirzet joined ProTec in 2006 as an Account Manager.  Prior to ProTec he honed his experience at All American Construction as a Maintenance Technician.  With over 15 years of experience in contract management, construction, electrical, and property management Mirzet can solve any technical problem. However, Mirzet’s true tour de force is his Customer Centric service model; he takes care of clients’ needs before they even know they have a need. 

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Timothy (Ty) Haisch Bio

Ty is ProTec’s Construction Division Manager for the North County San Diego region, working out of the Vista office.  Ty joined ProTec in 2010 as a Project Supervisor.  He has moved up in the management ranks due to his excellent work record, supervisory skills, hard-work and dedication to getting jobs done in a timely manner that have made him a “go-to” manager at ProTec.  Prior to joining ProTec, Ty was a manager at TDT Construction.  Yes, Ty has many years of experience, but it is mostly his excitement with solving complex problems, that cause Ty to stand out among his peers.  Ty loves challenges and will happily solve our clients most vexing or technical problem(s).

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John T. (JT) Anderson Bio

John learned the value of hard work at his family business at the early age of 5, where he started out as a janitor.  He went on to learn additional trades and skills, where he eventually left the business world to attend college at The University of Hawaii and the University of Utah.  He received his degree in Political Science and Business.  After moving to San Diego in 2004 he founded Elite Services, which provided building services to Commercial and HOA clients.  In 2016, John saw an opportunity to join the ProTec team where he has put his many talents to work, expanding ProTec’s list of 172 services and engaging new clients.

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