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Here’s some big news:
Barratt American, a prominent local homebuilder, is going out of business. The company filed for Chapter 11 bankruptcy reorganization in December, but switched to Chapter 7 bankruptcy liquidation last week after its creditors complained that reorganization would be “futile,” the Union-Tribune reported this morning.
From the story:
Barratt President Michael D. “Mick” Pattinson, who with local management partners had acquired the company from its British owners in 2004 for $165 million, said yesterday that he intends to start a new company next year after learning the lessons of building in a boom and bust.
“Here’s the mistake we builders made — we went on building when we should have put our tools down and stopped work and said these land prices are ridiculous, the time to get entitlements is stupid and $100,000 per house in fees is unconscionable,” Pattinson said.
I profiled Pattinson and his efforts — even amid bankruptcy — to browbeat banks and other opponents in January. Barratt American’s financial trouble is behind that mess in Leucadia, where a high-priced subdivision called Nantucket is half-built.
“We haven’t hidden the fact that we’ve been going through this process,” he said today. “This recession is unlike previous recessions in that this time, it’s the banks that are in trouble and it’s the banks that have not done the workouts with their customers.”
And because the banks have turned off the lending and negotiation process, they face greater losses now, Pattinson said.
“The banks are going to lose millions of dollars they needn’t have lost had they done workouts,” he said. “That’s contributed to the downward spiral of values. It’s a scandal. It’s a national disgrace. Where is the outrage?”
Last September, when I wrote about the issues Barratt had after Bank of America froze its $125 million credit line, a bank spokeswoman criticized Pattinson’s message.
Shirley Norton, spokeswoman for Bank of America, took issue with Pattinson’s perspective. The bank is continuing to make loans on some developments in the state, she said.
“He tells only his side of the story,” she said. “As most of the builders know this is an economic issue, not a bank issue.”
What’s next for Pattinson? He said that if the housing market bottoms sometime later this year, which he’s hoping for, he’ll try to be back in business as a homebuilder sometime next year.
“That’s our goal,” he said. “But that obviously will depend on various factors.”