WCI Communities is shaking off the last vestiges of its 2008 bankruptcy, recapitalizing itself, and—like a lot of other Florida-based builders—is out shopping for land that will help rebuild its business.
The Bonita Springs, Fla.–based builder filed for bankruptcy protection in 2008, emerged a year later, and then spent the next two years paying off $300 million of its $450 million in post-bankruptcy debt by selling off assets that didn’t fit into its new business plan.
It all but abandoned its multiple-state luxury tower building business, which got the company in trouble when the market for high-end high rises dropped to nearly nothing during the recession.
Almost two years ago WCI started building homes again in communities it had kept in its portfolio, growing its community count to 23. This year the company has exceeded sales goals and is on target to double both closings and revenue.
With the market improving, company officials have been discussing paying off the remaining $160 million in debt left from the bankruptcy. The debt’s terms were such that it was restricting WCI’s ability to grow, said Russell Devendorf, WCI’s chief financial officer. So the company went out looking for new debt and, thanks to the vigorousness of the recent spring selling season, it found it within its own investor ranks.
Two of the company’s existing investors, Monarch Alternative Capital L.P. and Stonehill Capital Management, gave the company a new term loan for $125 million due in 2017, and it raised another $50 million by selling stock to current investors. The move is an unusual one for WCI note holders, who typically buy distressed debt rather than stakes in growing home building businesses.
“These guys don’t typically do that, but I’ve got to give them credit. They realize an opportunity when they see it,” said Devendorf.
The proceeds from the new loan will be used to pay off the term loan, leaving some extra left over to help the company make new land acquisitions and other investments needed to grow. In addition, WCI is expecting to generate good cash flow from home sales and a tax refund that it should also be able to reinvest in the business by year’s end, Devendorf says.
Already the reinvestment has begun. WCI recently hired Mike Wolfe as vice president of land acquisition to start shopping for land deals in the state. Wolfe came to WCI from Toll Brothers.
“We feel very fortunate to have attracted some top talent,” said Devendorf. “Our investors and shareholders are very supportive of management and our strategy. We are looking to expand our holdings within our core markets.”
For the time being, that won’t involve moving back into the riskier world of building luxury high rises, said Devendorf, though the company has kept a couple of tower sites in its portfolio.
“It will be some time for the towers to come back,” he said. “But we hold what we believe are some really good tower sites for future development. We can be patient.”
Teresa Burney is a senior editor for Builder.