Unable to pay its debts, America's First Home LLP, a Florida-only builder, is asking a judge to let it turn all the company's assets over to a receiver, who would liquidate the company and then divvy up the proceeds among its creditors.
In a court petition, filed December 21 in Circuit Court in Seminole County, Florida, where the company is based, America's First Home says it "is unable to pay its debts as they become due, and is desirous of providing for the payment of its debts, so far as it is possible by an assignment." It says it has assigned all the company's assets for disposition to Lewis B. Freeman, principal of Miami-based Lewis B. Freeman and Partners, a professional receiver or trustee whose business it is to operate and/or liquidate businesses by court order.
The company appears to be shut down for the moment. On Wednesday, the model home at one of its Lake County developments, north of Orlando, was empty with a sign on the door suggesting those interested call a sales associate at a number. There were no signs of any construction at any stage in the neighborhood. Its web site says it is "Under construction; please check back soon."
America's First Home, was created in 2001 after the Frey family, custom home builders in the Fort Myers area and investors in First Home Builders of Florida, broke off the Orlando piece of First Home Builders and created America's First Home.
Focusing on the first-time buyer market, the company quickly grew from 92 home sales that year to a peak of 1,129 in 2005. Sales slipped a bit to 1,096 in '06, and then plummeted to a point where managing partner Barry Frey said in October that he expected the company to sell about 500 homes last year.
Still, he seemed optimistic during that interview that the company would be able to weather the storm, because, in expectation of the slowdown, the company stopped buying land in 2004 and was aggressive in managing its backlog. During the boom years, the company spent a lot of time perfecting its construction techniques, even earning NAHQ certification. And to help make its operation more efficient, it invested in state-of-the-art software linking all parts of the business.
But Frey acknowledged in October that the market had fallen harder and further than he had expected. "We planned for it, but this has been a bigger freight train than I think anybody expected," he said at the time. "We are survivors...We did build up a big cash reserve. We have got about $20 million in excess liquidity, so we are in good shape."
Frey did not return calls placed Tuesday and Wednesday. In the court petition, which details the company's assets and liabilities, only $850,000 of cash-on-hand is listed.
The company's three largest creditors are three mortgages totaling $28.9 million to Bank of America, one for $18 million to Wachovia, and another to Fifth Third Bank for $4.5 million. The petition says America's First Home has real estate assets worth $24 million pledged to Bank of America, $16.6 million to Wachovia, and $5.9-million to Fifth Third. It says it has land worth $1.7 million that is unmortgaged.
The company lists 30 pending sales contracts in its portfolio on homes sold for between $170,000 and $314,015.
In addition to the banks, America's First Home owes property taxes on land in 10 Florida counties, as far south as Collier County and as far north as Ocala in Marion County.
Unlike traditional bankruptcy filings, which are filed in federal bankruptcy courts governed by federal laws, petitions for receivership, like that filed by America's First Home, are filed in local courts where local judges oversee the division of assets. In Florida, such proceedings are governed by Chapter 727 of Florida Statutes which states that the assets will be paid on a pro-rata basis and sets the order of who gets paid first. Those with liens against assets are first in line, the people who get paid to dispose of the assets are second, governments owed cash are next, then come employees, and last are unsecured creditors.
A hearing date for the petition has not been set.