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The End of an Era

Illinois-based Kimball Hill Homes will shut down, liquidate assets.

A nearly 40-year home building legacy died on Dec. 2, 2008, when executives at Kimball Hill Homes announced the company would liquidate all assets. The Illinois-based private builder was unable to effectively restructure its business after filing for Chapter 11 bankruptcy protection less than a year ago.

In a statement, CEO Ken Love said: “We deeply regret the necessity of today's decision, but given the current housing and financial market conditions, we are simply unable to conduct normal operations while the company continues its sales efforts. We believe it is appropriate to begin the wind-down process now to ensure the smoothest transition possible for our employees, our home buyers, the communities we serve, as well as our creditors.”

Kimball Hill filed for bankruptcy on April 23 in the Northern District of Illinois Bankruptcy Court. At the time, the company claimed $795.5 million in total assets and $631.9 million in total debts, and more than 10,000 creditors.

“The restructuring plan they had might have been sound [when they filed for Chapter 11 bankruptcy protection], but the market has significantly changed since then,” said Lance Ramella, a principal at RW Real Estate Advisors. “It is a different world.”

Like many other builders who have tumbled into insolvency throughout the downturn, land was to blame for Kim-ball Hill's hardship. The company was involved in a number of land deals that were made close to the peak of the market, according to Ramella. “The land holdings weighed them down too much to generate any amount of revenue,” he said.

A prime example, Settlers Ridge, a 2,470-unit development on 1,300 acres in Sugar Grove, Ill., was purchased near the market peak in 2005. The company also held land in far-out suburbs, adding to the difficulty.

Calls to Kimball Hill and chief restructuring officer Andrew Hede, with Alvarez & Marsal, were unreturned.

In the release, Love stated that, during the next six months, the company will finish the homes it has under construction. The company maintains access to $35 million from its debtor-in-possession financing facility. Those funds combined with money coming in from home sales should enable Kimball Hill to fund all contractors, trade partners, and employee payrolls during the wind down.

“We have maintained very strong relationships with our trade partners and suppliers during the bankruptcy and have appreciated their ongoing support, which we anticipate will continue as we complete homes currently under construction,” Love said. “The quick resolution of our trade partners' pre-petition claims following the bankruptcy filing was a significant achievement, and we will continue to pay our suppliers as work is completed throughout the process.”

With bankruptcies proliferating, Ramella said he believed that Love did a good thing by “calling it quits in time to satisfy the company obligations.”

Founder David K. Hill died in late July, following a battle with cancer. He formed the company in 1969, naming it after his father who also had been a builder. At its peak in 2006, the company built 4,079 homes, generating nearly $1.2 billion in revenue and earning it a No. 22 slot on the Builder 100 rankings. —Lynn Norusis

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