So far this year, the Village of Hampshire, Ill., has had two snowfalls. As of yesterday, some of the streets in its Tuscany Woods subdivision were covered with ice because Park National Bank—which took over this development when Pasquinelli, the Burr Ridge, Ill.-based builder and developer, defaulted on its $21 million loan with the bank — didn't have its snow-removal contract in place, according to Village president Jeff Magnussen.
So it sometimes goes at partly finished communities that become victims of the housing and credit crises. Their completions are uncertain and their services can get lost in the shuffle. Magnussen tells BUILDER that Pasquinelli finished fewer than 100 of the 341 homes in Phase I of Tuscany Woods before it "walked off the project" last August. He says the builder was having trouble selling single-family homes that accounted for about 20 percent of what it had built there (the rest were townhomes).
Calls that BUILDER placed with both the office of Michael Pasquinelli, the builder's CEO, and Sarah Withrow, Park National Bank's contact with the Village of Hampshire, were not returned.
Tuscany Woods is one of several neighborhoods on which lenders have filed foreclosure lawsuits against Pasquinelli, the housing industry's 21st-largest builder in 2007. In its complaint, which it filed last summer, Park National said it was taking over the 119-acre Tuscany Woods development because the builder's debt to tangible net worth ratio had risen above 5 to 1, which placed construction loans totaling $38.6 million for the Tuscany Woods project and another development in Myrtle Beach, S.C., in violation of their respective covenants. A call by BUILDER to David Trimmer, Pasquinelli's division manager in South Carolina, to find out the status of the subdivision in question, was not returned.
Crain's Chicago Business, which has been following Pasquinelli's legal problems, reports that GMAC Mortgage Group filed a foreclosure lawsuit in October against one of the builder's projects in Texas, and that Park National filed another suit in Kane Circuit Court in Illinois on a development adjacent to Tuscany Woods after a Pasquinelli affiliate missed a $3.3 million payment due Sept. 30. The magazine also reports that Harris Bank last month filed suit against Pasquinelli in Cook County Circuit Court in Illinois, claiming the builder owes $3.9 million for an interest-rate hedging contract. The Aurora Beacon Journalreported a few days ago that First Midwest Bank is foreclosing on Pasquinelli's Cedar Creek subdivision in Joliet, Ill. The bank filed a foreclosure lawsuit against the company Nov. 7, claiming that Pasquinelli is in default in the amount of $6,740,408 for the Villas of Cedar Creek as well as another $4,329,273 for the Reserves and the Estates at Cedar Creek.
It's hard to gauge whether Pasquinelli's financial problems are isolated to a handful of its projects—as is the case with many large productions builders whose AC&D loans are collateralized by assets that are currently under water—or if its problems run deeper. According to its Web site, Pasquinelli currently has around 100 communities in nine states, where it builds under its own name and Portrait Homes. BUILDER's attempts to reach sales contacts at several of Pasquinelli's neighborhoods were either not returned or unavailing. Some people who picked up the phone sounded extremely nervous talking to a reporter. A few salespeople deferred questions to division managers—who include Tina Pasquinelli in Indianapolis and Bruno Pasquinelli in Dallas—whom BUILDER was not able to reach.
Magnussen confirms a report, which first appeared in the Courier News, which covers Chicago's suburbs, that his village is holding $1.2 million in bond money from Park National to ensure that its roads, streets, and parks are completed. He's not sure, though, when the 310-unit second phase of Tuscany Woods—which is vacant right now—will get built by PHI, a developer contracted for the project that Magnussen says has ties to Pasquinelli and the late owner of Kimball Hill Homes, David Hill.
John Caulfield is senior editor with BUILDER magazine