The Jamison, Pa.-based builder—which reported a 12% revenue increase in 2008 and jumped to number 65 on the BUILDER 100 ranking in 2008, from number 115 in 2007—continues to build and sell homes in the four subdivisions that filed for protection from creditors under Chapter 11 of the federal bankruptcy code on Jan. 20 in the U.S Bankruptcy Court in Camden, N.J.
Nicole Nigrelli, an attorney representing Heritage in these proceedings, says the filings were the result of a dispute between the builder/developer and its lender, Wachovia Bank, over release prices for homes sold in those neighborhoods.
She claims that the rest of Heritage’s business was “doing well” and was in no danger of needing to file for protection from creditors. Heritage itself, whose businesses include property management and rental and commercial construction, is not part of the Chapter 11 proceedings. Richard Carroll, president of Heritage’s home building operations, did not return phone calls requesting comment.
Heritage has until May 20 to file an exclusive plan for reorganizing its developments; after that, other interested parties—such as its lender or other creditors—can file separate plans.
Nigrelli explains that Heritage has worked out a cash-collateral arrangement with Wachovia’s parent, Wells Fargo, that allows the builder to complete construction and sell in the four subdivisions where its LLCs filed for bankruptcy: Heritage Highgate and Heritage Twin Ponds in Breinigsville, N.J.; and two developments called Wilton’s Corner in Sicklerville, N.J.
In a March 3 filing for one of the Wilton’s Corner LLCs, for example, Heritage gave a breakdown of how its cash collateral would be used to continue construction of eight homes, which ranged from $15,160 to $75,593 per unit.
In its filings, Heritage claims that the four townhome and single-family subdivisions in Chapter 11 have between 50 and 99 creditors, between $10 million and $50 million in assets and about the same in liabilities. The filings didn’t provide many specifics about inventory and lots except to note that one of the Wilton’s Corner developments had 195 units, all but 13 of which had been sold through February 3. Nigrelli adds that Highgate has 68 lots available on that date in various stages of completion.
The LLCs’ respective unsecured debt varies. Heritage Highgate, for example, owed its 20 largest unsecured creditors (which are mostly building product suppliers and contractors) nearly $3 million (including $60,580 to Heritage Building Group). Another LLC, known as Heritage Residential at Wilton’s Corner VII LLC, owed its top 20 unsecured creditors just over $1 million.
John Caulfield is senior editor at BUILDER magazine