C.P. Morgan Communities, the Indianapolis-based builder of mostly entry level homes, announced Thursday that it would shut down operations on Friday, Feb. 27.
Reached by telephone by BIG BUILDER Thursday, company spokesman David Sease provided little more detail than was spelled out in the company's official press release. However, Sease added that the move was not a precursor to a bankruptcy filing. When asked if the decision to shut down was rooted in financing troubles, he said, "The company's not pointing any fingers." He went on to say that the company's assets would be turned over to its lending institutions.
The company said in the statement that all homes under construction had been completed and that warranty issues would be handled by a third-party residential warranty company "as outlined in each homeowner's warranty manual." There was no other information regarding assets.
The Indianapolis Business Journal quoted the head of the local builders' association as saying Morgan had in recent days been in talks with Pulte Homes about taking over operations. When asked about that report, Sease said, "The company's not commenting on that." However, local sources have said that Pulte wasn't alone in looking to pick up C.P. Morgan assets for as cheap as $0.15 or $0.20 on the dollar.
Like many builders, the company faced significant headwinds in 2007 and was forced to begin cutting staff. However, its problems have since accelerated. In April 2008, company CEO Tom Eggleston left the company, leaving Steve McFarland as company president and COO. McFarland had been the company's CFO since June 2006. Last month, the company consolidated its operations in the Piedmont Triad area of North Carolina into its Charlotte business.
In the statement, owner Charles P. Morgan said, "This is one of the most difficult decisions I've ever had to make. With home prices dropping precipitously, resulting in millions of foreclosures, we believe our industry will be in trouble for many months to come. Unfortunately, I believe it's a crisis that will swallow up many companies like ours all across the nation."
According to its Web site, the company has build more than 25,000 homes, primarily in Indiana but also in North Carolina. It was known for its "More square feet. Less money." marketing program, which centered around its controlled volume, centralized scheduling building system.
But that business model doesn't work when there's no volume, said one local source who asked not to be identified. "You can't reinvent the machine that used to start 12 homes a day and now does zero," he said. "It's not so much bad business as getting caught in the economy."
The company enjoyed top positions in its core markets, according to BUILDER magazine's Local Leaders rankings. In its hometown of Indianapolis, in 2007, the company closed roughly 1,100 homes, earning it a 13% market share and status as the metro area's No. 1 builder. It was a similar situation in Charlotte; that same year, the company closed 1,565 homes for a 7.6% market share.
"This definitely is not what I contemplated when I started the company in 1983," said Morgan, "but this is the worst catastrophe I've seen in our industry in my lifetime. I could never have imagined this outcome, even as recently as six months ago. We have done everything possible to prevent this from happening. From the very beginning, our goal was to provide more people with more home than they ever dreamed possible. I believe we achieved that goal."
"The hardest part of this decision for me has been our associates who have worked tirelessly over the last several months to prevent this from happening," Morgan continued. "I'm extremely grateful for their exceptional commitment to our company, which only adds to the sadness I feel about closing our doors."
C.P. Morgan is the second large private builder to cease operations this week. Earlier, Ft. Worth-based Choice Homes announced it was calling it quits.
Sarah Yaussi is editor of BIG BUILDER magazine.