The DeLuca family has been building houses for more than four decades, during which the housing market has had its ups and downs. The recent housing recession has been particularly tumultuous, and the DeLucas this summer found themselves having to start their business anew after relinquishing most of the company’s real estate assets in 20-plus projects that served as collateral for $119 million in debt it owed eight banks.
The corporate entity under which those assets had been managed, Yardley, Pa.-based DeLuca Enterprises, will cease to exist by the end of the year, according to the company’s vice president Joseph DeLuca. As BUILDER reported last Friday, a federal court assigned 800 lots and houses that DeLuca Enterprises had owned to a third-party receiver, Rouse Chamberlin, which will maintain those properties and market them for sale, the proceeds from which will go to a syndicate of bank creditors led by Wells Fargo.
Many builders in similar straits have ended up in bankruptcy or are out of business. But DeLuca never filed for court protection from its creditors, which might have been its saving grace. From its ordeal has emerged a new company, also based in Yardley, called DeLuca Homes, which had always been the corporation’s trademark.
DeLuca Homes, says Joseph DeLuca, starts out modestly with one active community, Garden Villas at Amberleigh in Gloucester, N.J. It expects to have four other communities in Pennsylvania and New Jersey opened by late 2010 or early 2011. (The company does not intend to re-enter Florida, where a portion of DeLuca Enterprises’ assets were.) One of the new communities, says DeLuca, will be a 178-unit townhouse neighborhood in Bensalem, Pa.
The new company, which DeLuca says is being financed through a combination of private equity and community bank loans, will focus on building townhouses and single-family homes. (Its previous incarnation also built condo flats.) DeLuca Homes is projected to build 32 homes that generate under $10 million in revenue this year, but that production should increase to 80 homes in 2011 and to between 100 and 150 homes in 2012.
The unraveling of DeLuca Enterprises dates back to June 2009, when its executives signed a forbearance agreement with its lenders to complete existing projects and sell them to pay off its debt. Most of the vertical construction that it had done was for projects in Delaware and Florida, says DeLuca. The company defaulted on this agreement in December 2009, and Wells Fargo sued the builder in April 2010, claiming that DeLuca Enterprises was financially incapable of maintaining the properties long enough to sell them.
DeLuca adamantly disputes Wells Fargo’s contention about his company’s financial difficulties. “I still feel we were the most qualified to liquidate the assets for the maximum return,” he explains. “But we each came to the point where we felt it might be better to turn over the properties to a third party.” The family did not fight the court’s decision to appoint a receiver, although DeLuca also points out that Rouse Chamberlin “will be working for the banks, just as we had been.”
John Caulfield is senior editor for BUILDER magazine.
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