On Saturday, March 5, California Coastal Communities, which emerged from a 16-month-long bankruptcy this week, plans to release new floor plans and prices for its 356-unit Brightwater project in Huntington Beach, Calif., where it recently started another eight homes.
The Irvine, Calif.-based builder/developer, which builds under the name Hearthside Homes, is coming out of Chapter 11 with a pretty clean slate, thanks to $184 million in “exit financing” it negotiated last June from Luxor Capital Group, a New York-based hedge fund. The builder hasn’t purchased land since 2005 and is actively building only at Brightwater, with 105 acres near the Bolsa Chica wetlands.
Ray Pacini, Coastal’s CEO, tells Builder that his company has sold 11 homes in that community so far this year, versus only 14 new sales there for all of 2010. He projects that the company’s sales this year could hit 40 units. “Our bankruptcy has been very tough, but fortunately we have a very good piece of land.”
Brightwater includes four neighborhoods—The Trails, The Sands, The Cliffs, and The Breakers—whose home sizes range from 1,710 to 4,339 square feet and whose new prices will start from $775,000 to $1.38 million. The most significant change to its house plans, says Pacini, will be evident at The Sands, where existing homes have two adjoining driveways that load into the sides of two garages. The new plan rotates the driveways to the street, freeing up space for a front yard patio or a downstairs bedroom. Pacini says the revised new plan can increase the size of the house to 2,399 square feet, from 2,161 square feet previously.
The biggest price dip will be seen at The Breakers, whose homes average $2.6 million, down from more than $3 million previously. Pacini says the buildout of Brightwater should run through 2015.
Coastal has another development across the street from Brightwater called The Ridge, with 22 homesites in the process of being entitled, which Pacini says could take a year or more. Coastal also has 73 paper lots in Lancaster, Calif., in Los Angeles County, where it hasn’t started building yet.
Last year, Coastal delivered only 21 homes, seven of which had been in escrow. That’s less than half of its settlements the previous two years and only about one-quarter the 77 homes it delivered in 2007. Pacini admits that after filing for bankruptcy court protection on October 27, 2009, his company “encountered resistance” from buyers “who didn’t know whether we were going to be around.” As it comes out of Chapter 11, Coastal has stepped up its advertising in print, on Facebook, and through e-mail blasts.
To emerge from bankruptcy, Coastal made several compromises. Luxor agreed to refinance Coastal’s debt only if the builder agreed not to compensate holders of nearly 11 million shares of the company’s old stock. Holders of term loan claims totaling $99.8 million receive $44 million plus a prorated distribution of nearly 1.6 million shares of new stock the company is issuing. (Luxor gets a portion of this new stock, says Pacini.)
The builder’s revolving credit lenders, with $81.6 million in allowable claims, are being paid in full. Its general unsecured creditors, with allowable claims of between $6 million and $10 million, are receiving between $1 million and $2 million.
John Caulfield is senior editor for Builder magazine.
Learn more about markets featured in this article: Los Angeles, CA.