Simonini Builders, a fixture in the Charlotte, N.C. executive home market, building more than 700 homes in 16 years, is winding down its operations there and in Charleston, S.C., the company announced on the eve of the Labor Day weekend.
"The catastrophic changes we've seen in the overall real estate market over the past two years could not have been anticipated and are unlike anything I expected to see in my lifetime," Alan Simonini, the company's chief operating officer, said in the announcement. Simonini and CEO Ray Killian Jr. started the company in 1994.
"The Simonini story is one of evolution from a family business to a dynamic builder of some of Charlotte's finest homes. Regrettably, that story will end as a result of general deterioration of the fundamentals of the home building industry in ways never seen before," Killian said in the company's announcement.
The company plans an "orderly transition," finishing up the 14 homes it is currently building for customers, renovation jobs it has underway, and selling and marketing the 21 inventory homes it has on its books.
There is a possibility that another home building entity will arise from the remains of Simonini. The company said that third-party investors in the entities that are developing lots in some of its communities have "expressed strong interest" in forming a home building company "to fill the void left by Simonini".
The new company's primary focus would be to build and sell homes consistent with what already exists in the communities, offering jobs to some former Simonini staff, the announcement said.
"At present the investors are engaged in due diligence activities and they expect to make a specific announcement in the near future," the company's release said.
Neither Simonini nor Killian immediately returned Big Builder's telephone calls.
Simonini was the 37th largest builder in the Charlotte metro area, according to Hanley Wood Market Intelligence, closing 15 homes so far this year compared to 26 in 2009. So far this year builders in the Charlotte market have closed 3,409 home sales compared to 5,994 in 2009.
While builders in North Carolina's Raleigh market have reported some recent improvements in sales, even greater than expected traffic over the Labor Day weekend, the same can't be said for builders in Charlotte, said Jodi Kahn, a vice president for John Burns Real Estate Consulting.
"Charlotte is not one of those places where any of the builders feels that they have seen an improvement," she said.
Simonini's homes, at the high-end of the market were likely to have made the market even tougher for the builder, said Kahn. The average price of a Simonini house sold this year was $767,167, according to Hanley Wood Market Intelligence data.
"There is a glut of high-end houses in Charlotte, a couple of builders have told me," Kahn said. At one point a number were built to accommodate corporate relocations in the banking industry. "The market kind of got stuck with a lot of high-end inventory that basically has not been clearing with any great speed."
Jim Harvey, president, Kolter Land Partners, which moved into the Charlotte market earlier this year, agreed that the market for high-end homes in Charlotte is severely depressed. Kolter is focusing on lots for homes that will sell in the $250,000s.
Simonini is not expected to be the last builder to shut its doors despite being able to hang on during the last few years of recession.
"I am worried that we will see, not just in the Carolinas, another round of these," said Kahn. And it might not just be privately held builders pulling back.
"We are waiting to see if any public (builders) start retreating from some of the markets," she added.
Teresa Burney is a senior editor for BUILDER and BIG BUILDER magazines.