WCI Communities is on the brink of selling and building new homes again.
This move comes roughly two years after the Bonita Springs, Fla.-based builder stopped its selling and building activities as it worked its way through bankruptcy reorganization, selling off its existing home units and non-core assets.
After a little more than a year under the bankruptcy court’s protection, the once-public WCI emerged from Chapter 11 last September as a private company. Its primary goal: Sell non-core asset assets to pay the roughly $450 million in debt it owed its creditors. Part of those assets included 1,000 lots in Sun City Center near Tampa, which it recently sold to Minto.
Those sales will allow the company to pay off its first lien creditors, which are owed roughly $300 million of that $450 million total, by the end of August, according to WCI Communities CEO David Fry.
Fry said the company is negotiating to sell a few other communities, with two lining up to close sometime in the near term, which should pay off the remaining debt. “What that’s allowed us to do is restart operations in three communities in Florida,” he said, adding that the company will start taking orders for homes in Pelican Preserve, an age-restricted community in Fort Myers, and Venetian Golf and River Club in Venice, Fla., in the next 60 days.
A third community, Heron Bay in Coral Springs in Broward County, will be selling next. By the end of the year, two more communities should be up: Tiburon Golf Club, a Ritz-Carlton golf resort in Naples; and Manchester Square, a small community also in Naples, with approximately 120 homes. Manchester Square is the only community out of the five that is being started from scratch.
“This is raw land, but at this price point in a single-family product, we can do very well,” Fry said.
In terms of restarting construction operations, though, don’t look for WCI to return into the multifamily tower building business for now. That market’s not moving fast enough to support that capital-intensive, longer-term development, according to Fry.
Such caution is understandable. It was a heavy investment in luxury tower developments that contributed to WCI’s bankruptcy. The demand for that product disappeared practically overnight as the market crashed, leaving the company with a large inventory of finished towers, unsold units, and no cash flow to pay off the creditors.
Currently, WCI’s new customer is a second-home, retirement, or move-up buyer looking for homes priced between the low $200's and $1 million. Given the current market, though, it is is more realistic that WCI home prices will top out closer to $500,000, according to Fry.
Production numbers may also remain low for now. "It will take 2011 and 2012 to get ramped up again to any meaningful volume,” Fry said.
Teresa Burney is a senior editor for BUILDER and BIG BUILDER magazines.