Builder News: Comstock defaults, NVR pulls offering

I have been so busy following the ongoing saga in financial services that I forgot to tell you about two Washington DC-area home builders in the news.

Comstock, a privately-held developer, just defaulted on almost $100 million in debt. In addition, NVR, another builder, but a publicly traded company pulled a debt offering due to market conditions.

As for Comstock, these guys are pretty big in the DC area where I live and do retail as well as residential. Is their bankruptcy a sign of a weakened residential market or of a weakened retail environment? I can’t say at this time. Further research is required. But, Big Builder Online had this to say about their default:

Unable to maintain sufficient interest reserves on $94 million in debt, beleaguered Virginia-based Comstock Homebuilding Cos. has stopped making scheduled interest or principal payments on the debt and has hired Brad Foster of FTI Consulting as an interim chief restructuring officer.

Relatively new to FTI, Foster has more than a decade’s worth of experience in real estate and home building. He served as vice president of operations for the Sarasota, Fla., division of Morrison Homes–now part of the recently merged Taylor Morrison–for more than nine years and was the corporate controller at former UDC Homes prior to that.

Ceasing those payments puts the company in default on its loan agreements, some of which have reached maturity. A company-issued statement said that if it cannot renegotiate terms with its lenders, it may have to stop making payments on its other loans. As of June 30, the company had roughly $157 million in debt outstanding.
–Big Builder Online

NVR, also a DC-area firm, is the only home builder to rise on the U.S. stock market this year. So, that tells you they are as good as it gets in the space. Nevertheless, the turmoil surrounding Frannie and the financial services has made it a bad time to offer securities to the market, leading them to pull their offering.

NVR, Inc., one of the nation’s largest homebuilding and mortgage banking companies, announced today that it is no longer pursuing its public offering of $325 million aggregate principal amount of convertible senior notes due 2038 under its shelf registration statement filed with the Securities and Exchange Commission. The company decided to cancel the offering due to market conditions.
–Market Watch