Conner Homes of Bellevue has lost one new housing development to foreclosure, and is close to losing another property. Other King County developers may be in trouble as well.
One of the Seattle area’s most prominent homebuilders has lost most of one new Eastside housing development to foreclosure, and expects to lose another big property.
Most of Conner Homes’ upscale, partly built Bentley subdivision in Bothell was sold at auction last month after the company defaulted on a $24.8 million loan, county records indicate.
Another auction has been scheduled in October for 35 acres Conner owns and once planned to develop in North Bend. The builder hasn’t made loan payments on that land since at least December, according to a foreclosure notice filed with the county last week.
Conner Homes’ predicament “just goes to show that even well-established family-run firms are in distress,” said Seattle land-use economist Matthew Gardner
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Owner and president Charlie Conner said his 50-year-old company intends to keep building homes, and is conserving its capital to help it survive the recession. His financial situation is hardly unique among developers, he added: “I don’t know of anybody who hasn’t been affected one way or another.”
Industry observers agree. They say some substantial local homebuilders could go out of business over the next year, victims of falling home prices, declining land values, big loan balances and tight credit.
Bill Hurme of Team Builder JLS, which markets new homes for builders and developers, said he knows of at least a dozen developers trying to renegotiate loans now.
Some developments, like Conner’s, will end up in foreclosure, he said. Sound Built Homes of Puyallup, another major regional developer, already lost most of a new Kent subdivision, Vila Real, earlier this year, county records show.
“I just hope the builders and developers can survive,” Hurme said. “It’s very serious.”
That severity is underscored by Bellevue-based Conner Homes’ troubles. The company is a pillar in the Seattle development community.
According to its Web site, Conner has built more than 5,000 homes in King County since its founding in 1959. Charlie Conner is a former president of the Master Builders Association of King and Snohomish Counties, and was named its builder of the year in 2000.
In addition to Bentley, Conner Homes also is building and selling homes now in four other King County subdivisions it developed — a second in Bothell, two in Renton and one in Sammamish.
The lenders on those projects either have renegotiated or are renegotiating loan terms, Conner said, but he couldn’t reach an agreement with Bank of America, the lender on Bentley. The development loan needed to be extended before the end of the year, he said, and his company almost certainly would have been required to pump more of its own cash into the project.
Bank of America foreclosed on 26 of the 48 lots in Bentley’s planned first phase, plus about 40 acres slated for future development. It took control of the properties with a bid of about $10.5 million at the auction last month, according to county records.
The foreclosure didn’t include 22 lots where houses already have been sold or are under construction. Twelve or 13 families already have moved into homes in Bentley, Conner said.
Homes for sale in the development, south of the Sammamish River off 100th Avenue Northeast, range from $690,000 to $925,000, according to Conner Homes’ Web site
The developer said he’s trying to put together a new team of investors to buy back the foreclosed properties. “I’m confident we’ll have that property back, one way or the other, and build it out,” he said.
But Conner said he doesn’t plan to try to keep the North Bend land: “I decided that property wasn’t worth what I put into it … I said, ‘I can’t make the payments any more — I’ll just take my haircut.’ “
County records show Conner Homes paid about $7.8 million in 2007 for the land near the southeast edge of town. It owes $6.3 million to Lacey-based Venture Bank, but in late June was more than $300,000 behind on payments, according to last week’s foreclosure filing.
Job losses in the region have depressed demand for new housing, economist Gardner said. And banks are warier of risk, which makes construction financing more difficult to obtain.
“I believe a large number of single-family builders will not survive the year,” Gardner said.
Hurme agreed. “I’ve thought for a long time that June 2009 to June 2010 would be the true testing time,” he said.
“This is when all the loans are coming due, and the financial reality has really set in.”
Eric Pryne: 206-464-2231 or firstname.lastname@example.org