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E-mail StoryBankruptcy leaves subdivision with unfinished work
| Thursday, May 8 2008 6:34 PM
Last Updated: Friday, May 9 2008 7:26 AM
On Miranda Court the little things have been left undone.
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Fayetta Lapham can still laugh about her situation but is nevertheless concerned with the prospect of having to get repairs done on her new Alta Estates home in Tehachapi after the builder, Prestige Homes, filed for bankruptcy. She and her neighbors are wondering what this means for their home warranty.
Homeowners in Alta Estates in Tehachapi are wondering how the bankruptcy of Ontario-based developer Empire Land LLC, who built in Tehachapi under the name of Prestige Homes, will affect their home warranty.
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And some worry big things — such as home warranties — may vanish.
The developer of Tehachapi’s partially built Alta Estates neighborhood filed for bankruptcy protection April 25.
“We have seen or heard nothing from them at all,” homeowner Fayetta Lapham said of Empire Land LLC, the San Bernardino County homebuilder behind her new house.
Lapham heard about the filing from a neighbor.
Empire planned to build 384 homes in Alta Estates, near the northwest intersection of Curry Street and Highline Road.
But construction stopped after 104 permits were pulled.
These days, empty dirt lots surround Miranda Court and nearby roads. Streets need finish work. Residents complain about peeling paint and cracked windows.
If and when such tasks will be finished is up in the air.
The developer filed for a Chapter 11, or reorganization, proceeding. But whether Empire reorganizes or ultimately disappears remains to be seen.
“In most of the areas the company has been in, there’s been a real downturn in the market,” said Empire’s attorney, Richard Pachulski.
The plan is to liquidate assets within six months, Pachulski said.
Another bankrupt homebuilder with projects in Kern — Dunmore Homes Inc. of Sacramento — originally filed to reorganize in November but later got permission to liquidate.
Alta Estates appears to be Kern’s first subdivision hit by bankruptcy with so many houses built and occupied.
Elsewhere in the mountain community of about 11,000, Empire had planned subdivisions, condos and a retirement community.
“We were issuing permits left and right,” said David James, Tehachapi’s community development director. “Then the company as a whole just imploded.”
ELEVATE YOUR LIFE
Empire, headquartered in the city of Ontario, formed in 2002, state filings show.
The company has projects as far north as Sacramento as well as Arizona holdings.
Empire was the first big homebuilder to invest in the Tehachapi area, James said, followed by Los Angeles-based KB Home.
At various times, Empire held eight tracts in Tehachapi and had plans to develop more than 1,000 homes and hundreds of condo units.
The developer initially wanted to get approvals then sell to other builders, James said.
But there didn’t appear to be any takers.
The land where the Laphams now live “had been graded for a few years and just sat,” James said.
Alta Estates wound up being built by Empire’s own construction arm, Prestige Homes LP, which marketed the neighborhood with the catchphrase “elevate your life.”
Lapham and her husband, Roger, fell in love with the open floor plan and fireplace.
They moved into their $250,000 house in September, comforted by the idea of being in a new development where a builder could fix any small problems that might arise.
“My husband just didn’t want something he was going to have to put a lot of work into,” she said.
Now they worry they’ll be stuck doing repairs.
Chapter 11 allows a company to operate while it restructures finances. But that doesn’t mean the Laphams and their neighbors will have access to a familiar company that will fix broken windows as expected.
“It’s not that simple,” said Pachulski, the attorney, “because the company will probably not survive at the end of the day.”
DELINQUENT
Empire’s assets and liabilities are estimated to be between $100 and $500 million, filings show.
In February, a $79 million loan borrowed against Alta Estates defaulted, county records show.
As of Feb. 20, $63.7 million was past due, the default notice indicated.
If the delinquent loan isn’t repaid, the lenders could repossess property used as collateral: the unsold land, pipes, concrete and other furnishings around the new tract’s residents.
A group of banks organized by a Hawaiian institution, Central Pacific Bank, made the loan in April 2007, records show.
The loan was made to one of Empire Land’s many subsidiaries, Tehachapi-Et Ventures LLC.
As is common in today’s rough housing market, Empire’s local subsidiaries have drawn dozens of liens from unpaid construction companies.
Property taxes are also delinquent.
Jordan Kaufman, Kern County’s assistant treasurer-tax collector, said Empire’s local affiliates are behind on more than $350,000 worth of Kern taxes as of Thursday.
PROBLEM CHILD
In at least one way, homeowners at Alta Estates are fortunate.
Empire already landscaped and green spaces will be maintained by the city, James said.
Tehachapi residents have been skeptical of growth in recent years — particularly of walled-in cul-de-sacs like Empire’s. In 2006, the City Council halted new development and met with residents to establish design standards for the city.
A half-finished Alta Estates would be unfortunate, James said.
“I suspect the community may point to that project and say, ‘Why are we allowing more development when we’ve got all these lots sitting?’” he said. “It’s going to potentially be the problem child that everyone will point to.”