Wednesday, December 03, 2008

Another One Bites the Dust

From the Sacramento Bee:

Chicago-based Kimball Homes, a significant home builder in the Sacramento region since 1995, announced Tuesday it will close its business in coming months. The announcement comes eight months after the builder, once among the nation's largest, filed for Chapter 11 bankruptcy...Kimball Hill has projects in Rancho Cordova, Natomas, Elk Grove, Galt and Stockton.
From MarketPlace:
Home prices fell more than 10% in the third quarter in nine central California communities [according to IHS Global Insight]. The Central Valley communities of Merced, Stockton, and Modesto have seen property values fall to less than half their 2005 value. Twenty-nine metro areas in California, Florida, and Nevada -- at one time among the most overvalued -- have seen price declines in excess of 30%.
From the Modesto Bee:
Nearly 33 percent of Stanislaus homes and 40 percent of Merced County homes had their property taxes lowered this year because of value declines...Next year assessments will drop again, providing perhaps half of all Stanislaus homeowners a tax cut, said county assessor Doug Harms. He said next year he likely will review assessments for all homes purchased since 1990, which is when prices peaked before the last big housing market slump.
Despite the high cost [in penalties], last year 8.6 percent of Stanislaus County's property taxes -- around $36 million -- were delinquent. Ford said that was the highest rate on record, though he doesn't have statistics from the Great Depression.


Diggin Deeper said...

"Nearly 33 percent of Stanislaus homes and 40 percent of Merced County homes had their property taxes lowered this year because of value declines"

...and that will translate into job losses at the local and state government levels.

Diggin Deeper said...
This comment has been removed by the author.
Sold in '05 said...

A more in depth article on the Kobra bankruptcy from the Roseville Press-Tribune.

Kobra bankruptcy fallout could reverberate through Placer

By Nathan Donato-Weinstein |

Roseville-based Kobra Properties has asked a judge’s permission to walk away from more than a dozen properties throughout Placer and Sacramento counties once slated for projects, as the developer seeks to unload land it considers a financial drag, according to court documents.

That’s just part of the fallout from news that the company, one of the area’s highest-profile developers, filed for Chapter 11 bankruptcy protection last week.

It’s still unclear what the bankruptcy will mean for two Roseville projects – the under-construction Civic Plaza Office Building and a proposed hotel/conference center near the Galleria mall – that were hammered out as partnerships between Kobra and the city of Roseville, officials said this week, but further delays seemed likely.

“We’re monitoring the process watching it carefully,” Roseville City Manager Craig Robinson said this week.

A federal bankruptcy court in Sacramento was scheduled to hear a motion by Kobra’s attorneys this week to shed 16 properties, which stretch from Sacramento to Auburn as well as Clovis; the two city partnerships were not among those listed in court documents. The outcome was not apparent by press time.

The company says the properties have “negative value…because the amount of secured debt against each of the Real Properties exceeds the associated market value for such property,” according to court documents.

Kobra wants to abandon the sites to the holder of the respective first lien position against each property, the documents state.

The parcels slated to be abandoned include:

* land slated for a TGI Fridays in Lincoln;

* the proposed Loomis Marketplace development in Loomis;

* the second phase of the Placer Corporate Center office project in Rocklin;

* an undeveloped parcel adjacent to the company’s Kobra Preserve apartment complex in Roseville.

Kobra founder and general partner Abe Alizadeh was not available for comment. In a statement last week, Alizadeh said the filing was the result of the economic downturn and credit crunch and vowed to return the company “stronger” than it was before through the reorganization. Chapter 11 can provide some cover from creditors as companies try to reorganize their operations and return to profitability.

Jan Shellito, redevelopment manager for the city of Roseville, said Monday she had not spoken to Kobra regarding the Civic Plaza Office Building, under construction on Vernon Street in Downtown Roseville.

The building, which would be the first major Class A property in the downtown core in years, was supposed to be completed early this year. But work stalled for months this summer as contractors filed scores of liens against the project and Kobra never lined up a tenant for the building.

The city did not invest any money in the building, but it did spend $8.3 million to build an adjacent parking garage whose construction was part of the deal with Kobra to bring the office building to fruition.

“We continue to be confident the building will be completed,” Shellito said, noting construction had picked back up at the site, as workers button up the structure for the winter.

“The times being what they are, everybody is just kind of waiting,” she said. “It’s just really an unfortunate economic situation.”

Robinson, who likewise had not spoken with the company, said he couldn’t speculate on what Kobra planned for the property it owns near the Galleria, where the city approved spending $10 million as part of a joint project to build hotel/conference center. He reiterated that the city never transferred funds for the deal, which never started construction.

“Our business dealings are very straightforward so as a result we’re like everybody else -- wondering what will happen in the reorganization.”

“It certainly causes us to pause on whether we would go forward or not under the circumstances,” he added.

The company’s finances began to be squeezed this year by the downturn in commercial real estate, and then took further hits as banks demanded repayment on notes and contractors papered the company with suits and mechanic’s liens alleging nonpayment.

“When lenders on certain projects commenced foreclosure and other collection remedies these bankruptcy cases became necessary,” attorneys for Kobra wrote in court documents.

Kobra and its other companies affected by the filing own 80 properties with an aggregate value of more than $400 million.

Kobra, whose related companies operate Jack in the Box franchises and the upscale Crush 29 restaurant in Roseville, has said its restaurant operations are not affected by the filing.

Diggin Deeper said...

As a followup to what PR was writing about in the last blog:

Treasury Considering Plan to Ease Mortgage Rates

Mortgage rates as low as 4.5%? I guess you CAN play God when you have unlimited money at your disposal...What a way to solve the problem...address it the same way that got us to this point in the first place...and expect different results? Yea right!

The disconnect in Washington grows wider by the day...

Artifically lowering mortgage rates is in direct conflict with market fundamentals. Manipulating interest rates will only push potential buyers away until the only buyer of our debt will be our own government.

This is one idea that should be canned immediately

Sold in '05 said...

Hold my beer... watch this...

Why 4.5%? Wouldn't 3.5% or 2.5% be better? Of course that would be diluting the benefit of the mortgage interest tax deduction so they could also let you deduct your interest twice to keep things even. I like this free wheeling government money. Keep the presses running. Japan has no idea how to keep a donwturn going, were gonna show 'em how to do it right!

Jacob said...

How about we get to deduct the full amount paid to a mortgage from our taxes. Principal, Interest, Taxes. And you have to pay 25% tax on any rent you pay.

Buy and save, rent and bend over.

Diggin Deeper said...

BB is going to reflate this economy to the point of destroying debt through inflation...this will be the biggest tax increase we've ever witnessed and we won't see a dime coming out of our paychecks...If Obama is as smart as he appears, he'll cut taxes accross the board and allow us all to pay off our debts with cheaper dollars...The risk is that half the country could go hungry paying for the other things it takes to survive...

Got to love's so touches everyone equally...

patient renter said...

Why 4.5%? Wouldn't 3.5% or 2.5% be better?

They could make rates 0%, or -1% and it STILL wouldn't solve the "problem" of declining home prices. It's demand based, and the demand isn't there because nobody wants to overpay. The ignorance of this simple concept is astounding.

Like I said in the other thread, 4.5% or 0% or -1% of too much is still too much.