Two years ago, optimism ruled at Irvine’s John Laing Homes, even as the housing downturn was rearing its head.
Plans called for a national expansion of the California homebuilder, thanks to the deep pockets of Dubai-based parent Emaar Properties PJSC.
Emaar paid $1.1 billion for John Laing in 2006, near the peak of the housing market.
Company executives spoke of growing through the impending slowdown.
In a sign of John Laing’s optimism, it signed a deal in early 2007 to move its headquarters from Newport Beach to an office built for the company last year in Irvine.
But not even optimism and royal money could see John Laing through the worst housing downturn since the early 1990s.
Last week, the company filed for bankruptcy after being cut off by Emaar and lenders.
(The homebuilder shares its name with former parent John Laing PLC, but the British construction company no longer is involved with the homebuilder and isn’t part of the bankruptcy filing.)
Executives hope John Laing can survive by shedding operations outside California, selling off land and focusing on its home base of Southern California.
Adding insult to injury, John Laing nearly was booted from its offices on Jamboree Road this month for not paying its rent, according to court records.
The company’s filing listed assets of more than $1 billion, along with some $977 million in bank and other debt.
The move makes John Laing one of the largest homebuilders to fail during the downturn. Other major bankruptcies include Hollywood, Fla.-based TOUSA Inc. and Bonita Springs, Fla.-based WCI Communities Inc., which each listed assets and liabilities of about $2 billion.
Bank of America Corp. is John Laing’s largest secured creditor at $141 million. Wachovia Corp., now part of Wells Fargo & Co., is next at $85 million. RFC Construction Funding is owed $58 million.
Bank of America and Wachovia froze the homebuilder’s accounts in late January.
Parent company Emaar, a builder of office and condominium towers, hotels, malls and other projects in the United Arab Emirates and other countries, late last year cut off funding for John Laing, sparking the homebuilder’s spiral.
Emaar, a third owned by Dubai’s royal family, invested more than $600 million in John Laing since the acquisition, according to court papers.
The company told John Laing in December it was stopping funding of the homebuilder on an unsecured basis, court papers show.
The funding cutoff comes amid a sharp decline in sales at John Laing.
In 2007, John Laing had revenue of $948 million on the sale of 1,371 homes. Through last November, revenue was $287 million on the sale of 560 homes.
The declines apparently were too steep for Emaar, which is facing a deep fall in real estate prices and construction in its homeland.
Slashing Development
John Laing stopped home construction in January. Until recently, the company had 105 projects across the country.
That number stands to get slashed by more than half, assuming the bankruptcy court approves the builder’s restructuring plans.
John Laing wants to exit homebuilding in Colorado, Arizona and Texas, where it has been closing offices in recent weeks.
The company thinks it can get about $50 million for the land it doesn’t want to keep.
In Southern California, John Laing has about 40 projects. The region also is the focus of its luxury homebuilding division, which has nine additional projects.
John Laing’s employees have been cut from more than 1,100 in 2006 to fewer than 100 people now.
Recent talk has touched on the possible return of former chief executive Lawrence “Larry” Webb. So far, that hasn’t happened.
John Laing last week appointed Bradley Sharp from Chicago-based consultancy Development Specialists Inc. as the company’s chief restructuring officer.
Webb, who currently is helping restructure another bankrupt developer, Miami-based LandSource Communities Development LLC, still could be brought in to help with restructuring.
He’s also an interested creditor in the case. Court records list John Laing owing him $1.2 million, making him the company’s largest unsecured creditor.
Executives’ Status
Robert Booth, an Emaar executive who took over John Laing’s top spot from Webb last May, remains. A number of other executives and board members left prior to the bankruptcy filing.
The company’s 65,000-square-foot headquarters,part of a 125,000-square-foot building opened last year at Irvine’s Scholle Center office campus,now is largely empty. At least part of the space is expected to be put up for sublease, if not given back to the landlord.
Earlier this month, the company was given a notice saying it had five days to pay its rent for the building or leave.
