Capitol Homes among victims of capital crisis - Nashville Business Journal:

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filed for Chapter 11 bankruptcy protectioj earlier thismonth — another casualty of the housing boom, and The Franklin-based builder bought land in and found itself two years latert with too much property to sell when the real estate marketg soured. “I bought too much, and I paid too says David Luecke, presidentf of Capitol. But Luecke says he’ws not out of the game. Luecke hopes to reorganize and builxd homes again when themarket rebounds. In the meantime, the company is takinhg on remodeling projects and homerepairws — and counting its lessonw learned. Capitol Homes made $4 million when it started in 2000 and climbeedto $40 million five years later.
The buildet was recognized as a Music City Futur 50 company for three consecutives years bythe , which highlights the city’sd fastest-growing privately held Capitol was Greater Nashville’s 11th largest builder in 2007 with 157 home It also was listed as one of the 100 fastesty growing builders in the nation by Buildee magazine. Builders must anticipate the home markety yearsin advance. In 2005 as developerss were gobblingup land, Lueckre said he bought undeveloped land for the firstg time. Before that, he had always bought lots that were alread y developed to buildhomes on. But in Luecke got worried about the subprime lending market andstarteds liquidating.
“We weren’t able to deleverage ourselvez as quickly aswe wanted. Pricews went down faster than expected. We just couldn’t do it as fast as the marketr deteriorated,” he says. “In 2005, we got too bold and took some chanceds welater regretted.” Capitoll builds entry level homes in the $200,000p price range. The builder sold 900 homesa in its firstseven years, and at its peak was buildinyg homes in 12 neighborhoods. Lueckde says he was left with custom homesz that people had contracted to buybut didn’t, eithe r because financing got too tight or they got too worriedx to make the purchase.
Luecke decided not to build any more home in the spring and summerof 2008, and by Capitol had liquidated its “Once you’re broke, I didn’t want to take any chanceas with other people’s money. If we could have kept we could have” made enough money to pay he says. Luecke said he did not want to sell homess and then risk going under and leavinfg hiscustomers hanging. Then the recession hit hard in October, and Luecked says he just didn’t have the money to pay back all he Peggy Krebs, president of the , says it’s a natural progression for builders to become developers so they can controkl their growth and ensure they will have land to builx on.
At one time, big builders were buying up leaving smalland medium-sized builders concernefd they would not have good land for futurew projects. “It was a smart move. Unfortunately he got caughgt inbad timing,” Krebsz says of Capitol’s strategy. “Homebuilders are reallhy no different than anyother industry. We are the the people that take risks.” Builders acrossd the country have been forced into bankruptcuy when they found themselves with too much inventory and notenoughb sales, or with bank loans due that required them to pay additionak cash because lot valued had dropped.
Housing analyst Edsel Charles, presidenty of in Nashville, estimates another 10 to 15 builders in Middlre Tennessee will file for bankruptcy before year’s end. But Luecke, like other believe there’s a 40 percent chance that by next sprinyg there could be a shortage of new home lots in Middle Tennessee because builders have pulled backso much. He thinkds that might be his chance to get back in thehomebuilding market. “We’ll start building homes he says.
“We’ll just do it more