Longtime builder: ‘Has been and continues to be a very difficult economy’
SANTA ROSA -- The weakened housing market in Sonoma County has pushed another established North Bay builder with partially built projects in Petaluma, Sebastopol, Santa Rosa and Ukiah to seek U.S. Bankruptcy Court protection as it reorganizes its finances.
Two project partnerships managed by Pinnacle Homes of Santa Rosa filed for Chapter 11 reorganization on Feb. 23 to delay foreclosure, and two others are in default, according to public records.
"It has been and continues to be a very difficult economy," Pinnacle President Craig Lawson said in a statement. "The plans we presented to our bankers were not accepted. Discussions are continuing and we look forward to a favorable outcome."
The projects are four out of about a couple dozen in the North Bay with several hundred homes Pinnacle has built since Mr. Lawson and Vice President Dick Dowd started the company in 1993. And Pinnacle is hardly alone among North Bay homebuilders caught with construction loans for unbuilt or partly constructed projects.
The Bankruptcy Court filing for Pinnacle Development No. 22 LP followed a foreclosure notice filed Jan. 28 for a $2.64 million construction loan from Westamerica Bank of San Rafael.
When the loan was originated in December 2005 for the 13-lot Sebastopol project called Litchfield Terrace, the market for new homes in Sonoma County was reaching a peak. But six months later home values started a long, steep slide that only started bottoming last year.
Pinnacle donated two lots to Habitat for Humanity of Sonoma County in 2009, and construction started on two homes there in August.
The eleven other homes in the development remain to be built.
Westamerica filed a notice of default in October of last year on $2.45 million due for the Litchfield Terrace loan since July, according to public documents.
Meanwhile, builders have been looking to work with lenders on loans with high, variable interest rates meant to only be held for a few years while a project is being built.
As the market for new homes has dwindled, Pinnacle has thrust itself into home energy performance evaluations and upgrades as the leading-edge Sonoma County Energy Independence Program was getting started.
The policy statement last summer by federal home mortgage clearinghouses against a growing number of such property-assessed energy upgrade programs statewide and across the country took some of the wind out of Pinnacle's new-found momentum, Mr. Lawson said.
As part of the county of Sonoma's petition to Washington D.C. to overturn the policy, Mr. Lawson stated that the interruption in the SCEIP program threatened a significant amount of Pinnacle's energy-performance business.
However, the state's new Energy First program is generating new interest in such projects, he said. Pinnacle was recognized late last year for an energy-efficiency overhaul on former Rohnert Park councilman Tim Smith's home.
Along the road to Lake Mendocino northeast of Ukiah, Pinnacle Development No. 19 LP started building a 15-home development, called River Walk for its proximity to a fork of the Russian River. Six homes were built, and five were sold.
Nine lots with approvals and permits for construction are for sale. Partnership assets were listed in the Chapter 11 filing as less than $50,000.
Top creditors were Westamerica on two loans totaling $1.63 million, Pinnacle Homes for $778,000 in receivables, Don Dowd Co. of Santa Rosa for a $289,000 loan from and the County of Mendocino for early $22,000 in taxes.
In January of this year, Exchange Bank of Santa Rosa filed default notices on $3.68 million in loans on two Petaluma projects.
"We're continuing discussions, and we're optimistic about a resolution," Mr. Lawson said.
The bank claimed $867,000 was due on a $825,000 loan from November 2005 to Pinnacle Development No. 21, otherwise known as the 11-lot Pinnacle Ridge project west of the city on I Street. Pinnacle told the city it planned to build leading-edge energy- and water-efficient homes there.
The project is still in the planning stage, with an approved tentative subdivision map.
Exchange Bank said $470,000 is due on a $2.85 million construction loan from June 2006 to Pinnacle Development No. 18 LP also in Petaluma.
Also for sale are one lot with a foundation in the Vista Pointe development in Petaluma and a lot in the five-lot Pinnacle Grove project in the Fountaingrove area of northeast Santa Rosa.
Santa Rosa bankruptcy attorney Michael Fallon is representing the Pinnacle development.
A meeting of creditors is set for March 25 at 1:30 p.m. in the U.S. Bankruptcy Court in Santa Rosa.
