Local builder goes out of business

Construction lender cut credit for Brown Family

by J. Craig Anderson - Oct. 28, 2008 12:00 AM
The Arizona Republic

Tempe-based home builder Brown Family Communities closed its doors Friday after more than three decades in the business.
Company founder Dave Brown said he was forced to cease operation and lay off all 60 employees because the company's construction lender, which he didn't want to name, was unwilling to extend additional credit to build new homes or finish homes under construction.
Brown said that means customers currently in the process of buying a Brown Family home would not be allowed to close the deal.
Instead, the bank will keep those homes as collateral. Brown said that he would refund every customer's deposit.
The builder's problems escalated early this year when the bank reappraised Brown's land assets at a lower value and ordered the company to pay back a portion of money it had loaned, he said.
Brown said he had been trying to negotiate a compromise for months, and in the meantime the bank began keeping all of the proceeds from every home sale, cutting off Brown's ability to generate revenue.
"They sucked every nickel out of the company," he said. "I went through the company's money and my own money."
Valley real-estate analyst RL Brown, publisher of the Phoenix Housing Market Letter, said he was surprised by the way Dave Brown's (no relation) lender handled the credit issue.
"I think that particular bank's technique was pretty short-sighted," he said. "This is a company that, at least on the surface, one would think was as solid as any builder in town."
Brown Family Communities, founded in 1975, was not among the home builders on the Arizona Department of Real Estate's list of "builders in financial trouble."
It had no property in foreclosure and was not the target of any liens for unpaid construction work, although Dave Brown acknowledged that some of his subcontractors might not get paid for recent work.
Tom Osselaer, executive vice president of Suburban Mortgage in Phoenix, said he had 13 clients in the process of buying Brown Family homes. He hoped Brown would follow through on his promise to refund their earnest money so they could begin looking for other homes.
Osselaer said lending institutions are in such a state of panic that heavy-handed tactics like seizing all sale proceeds are becoming more common.
"Banks, when they get afraid, they just stop," he said.