Rhodes Homes files for Chapter 11

By Brian Wargo (contact), In Business reporter

Fri, Apr 10, 2009 (2 a.m.)

The housing market downturn has hit again with local homebuilder Rhodes Homes filing for Chapter 11 bankruptcy protection.

The filing covers Rhodes Design and Development and a group of related companies whose assets include the master-planned communities of Tuscany in Henderson and Rhodes Ranch in the southwest valley, the company said.

The company’s assets were used as collateral for a $500 million credit facility arranged by Credit Suisse in November 2005 and funded by a consortium of financial institutions, including Credit Suisse, Highland Capital, General Electric Corp., Cypresstree Investment Management and Sorin Capital Management, the company said.

The money was used for growth during the housing boom but because of the downturn, company founder Jim Rhodes said it was unable to meet a March 31 principal and interest payment.

“My skin has become thicker when it comes to hearing about builders’ problems,” said Dennis Smith, president of Home Builders Research and a Las Vegas housing analyst. “There have been so many of them that one more doesn’t strike me as a big deal. I don’t know if it means anything. (Rhodes) is reorganizing his finances, and he has done that before. He is not going away, by any means. He is one of the most resilient builders that I have ever seen. I have heard stories of his demise for 20 years.”

Rhodes Homes in a statement blamed the severe economic downturn for creating a situation where land values and home values have plummeted and new-home sales have fallen dramatically.

Company officials said the bankruptcy filing will have little effect on day-to-day operations, including sales and construction. The company, which said it may seek financing during the bankruptcy process, said it expects to deliver all homes on order and take new orders.

Rhodes was ranked No. 13 in Las Vegas in the 2009 In Business Book of Business Lists for new-home sales.

After closing on 585 homes in 2006, Rhodes Homes closed 366 in 2007 and 346 in 2008, Smith said.

“I don’t think there will be any noticeable changes to the public,” Smith said. “I was out at Rhodes Ranch Sunday and the golf course was full of people.”

Rhodes has been aggressive in buying property for development in Arizona, across from the Nevada border, and that property is part of the bankruptcy proceedings.

Rhodes also owns Harmony Homes, which is not part of the bankruptcy proceedings.

When demand softens and private builders like Rhodes take on a lot of debt compared with large public builders, that’s a burden for them, Smith said. Homebuilders are no different from the casino industry in carrying too much debt.

“He is not the first one and he won’t be the last to file bankruptcy,” Smith said. “I fully expect him to be around and build homes when the market turns.”

Those with the 25 largest unsecured claims against Rhodes include Sunstate Cos., $201,094; G.C. Wallace, $201,000; Aspen Concrete, $128,623; American Soils Engineering, $84,490; and Triton Grading & Paving, $78,683.