Pacific Lifestyle Homes on Tuesday emerged from bankruptcy with a promise to pay $1.5 million to its creditors.
U.S. Bankruptcy Court Judge Paul Snyder approved the company’s Chapter 11 reorganization plan, which takes effect this month. The judge’s order clears the way for the Vancouver-based homebuilder to step up production in five subdivisions where Pacific Lifestyle is currently building new homes. The company, Clark County’s second-largest production home builder at one time, expects to build between 70 and 80 homes this year in neighborhoods in Vancouver, Washougal, Salem, Ore., and Clackamas, Ore.
“I’m grateful to have gone through it and made it out the other side, and I think we’re well positioned to compete in the market today, “ said Kevin Wann, the company’s president and owner.
Founded in 1996, Pacific Lifestyle Homes has built more than 2,200 homes throughout the region from Woodland to Salem, Ore.
Sales peaked in 2006, when Pacific Lifestyle Homes sold 256 homes. It sold another 251 houses in 2007. In 2008, sales were down to 125.
Pacific Lifestyle Homes filed for Chapter 11 bankruptcy protection in October 2008, after falling sales and land values caused lenders to demand additional equity for the company’s land holdings. At the time, the company owed more than $56 million in combined debt to four or five banks, 50 to 60 subcontractors and others.
Pacific Lifestyle walked away from unbuilt subdivisions in Woodland and Beaverton, Ore., while going through its restructuring.
Reorganization plans were based on what turned out to be the successful liquidation of some 60 completed but unsold new homes built by Pacific Lifestyle.
About half the homes were in Clark County, priced from $220,000 to $450,000.
“These homes sold for 15 percent to 20 percent lower than at the peak of the market,” Wann said.
A least one local builder applauded the news of Pacific Lifestyle’s reorganization as a positive sign for the area’s home-building sector.
“The industry is working through its problems and the fact that Pacific Lifestyle is emerging is positive to me and an encouraging sign,” said Matthew Clarkson, president of the Building Industry Association of Washington and co-owner of Soaring Eagle Homes of Vancouver.
Wann said his company emerged from Chapter 11 on its ability renegotiate construction loans and sell houses. Six weeks after it filed bankruptcy, the company sold 34 houses. It sold another 18 in the first two months of 2009.
“If we didn’t have the ability to sell homes, we wouldn’t have made it,” Wann said.
He added that his liquidation sale competed with a glut of existing, foreclosed houses in Clark County. The county ranks in the top five out of the state’s 39 counties for its rate of foreclosure, according to California-based RealtyTrac, which tracks foreclosures nationwide.
Under the approved reorganization plan, Pacific Lifestyle Homes will pay its smaller creditors up to 40 percent of the money owed. Larger creditors and suppliers will get 10 percent, Wann said.
The home-building business has emerged from bankruptcy a much leaner company than at its peak. Pacific Lifestyle now has 19 employees, down substantially from the 115 employees who reported to work there in 2007.
These days, the company also is selling smaller homes aimed at a specific segment of buyers, Wann said.
Today’s buyer
“Going through the process allowed us to take a close look at what today’s buyer is looking for,” Wann said.
Like other local production builders, Pacific Lifestyle’s newest models range from 1,800 square feet to 2,500 square feet, which is much smaller than the 3,200-square-foot and larger houses the company was selling at the peak of the home-building market in 2007.
Wann said the smaller houses now include luxurious, high-end materials that have been reduced in price due to surpluses of materials and products that stacked up during the housing downturn.
Wann also credited record-low home mortgage interest rates for bringing down the price of the homes.
“It’s amazing how everyone in the building industry has pooled together to deliver more for less,” Wann said.
He expects similar dynamics to help sell approximately 20 houses now under construction by Pacific Lifestyle Homes. His company is already eyeing housing sites it plans to acquire for future growth.
“It feels great to finally be through this and I’m excited about the future,” Wann said.
