REAL ESTATE : Report Heightens Centennial Group Bankruptcy Rumors
Rumors that Centennial Group Inc. is teetering on the verge of bankruptcy were heightened by the developer’s latest annual report to shareholders. The recently filed report for fiscal year ended June 30 included an addendum by the company’s accounting firm, KPMG Peat Marwick of Costa Mesa, questioning Centennial’s “ability to continue as a going concern.”
Founders John B. Joseph and Ronald R. White began the publicly held company four years ago to handle their six real estate limited partnerships. Based in Orange, Centennial has suffered cash-flow difficulties and a cool reception on Wall Street almost from the start.
Over the past two years, the land developer has reported losses of more than $36 million: a net loss of $17.6 million on revenue of $14.5 million in fiscal 1991, and an $18.6-million loss on revenue of $55.7 million in fiscal 1990. One of Centennial’s subsidiaries, Arizona Commercial Property Development Inc., filed for Chapter 11 bankruptcy earlier this year.
When they created Centennial in 1987, Joseph and White hoped the company would fetch $10 per share. But Centennial never attracted much more than half that targeted amount, and in the past year its stock has languished between 25 cents and 50 cents a share. This week, the shares dived to a record low of 12.5 cents.
In a press release, Centennial blamed its problems on “the substantial reduction in the amount of financing available to the real estate industry,” which “ . . . has made it difficult for the company’s prospective buyers to consummate transactions.”
Centennial has landholdings in Arizona and California, mostly in the Sacramento area. Much of the company’s equity is in raw land.
Nowadays, liquidity is more valuable to developers than equity, pointed out Mark Coleman, real estate consultant in the Orange County office of the Deloitte & Touche accounting firm.
“It doesn’t matter how much equity you have if you can’t unlock it in terms of cash flow,” Coleman said.
