Newport Beach Builder Files for Bankruptcy : Development: The demise of Bramalea of California Inc. was triggered by the collapse of its Canadian parent company. About 25 workers face layoffs.
In one of the largest home builder bankruptcies in California history, Canadian-owned Bramalea of California Inc. on Wednesday filed plans to liquidate its assets and go out of business.
The Newport Beach-based company’s demise came after its financial lifeline was cut by the collapse of its Canadian parent two weeks ago. Bramalea of California claimed $112 million in assets and $179 million in liabilities.
An immediate impact of the action is that about 25 company employees face certain layoffs and about 350 recent home buyers will no longer have a company-backed warranty on their new homes--although the company said it is seeking agreements with its subcontractors and suppliers to assume responsibility for repairs.
Jeffrey Roos, senior vice president and head of operations at Bramalea of California, said the company “is trying to protect our homeowners as best as possible in difficult circumstances.”
Because the company is liquidating under protection of bankruptcy it cannot be held liable for repair work any longer. But Roos said that for the past eight weeks or so the company has been disclosing its uncertain future to buyers. For those who wanted to go ahead with the home purchase, he said, Bramalea bought supplemental one-year home warranty policies--the same kind that are widely used in the residential resale market.
The bankruptcy was not tied to either the weak Southern California housing market or to the December bankruptcy of the Orange County government, said Bramalea attorney William Lobell. The builder has been profitable, he said, and took the action to preclude Canadian owner Bramalea Inc. from exerting claims on the Southern California properties.
Bramalea of California’s petition for a Chapter 11 liquidation was filed in federal bankruptcy court in Santa Ana. The company’s Marlborough Homes subsidiary in Newport Beach was not affected and will continue operating. That company builds about 125 homes a year in the $180,000 to $280,000 price range.
Bramalea of California’s demise, said Placentia real estate industry consultant Alfred Gobar, should not have a dampening effect on the still weak Southern California building industry. “Their properties probably will go back to the lenders because there’s nobody else to buy them,” he said, “and it usually takes lenders a long time to get rid of property, so there won’t be a bunch of it dumped on the market” to depress land prices.
The parent company has been involved in a Canadian bankruptcy reorganization for more than a year and, amid increasing dissent among its creditors, the company’s entire board of directors and top management resigned two weeks ago. As a result, the Canadian company, which owns a $30-billion portfolio of commercial and residential real estate in Canada and the United States and has almost $4 billion in debt, has been forced into an involuntary liquidation and has stopped providing operating funds for its California subsidiary.
Lobell said that Bramalea of California’s bankruptcy will give it clear title to its 12 active housing projects and seven vacant parcels of land in California, enabling the company to sell them to other developers or to its investment partners or bankers. The company has four Orange County projects in Mission Viejo, Aliso Viejo and Tustin Ranch.
Roos, the company’s top officer, said he hopes to sell all of the properties within the next three months.
Roos spent much of Wednesday evening explaining the action--and its consequences--to the company’s 75 employees at its leased headquarters in an office tower overlooking Newport Beach’s picturesque Back Bay. It is a building that was owned by Bramalea Inc. until its lenders foreclosed and took it back in 1993.
He said he told employees that the company intends to continue selling homes in its active projects until the developments are taken over by new purchasers and that the people assigned to each project would likely be taken on by the new owners. Administrative workers, however, are likely to be laid off, with as many as 17 of the 25 losing their jobs by mid-June, he said.
Bramalea builds homes and condominiums that range from under $200,000 to more than $2 million and is best known for its high-priced projects. Its most ambitious was a hilltop tract of semi-custom homes in the Irvine Co.’s prestigious Newport Coast development. The Bramalea project featured homes of more than 5,000 square feet with prices that could soar past $2 million, depending on the customizing touches ordered by buyers. The project opened with great fanfare in 1990 but poor sales in the ensuing recession forced Bramalea to shut it down and it remains inactive.
