Builder faces a mountain of debt

Renaissance Homes’ bankruptcy is hurting banks and vendors even as the giant homebuilder pledges to repay $138 million

By Lee van der Voo

The Lake Oswego Review, Oct 2, 2008, Updated Oct 30, 2009

A shift in focus

That shift in focus from homebuilders to homeowners is also a survival strategy at Tualatin-based West Lake Coatings, owed $101,787 by Renaissance Homes, and for Tualatin Valley Paint in Tigard, owed $96,938.

Kevin Dressel, owner of Tualatin Valley Paint, said he began searching for remodeling work approximately 10 months ago when homebuilding in the Metro area began to level off.

Once responsible for 75 percent of painting at Renaissance Homes, Tualatin Valley Paint has drawn 90 percent of its revenues from new home construction in the last five years.

Dressel said the lucrative homebuilding market drew many contractors to the area in recent years. Competition for remodeling jobs is now fierce as a result.

“I’m not the only person doing that so the reality is there is just not enough work to go around,” said Dressel.

In the last year, Dressel said his staff has shrunk from 85 employees to 15. He believes Renaissance Homes waited too long to tell contractors that it could not pay, forcing smaller businesses to stretch resources thinner while they waited.

“I kept telling my people I’m doing my best to keep you busy for right now but any day we’re going to get some money,” said Dressel.

‘A financial bind’

“It’s not a big surprise to anyone that they’re putting a lot of us small companies like myself in a real financial bind. Renaissance is doing what they can for self-preservation. And they’ve forced a lot of us to do the same thing.”

Renaissance’s Whitman said he understands why some of the company’s subcontractors are upset over delays.

“On the other hand, here we were exploring all these other alternatives with full faith something would happen,” he said. “We felt like we could pay our own way and there was also the possibility of outside infusion of capital.”

Once it became clear the company could not pay, Whitman said Renaissance opted to maintain its relationships with banks.

“Lots of builders chose to pay subs and stiff their banks. We made a decision to pay the banks and started stiffing our subs,” he said. “We believe that long-term our approach was superior because we will be able to build houses.”

That’s important for economic recovery for everyone, Whitman said, including subcontractors who went unpaid. Many are likely to see future work as Renaissance Homes resumes building, Whitman said, even while old debts sit unresolved in bankruptcy court.

Linda Sandsness at Canby Plumbing said the mandate to pay banks first will make it hard for subcontractors to collect debts in the short term.

Canby Plumbing is owed $84,291 by Renassiance Homes and focuses all of its work on plumbing for new homes. Sandsness said the 70-year-old family business is prepared to weather the slump.

Only 25 percent of work at Canby Plumbing came from Renaissance, Sandsness said, so she expects the business to retain its 32 plumbers through the slow winter. But she said the company will put off needed purchases of trucks and forego bonuses for staff.

Other plumbing companies, she said, have simply given up.

Worried for winter, some have set their sights on government contracts for road work, utility projects and new buildings. With banks strapped and loans to small businesses in short supply, many are concerned.

Gary White at White Wykoff and Company said his advertising agency is owed $97,600 by Renaissance Homes.

With uncharted waters ahead, he said it’s difficult to know what businesses tied to homebuilding should expect.

“I’ve been in the business for 40 years and I have seen the spikes before and usually, like during the 70s and into the 80s, interest rates would spike and home sales would drop off,” said White. “It’s always been a cyclical business. But nothing like this. This is just unbelievable.”

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