Sacramento's big developers have lost plenty of possessions since the real estate market collapse: private jets, vacation homes, expensive cars and multi-million-dollar tax refunds.
But mostly they've lost land. Lots and lots of it.
Their loss is Ray Sahadeo's gain. The 27-year-old has spent much of this year buying lots and building houses, capitalizing on the stumbles of his more established peers.
The local real estate industry is in the midst of a massive reshuffling as developers who have long been in the top tier of Sacramento society see their fortunes fall, and others step in to fill the void left by their departure.
Sahadeo, a relative unknown, has gained control of more than 400 home lots from distressed builders and banks. Buying low, he sells low, with homes starting at $139,000.
It's the Great American story: a son of immigrant parents from Guyana tapping private equity to "make hay while the sun shines."
While Sahadeo and partner Mark Chisick stake a claim in the local housing market, some of the most prominent family names in Sacramento development circles have become synonymous with bankruptcy and losses.
The list of those brought low includes royals like John Reynen and Christo Bardis, Sidney B. Dunmore and C.C. Myers. Collectively, as their businesses have collapsed, they've lost status and well-paying livelihoods, and surrendered corporate jets, vacation homes and millions of dollars in tax refunds to creditors.
Even so, they have managed so far to keep some vestiges of their opulent lifestyles.
As their stories unfold in bankruptcy courts, players like Sahadeo and others with access to money have moved into the game or gotten bigger. Last year, McClellan-based janitorial services partners and land developers Ron Alvarado and Charles Somers scooped up 879 building lots on 250 acres in growth-friendly Rancho Cordova from Pulte Corp. and Centex Corp., home building giants that were shedding assets.
It was a "prudent buy" for a "decent property" said Alvarado, and reportedly for far less than Pulte and Centex paid and spent to improve it.
Investors from Granite Bay, Pleasanton and Southern California also have swooped in for bargains after implosions of John Laing Homes, Kimball Hill Homes, Dunmore Homes and Reynen & Bardis Communities.
Among builders that survived after selling assets and downsizing, none has a more formidable position for the region's next housing boom than Pulte and Centex. Last month, the giants merged into a superbuilder that accounts for almost one in five sales.
That giant is in place now to realize dreams of builders killed off by debt and plunging land values – the same knockout punches that sent thousands of homeowners hurtling toward foreclosure and bankruptcy.
"The critical thing with land is not to owe," said Angelo K. Tsakopoulos, owner of AKT Development Corp. and the region's largest land developer.
Tsakopoulos, 73, said he is buying in this downturn just as he did in the 1990s recession and housing crash. Back then, Tsakopoulos bought hundreds of distressed and discounted acres, especially in North Natomas, after landowners crumbled under debt.
"Those were pretty bad days," he said. "But this cycle's a bad one. People didn't see it this time. We never do. They come, and come quickly, and they're brutal."
Brutal is an apt description of the past two years in the lives on John Reynen and Christo Bardis, partners for 36 years in Reynen & Bardis Communities, the Mather-based home builder and land developer. The pair filed for Chapter 11 personal bankruptcy protection after they personally guaranteed $900 million in loans for land their company bought during the housing boom. Lenders are now selling off many of their possessions.
Their bankruptcy filings offer a glimpse into how well Sacramento's development class lived when the market was booming, and how much it's losing now that it isn't.
Bankruptcy court records show that Reynen and his wife are giving up $26.8 million in cash to creditors, including $24.5 million in income tax refunds. They're surrendering a $2.5 million vacation home in Mendocino, a $325,000 property in El Dorado Hills, a $1.8 million vacation home in Cabo San Lucas, Mexico, and a vacant lot valued at $1.35 million in the same city.
Source Sac Bee
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