This article is reprinted from ChicagoBusiness.com. You can link to the article here or keep reading. I thought I would post it given the large number of people affected by Montalbano Builders that visit the site.
Suburban homebuilder Montalbano files for personal bankruptcy
By: Eddie Baeb Sept. 16, 2009
(Crain’s) — Prominent homebuilder Anthony P. Montalbano Sr. filed for personal bankruptcy protection last month, just days before he was hit with a $34.4-million foreclosure lawsuit from his largest creditor.
Mr. Montalbano, president and CEO of Oakbrook Terrace-based Montalbano Builders Inc., listed assets of less than $10 million versus liabilities of more than $100 million in the Chapter 11 case, which was filed Aug. 19 in U.S. Bankruptcy Court in Chicago.
Among the list of Mr. Montalbano’s 20 largest unsecured creditors are 16 different banks, to whom he personally guaranteed loans totaling about $150 million, according to the filing.
Five days after the bankruptcy filing, RBC Bank filed a foreclosure lawsuit in Will County seeking $34.4 million on loans for various subdivisions in the exurban Chicago area and Arizona along with a master revolving line of credit and a letter-of-credit note.
The suit names Montalbano Builders and Mr. Montalbano as defendants along with various related ventures.
RBC Bank, a Raleigh, N.C.-based subsidiary of Royal Bank of Canada, claims in the suit that it declared the loans in default last September, because Montalbano failed to make interest payments and violated certain loan covenants.
Mr. Montalbano, 62, didn’t return calls seeking comment.
The attorney for Mr. Montalbano in the bankruptcy proceeding and RBC’s attorney in the foreclosure both say the developer is working with the bank to resolve the matter.
“They have a plan, and they’re going to try and get through it,” says RBC’s attorney William Mitchell, a partner in the Chicago office of Meltzer, Purtill & Stelle, LLC. “I think they are continuing to work toward an amicable resolution of the situation.”
Mr. Montalbano’s attorney, Howard Adelman of Chicago-based Adelman & Gettleman Ltd., says Montalbano is trying to sell some of its land.
“Mr. Montalbano is going to do everything reasonably possible to successfully resolve these matters with his creditors,” says Mr. Adelman.
But sales of the land Montalbano controls – mostly undeveloped or partially developed tracts on the exurban fringe – are among the most difficult deals to pull off these days in the wake of the housing and credit bubbles. Land prices in the exurbs have cratered as few believe demand will return there any time soon.
“The land market right now is brutal,” says Dan Flanagan, president of Flanagan Realty LLC in St. Charles, who several months ago was working with Montalbano to market some of its local properties. “There’s just nothing happening, and there’s still a huge bid-ask spread between sellers and buyers.”
In the RBC foreclosure, there were developments in four local municipalities: south suburban Matteson in Cook County; Beecher in Will County; Harvard in McHenry County; and Cortland in DeKalb County.
The other two were in the Arizona towns of Peoria and Coolidge, according to Mr. Mitchell, RBC’s attorney.
Mr. Montalbano was a carpenter who founded his homebuilding firm in 1976, according to his “construction entrepreneur of the year” award in 1989 from accounting firm Arthur Young.
A profile of him that year in the Chicago Tribune says Mr. Montalbano “dresses in stylish suits and drives a red Mercedes convertible,” and that his specialty in the mid- to late-1980s was acquiring distressed housing developments.
In 2004 and 2005, Montalbano cracked Builder magazine’s list of the 100 largest U.S. homebuilders, ranking 93rd and 95th those years, with revenue peaking at $232 million in 2005. The company had 90 employees in 2007 and revenue of $114 million, down 40% from 2006, according to Crain’s list of the Chicago area’s largest privately held companies.
Based on 2006 revenue, Montalbano ranked as the 21st largest local homebuilder, according to a separate Crain’s list published in 2007. The company had local revenue of $92.8 million in 2006 and $188.5 million of revenue nationwide that year, according to the list.
The housing market’s crash has taken a big toll on many homebuilders. In May, Streamwood-based Kirk Corp. became the third suburban homebuilder here to file for bankruptcy protection after Neumann Homes Inc. and Kimball Hill Inc. Mr. Montalbano is the second local residential developer to file for personal bankruptcy.
In June, Evanston condominium developer Thomas Roszak also filed for protection from creditors.
Flanagan Realty’s Mr. Flanagan says small, private homebuilders are particularly vulnerable these days because they rely more heavily on banks for financing.
“Virtually every private homebuilder is severely challenged,” he says. “I can’t think of any one of them that’s truly safe.”
Reprinted from ChicagoBusiness.com.
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