A dream of more than 60 years died today, when builder Kimball Hill Inc. gave up its attempt to emerge from Chapter 11 bankruptcy. That dream of building affordable quality homes in return for a profit became a casualty like no other. In 1952, a lawyer named Kimball Hill bought a land earmarked to be a golf course. There on the would-be greens and fairways he built homes in a community while conducting business in stark contrast to the Countrywide crooks of today. Hill built homes that returning WWII vets and generations thereafter thrived in. He built a booming suburb that became known as Rolling Meadows.
“He really said, ‘We don’t call these houses, we call these homes,’” she said. “He believed in a home having a real transformative power for a family. Doing the most with less square footage, that was really his passion. He loved figuring out how to make it feel as big as possible.”With help from his father and a $10,000 loan, David Hill in 1969 opened his own home-building entity, named for his father, with the idea of building “fine homes and remarkable communities. That was one of the core values,” said Diane Hill,
“David had more energy than any builder I ever met,” Hoffman said. “He had wonderful ambitions. He wanted to be very large, and there’s a finite number of homes you can do in Chicago. He diversified beautifully. Had this thing only been a little blip, David and others would have been fine.”
But this thing was far from a little blip. It was the worst credit burst in anyone’s lifetime, an unbelievable time of unprecedented catastrophic events of Great Depression magnitude each. A time when the once powerful torrent of credit seized up like concrete and opportunity evaporated overnight.
Kimball Hill Homes’ demise isn’t the tale of a home builder undone by simple greed or short-sightedness. It’s the story of a company that saw itself as offering people a version of the American dream and tried to buffer itself against the real estate industry’s inevitable cycles, but got swamped anyway.
In 2001, the privately held Kimball Hill placed 482nd on the Forbes list of largest private companies, with its annual revenue of $580M in 2006. It was number 357 on the same list, with $1.1B in revenue. Even though he heard the angry rumblings of a coming credit contraction as early as 2006, David Hill could never have imagined that he would be bankrupt by 2008.
“We anticipate that the changing marketplace will be amplified in the coastal markets, and that some of the recently hot markets will give back a portion of their recent gains,” the company said in a quarterly earnings filing.
However, six months after that first warning, Kimball Hill noted in a September 2006 regulatory filing that “both the breadth and pace of market deterioration has been greater than anticipated, given the relatively strong broader economic backdrop.” For its fiscal year, the company’s net earnings totaled $41.8 million, less than half of what it earned in 2005.
So it began the frantic effort to escape the relentless credit crisis. To generate cash, the company issued $203M in publicly traded bonds, sold 952,000 common shares to generate another $110M, the majority of which was used to lessen its debt load, and in 2007 sold $59M of raw land. But it wasn’t enough. The contract value of its backlog, or sales contracts for homes in the pipeline to be built, was more than cut in half from $423.5M in September, and the average sales price fell 3.6 percent. It continued to meet with creditors to amend its credit facilities and ease the most restrictive terms. But it would not be enough, for capital intensive builders, the credit crises moves in fast and comes down hard.
Then late in fiscal 2007 Kimball Hill lost $221M. As the credit bubble burst, the shock wave ripped through 42 homebuilders before Kimball Hill filed for bankruptcy in April of in 2008.
It’s a worst-case scenario for what’s happening to builders that turned what was once far-flung farmland into suburbs filled with affordable homes and real yards. Now, years later, these longtime builders that put the “metropolitan” in metropolitan Chicago are fighting for survival. Their only recourse is to beg leniency from lenders or try to wait it out.
But in the credit crisis, there is neither goodwill nor second chances. For the company named after Kimball Hill, there was no one to turn to for mercy.
On Monday, that unnamed investor backed out of the deal, deciding that the housing markets, particularly in Texas, were a long way from recovery. As a result, Kimball Hill will liquidate, and the name will disappear from the local landscape after almost 40 years.
No mercy for the company, no forgiveness for the son who carried on his father’s dream: there in the cold twilight at the end of ponzi finance, the dream died.
David K. Hill, founder of Kimball Hill Homes in Rolling Meadows, Ill., died Saturday at the age of 67. He had cancer.
Educated as a lawyer, Hill founded Kimball Hill Homes in 1969, naming the firm after his father, who had also been a builder. Under David Hill’s leadership, Kimball Hill Homes grew to become one of the largest builders in the country, closing 3,246 homes in 2007, according to the BUILDER 100. Like many firms, it has been battered by the housing crisis and is currently reorganizing under Chapter 11 bankruptcy.
But Hill was known for more in the housing industry than just the company he founded. He was also a dedicated advocate for affordable housing, both on a local and national level.
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