Wednesday, January 2, 2008

End Of An Era-Levitt's goes bust.

January 3, 2008

With Builder in Bankruptcy, Buyers Are Left Out

MURRELLS INLET, S.C. — Ettore and Larisa Costanzo are showing off their new house, which they love madly.

“Notice how we upgraded so there’s tile on all the floors,” said Mr. Costanzo, a retiree from Brooklyn. He pointed to the Kashmir granite in the kitchen. “It’s nice, no?”

Now if only they could get the keys and go inside, instead of peering in the windows like a couple of Peeping Toms.

The house, on which the couple made a down payment of $88,820, is empty. Their belongings are in storage. They live, unhappily, in a hotel.

“It’s very upsetting, not to be allowed in our own house,” said Ms. Costanzo, a Russian immigrant. “Please take our money and let us move in.”

Their builder is Levitt & Sons, a unit of the Levitt Corporation, which ran out of cash in October and declared bankruptcy in November. All work on this planned 460-home development for retirees, grandly named Seasons at Prince Creek West, has ceased. The Levitt employees were laid off, the subcontractors put down their tools, and the Costanzos found themselves in limbo.

The collapse of Levitt, the first big home builder to fail in the current slump, illustrates how the turmoil in real estate is spreading far beyond subprime borrowers who cannot pay their mortgages. Levitt had a fabled brand, decades of experience and enthusiastic customers with good credit, but none of that was enough to save it.

Paul S. Singerman, Levitt’s bankruptcy lawyer, said that as the real estate market in Florida went into “an absolutely unprecedented and catastrophic downturn,” the builder’s customers across the Southeast became victims. “There is a bad story, an unfortunate story, about every customer that placed a deposit,” Mr. Singerman said.

Seasons is less than a quarter finished. About 90 buyers have paid a total of $3.48 million in deposits for houses in varying stages of completion, ranging from all but done, like the Costanzos’, to unadorned dirt.

Another 90 houses are occupied, but many of these residents are, if anything, even more unhappy than the depositors. Levitt sold them on a community where everything would be taken care of. Those assurances mean little now.

“I can’t believe we’re dealing with Levitt & Sons,” said Nancy Harth, 59, who moved in last March. “It feels like a start-up company.”

The initial popularity of Levitt’s 18 retirement communities — at least 4 of them are now in as much disarray as Seasons — is testament above all to the durability of a name.

Sixty-one years ago, Levitt began mass-producing homes on a patch of Long Island potato fields. It quickly built tens of thousands of houses in Long Island, New Jersey and Pennsylvania, creating the modern suburb in the process.

In recent years, the builder has been concentrating on projects for the children of the Levittown generation, the 78 million aging baby boomers. Its sales strategy leaned heavily on both the company’s long operating history and its long-ago achievements.

The pitch worked brilliantly.

Christine Roberts was born in Queens in 1966. Six months later, her parents moved to Levittown, and Ms. Roberts lived there for 38 years. “Buying at Seasons meant I was still going to be part of a Levitt community,” she said. “We thought that was so cool.”

She and her husband, Richard , like the Costanzos, are now full of uncertainty. They sold their Long Island home a year ago in preparation for their move to Seasons, and spent $10,000 on new furniture. With their Seasons house unfinished, they have been living in a trailer they own in the Poconos. Their furniture is in storage in South Carolina.

“We didn’t think anything bad was going to happen,” said Ms. Roberts, a former worker with the United States Postal Service. “We really and truly had the utmost faith.”

Many of the Seasons buyers came from the New York area. South Carolina offered a milder climate, lower taxes, less congestion and more golf. The development is about five miles south of Myrtle Beach, S.C.

“We raised our children. We’ve done the grandchildren thing,” said Karin Beaupre, who taught elementary school in Lynn, Mass., for 30 years. “It was time for us. So we took all we had and put it into this.”

Nancy Darr, 61, has macular degeneration, an eye condition that prevents her from driving and makes her unable to distinguish between a flower and a weed. She wanted a house, but couldn’t do the upkeep.

Seasons promised to take care of her concerns. The gated community would have 24-hour security. An activities director would arrange entertainment. Owners would not have to mow their lawns. Even their bushes were to be fed by a central irrigation system.

Best of all was the promise of a clubhouse.

The 29,000-square-foot recreation center would have tennis and bocce courts, a fitness center, and indoor and outdoor pools. There was to be a ballroom with a stage, a room for card games and another for billiards. Levitt promoted it as “a luxury cruise ship on land.”

“If you wanted to socialize, you could walk over and just mingle,” Ms. Darr said.

Everyone had plans for the clubhouse. Ms. Darr wanted to swim and work out. Andy and Pat Hudak were looking forward to dancing the jitterbug, as they used to.

“We didn’t buy a house; we bought a lifestyle,” said Mr. Hudak, 68, who ran a messenger service in New Jersey. They signed a contract in March 2006, paying $58,508 for a deposit and upgrades.

Selling a lifestyle was something Levitt perfected long ago.

Thanks to the builder, Time magazine noted approvingly in a 1950 cover story, buying a house was suddenly easier than buying a car. The original cost was $6,990, about $70,000 in today’s dollars; government-backed mortgages and low down payments smoothed the way. A second Levittown rose in Pennsylvania and a third in New Jersey (now called Willingboro).

William J. Levitt, son of the company founder and chief engine of its success, took the company public in 1960. It was acquired by International Telephone & Telegraph in 1968, and then sold in a court-ordered divestiture three years later. The company went through a succession of owners, relocating to Florida in 1979 and declining into insignificance.

In 1999, BankAtlantic Bancorp purchased Levitt. Under the leadership of BankAtlantic’s chief executive, Alan B. Levan, the builder began acquiring large chunks of land, first in Florida and then in neighboring states. The Levitt Corporation became a public company in 2004.

The product changed in a half-century, of course. The houses at Seasons are not the tiny boxes of the original Levittown but expansive dwellings with whirlpool tubs and marble vanity tops. With upgrades, prices reached $450,000.

But they were still sold as Levitt houses. Home movies of early Levittown residents dancing on their lawns played in the sales center and on the Web site. A pamphlet giving a detailed history of Levitt’s glory years was passed out to prospective buyers.

Nancy Darr, who had once watched her condominium developer go bankrupt, asked her Levitt salesman whether the company could fail.

“This is Levitt & Sons, America’s oldest home builder. We built Levittown,” Ms. Darr remembers him replying. “It’s a solid company. It’s listed on the stock exchange. This could never happen.”

Gary Drejza, a former Seasons salesman, confirmed that such assertions were routine. “We felt they were the truth,” Mr. Drejza said. “We believed.”

He must have, because he bought a house himself. “Want to see it?” he asked, pointing from the window of his Mercedes-Benz at Lot 49, still a pile of dirt.

Mr. Drejza now has a somewhat different view. “A name was purchased, that’s all. There’s really no remnant of the old Levitt. None of the family,” he said.

That might be no guarantee of satisfaction either. William J. Levitt, trying to make a comeback in Florida in the late 1970s and early 1980s, was forced to refund thousands of deposits when he failed to build the homes.

Booms are great, until the hangover. Mr. Drejza’s conclusion is that Levitt got “caught up in the madness,” buying too much land for too many new developments for too much money.

Analysts echo that view. “They tried a national expansion at the very worst time,” said Eric Landry, an analyst at Morningstar, the investment research firm.

In the bankruptcy, the Levitt Corporation is trying to sever itself from its Levitt & Sons division. Only the latter is insolvent. Mr. Levan, the chief executive of the Levitt Corporation and BankAtlantic, declined through a spokesman to be interviewed. BankAtlantic is based in Fort Lauderdale, Fla.

Seasons residents express confidence that another developer will finish the neighborhood, including the clubhouse. But privately, many acknowledge a lot of misery. “By the time the clubhouse is up,” said Jim Blake, 70. “I don’t even know if I’ll be alive.”

Damon Savino, who drove a truck for a lumber yard, feels particularly bad. He praised Seasons to his pals. Five of them bought houses; three are unfinished. “I’m losing friends here,” he said.

At a court hearing in Fort Lauderdale just before Christmas, Wachovia Bank, which is Levitt’s largest creditor, agreed to provide $10 million to finish at least 80 homes in Georgia, Florida and South Carolina.

The Costanzos, the buyers with the all-tile floors and the granite countertop, are optimistic. “We’re going to get our house,” said Mr. Costanzo, 64, a former shoe salesman for Salvatore Ferragamo.

Few of the other depositors seem as relieved. Sixteen of them held a conference call after the hearing. Fifteen said they did not want their house at the contracted price unless the clubhouse is built.

Mr. Singerman, Levitt’s bankruptcy lawyer, said he did not think that was likely anytime soon. Wachovia declined to comment.

Dave Whalen, a retired analyst with the New York City Transit Authority, does not have even the illusion of a choice about building or walking away. He put down $46,635 for a house that was never started by Levitt. That means Wachovia is unlikely to bother with it.

“We end with nothing,” said Mr. Whalen, 62. “I might as well have taken my deposit, put it in $1 bills, and let them blow off the front porch.”


Copyright 2008 The New York Times Company
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