In California, a Generational Tale of Real Estate Boom and Bankruptcy
By KATIE HAFNER
New York Times
Published: March 7, 2008
YUBA CITY, Calif. -- When George P. Dunmore started his business in
Sacramento in the early 1950s, World War II was over and the building boom
was on. Over the next several decades his company, Dunmore Construction,
along with other respected builders, took the tabula rasa that was
Californiaıs Central Valley and etched it with entire neighborhoods filled
with well-built ranch houses on trim lawns.
In Elk Grove, Calif., a Dunmore Homes development remains half-built after
work ceased last year. Dunmore had prospered in the fast-growing Central
Valley.
Mr. Dunmore lived through his share of lean years, of course; that is the
rhythm of the home construction business. But for the most part, his
company
prospered. His son Sidney got into the business. And Sidney B. Dunmoreıs
boys followed him.
But by the time Mr. Dunmore died last October, at age 89, his son Sidney
found himself caught in the middle of a real estate collapse. Overextended
and pursued by a long line of creditors, the company bearing the family
name, Dunmore Homes, was sold to a New York cor****ation owned by a
Sacramento-area mortgage broker for $500, including the assumption of
liabilities totaling more than $250 million. Two months later, the new
owner
filed for protection from creditors under Chapter 11 of the Federal
Bankruptcy Code.
A bankruptcy court in Sacramento is left with the task of untangling a web
of transactions, affidavits, property transfers, loans and liens that have
come to symbolize the real estate crisis not just for Dunmore Homes, but
for
an entire industry.
Beyond that, George Dunmoreıs widow, Ruth, 84, is contending that her two
grandsons who had also started real estate development companies
carrying
the Dunmore name forged her signature on bank loan do***ents and
pressured
her, according to do***ents filed in a California state court.
The story of the Dunmores is the story of the nationıs housing crisis writ
small, familial and mean: three generations of home builders who got rich
from the go-go years of the California real estate boom, only to fall
victim
to the housing bust. And it is a tale of greed, hubris and denial of
economic reality.
Dysfunctional families, of course, can be found in every business, but the
bursting of the housing bubble in the Central Valley, where there was once
so much money to be made, accentuated any problems this family might have
had.
Not only was George Dunmore a fair businessman, friends and acquaintances
say, but he was an avowed family man as well. Of Mr. Dunmoreıs three
children, Sidney, now 53, showed the most interest in taking up the family
trade. After years of apprenticing under his father, the younger Mr.
Dunmore
started his own firm, Dunmore Homes.
Throughout the 1980s and 1990s, Dunmore Homes expanded. The company formed
more than a dozen subsidiaries throughout the state, with more than two
dozen developments, many of them catering to first-time home buyers in
need
of subprime and nonconventional loans. The company eventually built a
total
of 22,000 homes.
The region was one of the fastest-growing real estate markets in the
country. In Sacramento County, from 2000 to 2005, the median price of
homes
more than tripled, to $385,000, according to DataQuick Information
Systems.
³It was the type of market that floated all boats,² said Greg Paquin,
president of the Gregory Group, a real estate market research firm in
Folsom, Calif. ³Builders, buyers, investors: everyone was happy.²
For Sidney Dunmore life was good. His own opulent home all 12,000 square
feet of it is in Granite Bay, an affluent Sacramento suburb. He also has
a
$2 million 4,600-square-foot second home in the resort town of Palm
Desert,
Calif.
Then, in late 2005, the housing slowdown hit the region, falling squarely
on
the corridor south of Sacramento, from Modesto to Merced, where the
Dunmores
had once been so successful. Builders began offering incentives to move
homes as if they were cars on a dealerıs lot: low-interest financing, free
appliances, anything to make a sale.
By last year, the subprime mortgage industry was in crisis, credit had
dried
up and the younger Mr. Dunmore became no less reflective of an era than
his
father was of his. ³I think Sid always built a nice product, but he was
always very aggressive,² Mr. Paquin said.
Delbert Rapini, a longtime Sacramento contractor who said he was an
admirer
of George Dunmore, said, ³Sid had it made, but he acted like an idiot² by
extending himself too far.
Mr. Rapini, who does not do business with Sidney B. Dunmore, said that Mr.
Dunmore would have been well advised to remember that downturns in real
estate are ³all part of a cycle that happens every 10 or 12 years.²
Mr. Dunmore refused several requests for an interview.
By last August, the company had halted construction altogether, leaving
vast
tracts peppered with partly finished homes.
At one new ghost town in Yuba City, which is north of Sacramento, the
scene
looks as if construction workers just picked up and left. Some homes are
mere frames, barely suggestive of a dwelling.
Dunmoreıs rapid expansion may have been unwise, analysts say, but it was
not
unusual.
³Any builder, even the best-capitalized builders, drank the Kool-Aid and
bought too much land and loaded up at the peak,² said Ivy Zelman, a home
building industry analyst. Ms. Zelman, who said she had no direct
knowledge
of Dunmore Homes, said she believed that the company might have taken on
³way too much risk and just assumed values would go up.²
³I imagine thatıs what they were thinking and didnıt have good disciplines
in place.²
John Slaughter, a spokesman for Dunmore Homes who left the company this
week, recalled how ³so much happened with the mortgage industry, and
prices
dropping, and all the foreclosures.²
³It got to where we were a private company, competing with the large
billion-dollar companies that could continue to reduce prices, and we just
couldnıt compete with that,² he said.
In September, Dunmore Homes changed its name to DHI Development and sold
its
assets for $500 to a New York entity called Dunmore Homes Inc. The new
Dunmore Homes is owned by Michael Kane, a Sacramento mortgage broker. He
declined to comment.
Mr. Kane got not just the assets, but debts amounting to more than $250
million owed to a lengthy list of creditors that includes banks,
contractors, landscapers, electricians, plumbers and paving companies.
Mr. Dunmoreıs creditors cried foul over the sale, as well as the
bankruptcy
court filing in New York, a continent away.
Mr. Dunmore apparently had his reasons for the quick, cheap sale.
According
to court do***ents, by declaring his losses in the sale of the business,
Mr.
Dunmore is due a 2007 tax refund of approximately $11 million money that
he will use to pay off an $11 million obligation to Dunmore Homes.
³He couldnıt have financial gain without showing a loss,² said James
Curran,
a lawyer representing Travelers Casualty and Surety Company of America,
which has a separate lawsuit pending against DHI Development and Mr.
Dunmore
to recover $9.65 million. ³He went into bankruptcy for a reason, and it
was
to capture those losses for his financial gain.²
In December a federal judge in San Francisco granted Travelers a writ of
attachment against both of Mr. Dunmoreıs homes.
Meanwhile, William M. Niemi, the former president of Dunmore Homes, has
sued
Mr. Dunmore, contending, among other things, breach of contract.
³Itıs about as horrible as it could be,² said Howard Nevins, a lawyer who
represents Hemington Landscape Services, which, according to legal papers,
is owed $827,941 by Dunmore Homes. ³There just appears to be inadequate
resources to get creditors paid.²
In January, a bankruptcy judge in New York agreed to have the case moved
to
California.
³It seems like the company is in a shambles, but Sidney Dunmore is still
alive and well,² Mr. Curran said. ³Iım sure we havenıt seen the last of
Mr.
Dunmore or Dunmore Homes.²
Indeed, the real estate vein runs deep in the Dunmores. People close to
the
family say that Sidney Dunmore keeps his distance from his two sons,
Sidney
and Jeremy, now in their 30s. Their company, Dunmore Capital, a real
estate
venture firm, has troubles of its own. Umpqua Bank, based in Oregon, is
suing the two for repayment of several million dollars in loans.
The bank named Ruth Dunmore, their grandmother, and the estate of George
Dunmore in that suit. Umpqua Bank points to them as cosignatories for the
loans. But in her cross-complaint to that suit, the elderly Mrs. Dunmore
says the two young entrepreneurs ³embarked on an aggressive and unending
campaign to, among other things, scare, pressure and manipulate² her.
The booming real estate business in the Central Valley has ground to a
halt,
but another business is booming here. For Mr. Nevins, whose specialty is
bankruptcy law, ³itıs been very busy.²
Katie Hafner re****ted from Yuba City in December and did additional
re****ting in San Francisco.
http://www.nytimes.com/2008/03/07/business/07dunmore.html
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