by Michele Gillis
Staff Writer
With bankruptcy behind, what now for Mercedes Homes?
The Melbourne-based company was among North Florida’s most visible builders, but found itself unable to pay creditors and filed for Chapter 11 in January.
A massive reorganization allowed the company to emerge from bankruptcy in late September. Debts were renegotiated and new stock was issued.
But it’s been business as usual all year.
“We’ve been open selling homes during the entire Chapter 11 process,” said Donna Sadowski, who handles the company’s marketing here.
“I think we lost two vendors through the whole thing. Most everyone agreed to stay with us, so we still finished our houses on time, met our delivery dates and continued to build and close. Actually, our build time has gone down.”
What’s different now
• Emphasis on smaller homes.
• Avoid building spec homes.
• Big reduction of full-time staff.
• Smaller offices.
What happened?
“The economic times put a lot of pressure on every builder, but I think what pushed Mercedes to the point of where it was necessary to file for the bankruptcy was that they worked with a consortium of banks here and in Texas,” said Dave Caputo, division president. “One of the banks in Texas was actually taken over by the FDIC, so there was a portion of funding there that was no longer available. That really pushed us over the edge. The banks here in Florida weren’t willing to take up that risk and funding.”
Though overbuilding and difficulty moving inventory has hurt many builders, Caputo said that is not the case with the company’s operations here.
“Depending on the division, we had different levels of risk,” said Caputo. “Here in Jacksonville, we were fortunate to never have too many lots or speculation homes on our books. But we had other portions of Florida where land deals, that the company itself did, put a strain on the cash flow. I don’t see us getting into the land development business again any time soon.”
Caputo said they will now purchase lots from an outside source. He said the emphasis now is to be a “to-be-built” builder, not a speculation home builder.
After they filed bankruptcy in January, they not only cut their staff dramatically, they also moved the office to a smaller location.
“We had to re-organize the company as far as staffing, operations, number of viable neighborhoods and overall business plan,” said Sadowski.
The company was not bailed out of Chapter 11.
“We were able to sustain our business through our normal operations during the Chapter 11,” said Sadowski. “We relied on our revenue.”
Sadowski said they are introducing four new product lines that meet the demands of consumers today.
“In the past, we were selling to people who wanted a large two-story house, but today the demand is for a much smaller one-story,” she said.
Price points will still reach first-time homebuyer all the way up to luxury home buyers.
“The plan is not to just stay where we are,” said Caputo. “We are actively searching for more land to build on. The plan is to now start expanding again. We had to get smaller in order to get leaner and more efficient. It is starting over. We are the size we were when we first started this division.”