June 4, 2009 - Prospect Homes of Richmond Inc., Richmond VA

Henrico-based Prospect Homes files for bankruptcy

Prospect Homes of Richmond Inc., one of the area's largest builders, has filed for bankruptcy protection.

"This is a reflection of the market," said Roy M. Terry Jr. of DurretteBradshaw law firm in Richmond, which is representing the Henrico County-based home builder.

Sales of newly built homes are just beginning to inch up after hitting new lows in January, according to the National Association of Home Builders.

Prospect Homes, which has been in business for 26 years, was the sixth-largest builder in the Richmond area last year, according to the Home Building Association of Richmond. The company built 114 residential units and had nearly $36 million in sales in 2008.

The petition, filed Tuesday with the U.S. Bankruptcy Court in Richmond, lists assets of between $50 million and $100 million as well as debts of $50 million to $100 million. Specific details are not yet available.

The builder's largest creditor is SunTrust Bank, which is owed $6.1 million, including $3.8 million secured by real estate or equipment, according to the bankruptcy petition.

Nine of the 20 largest creditors are banks, including local community banks such as First Market Bank, Franklin Federal Bank, C&F Bank, Virginia Commonwealth Bank and Village Bank.

The banks are owed about $30.3 million, of which $21.6 million is secured by real estate.

David Reel, spokesman for the local building association, said the market for new homes isn't robust by any stretch.

"You hate to see any builder file for bankruptcy, but it's a double hit when it's a local builder."

Reel said the credit crunch is severe. Builders are having trouble getting loans, making it difficult to move on to the next project, he said.

"When the building industry across the board is frozen out of the credit market, that may be an underlying reason why the industry is hurting," Reel said.

Prospect Homes' bankruptcy could be an isolated situation or symptomatic of a bigger problem, he said. "Time will tell."

Terry, the builder's attorney, said the goal is for Prospect Homes to emerge from bankruptcy and build homes again.

He said he did not know how many people are employed at Prospect Homes. "It has been a changing number."

Prospect President Joseph R. Audi or other officials with the company were unavailable for comment.

The company has projects in various stages of completion, from property not yet divided into lots to houses that are nearly complete, Terry said.

Original Story - Richmond Times-Dispatch