day 5 :: trends, trials, & tribulations

After discussing the rise of social media and the downfall of traditional print advertising methods with Tom Doucette, Lindy and I hit the road for Gilbert, Ariz., and an appointment with Trend Homes.




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What I saw when I first stepped through the building's main entrance at first glance seemed merely indicative of the fact that it was lunch time...

However, after speaking with some folks at the company, it appeared in retrospect to be more a sign of the times.

In fact, as vice president of operations Darin Hughes explained, Trend went from approximately 230-plus employees at the company's pre-August 2006 peak to just 11—not counting sales representatives at its communities—today.

Following a reorganization under Chapter 11 bankruptcy protection, Trend Homes emerged as a new entity through the sale of its assets to Phoenix, Ariz.-based private equity firm Najafi Cos. At the time, Steve LaTerra of Land Advisors Organizations told Big Builder that Trend was "probably one of the best capitalized builders" in its local market.

But today, the situation is far from rosy—thanks in no small part to the FDIC takeover of at least one of the builder's creditors. Trend was told that it was fortunate in that it received a payout within a roughly 40-day timeframe, as this is pretty rapid movement through the bureaucratic red tape of FDIC operations.

However, just before the takeover, the bank had informed Trend that the payment would be made within one or two business days. Forty days may be fairly rapid movement by the FDIC's watch, but it's a far cry from a day or two.

Thanks to the difficulty of accessing operating capital, Trend found itself unable to make some payments to its trades. By maintaining an open and honest line of communication, the builder has succeeded in preserving positive working relationships.

On the home building side, it's all about taking things one day at a time. However, vice president of marketing and merchandising Sabrina Porter points out that the company has taken a proactive tack with respect to its dealings with Realtors and addressing the foreclosure crisis head-on. Using an FHA loan program, Trend is able to offer pre-move-in remodeling services on foreclosure properties, upgrading flooring, addressing vandalism (such as concrete having been poured into a home's plumbing), etc., which the buyer can finance through up to $35,000 above the sales price of the home.

It's a great program to get buyers into affordable properties while home building operations remain unsustainable. Whether or not it will be enough to get the company through the remainder of the housing downturn, only time will tell.

In the meantime, I'll keep my fingers crossed.