WORLD-HERALD STAFF WRITER
That's the word from Neil Smith, vice president of HearthStone, who, like others in the new-home game, has heard all the rumors: The company has filed for bankruptcy, it's going to file, it's going out of business.
"None of those are true," Smith said. "Certainly the last four years have tested the home-building business in general. We're not immune to that. We've experienced that same sort of difficulty in Omaha. When there's that much shift within an industry, it has a big impact."
In response to slow home sales, the company has cut staff and extended the cycles of payments to contractors.
That has prompted the filing of liens in the last two weeks by four contractors to lock in more than $250,000 in payments for work on HearthStone homes in Douglas and Sarpy Counties.
HearthStone built 300 houses in the Omaha area last year, down from a peak of 962 in 2007. The company cut its workforce in the past four years from about 120 people to 28, Smith said, but expects to build and sell another 275 to 300 homes this year.
HearthStone has 10 completed homes in its unsold inventory and is building 68 others under contract with buyers who expect to close on their purchases within a few months. It takes about four months to build each house, Smith said.
"I don't think they're having any problems" making payments, said Eric Patomson at AA Heating & Air Conditioning, which is owed about $200,000. "We're going to go to a meeting this week and see what's going on, to see where they're at, what the payment schedule will be."
Douglas County Register of Deeds Diane Battiato said Shamrock Concrete filed liens on 16 projects; Arid Resources, which does waterproofing and other foundation work, filed 34; and AA Heating filed 17. Shamrock is owed about $38,000 and Arid about $25,000, Battiato said.
In Sarpy County, Shamrock, Arid and J.C. Excavation filed 28 liens, Register of Deeds Lloyd Dowding said.
Smith said the liens are the method that contractors have to make sure they are paid for their work. Once a lien is filed, it must be paid off before a home can be sold. "We owe them money," he said. "They'll get paid, and we'll sell the houses."
David Angelloz, chief operating officer for Arid Resources, said the company filed its liens to protect its rights under the lien regulations. The company is still working on HearthStone projects, he said. The other contractors couldn't be reached for comment.
Patomson, from AA Heating, also said he filed the liens to protect the company's rights under state law, which recognizes liens filed within 120 days of work being completed.
AA Heating, which worked on about 1,100 HearthStone homes over the past 3½ years, stopped working on HearthStone properties in November because the margins were too small, he said, not because he anticipated payment problems. "They've been paying us," he said
Residential housing permits nationally have dropped from 1.2 million a year to about 350,000, and Smith, the HearthStone vice president, said demand in Omaha has slumped as well.
He acknowledged some uncertainty among vendors but said company officials "have been in communication with them all along the way," he said, holding frequent meetings to discuss the progress of each house toward closing.
Smith said he understands the doubts that led to the liens and the rumors. "That's not an unwarranted thought as we go through these tough times. Thousands of builders (nationally) have gone out of business. We're trying to do the things we can on a day-to-day basis to remain one of the builders that are around. The fact that we're here four years later is a testament to that."
The company has gotten good cooperation from its lenders and from the vendors who supply the workers and material to build the houses, Smith said. Some vendors have left, he said, but others have taken their places and most have stuck with the company.
"One of the great things about it is that we haven't had to do this by ourselves," he said. "All those people have helped and supported us. We're going to need those guys to help us going forward."
Crews are working to finish the houses under contract, and the company is signing up new purchasers to continue starting new projects, Smith said. Home prices and interest rates are good, he said, and Omaha's low unemployment rate and generally healthy economy are factors in favor of a good year for 2012.
"We've put together a plan and we're trying to implement that plan right now," he said.
He said HearthStone has its own sales force as well as relationships with Realtors who receive referral fees for bringing in customers. The company's model homes remain staffed and open for drop-ins. The job cuts have come mostly in back-office staff positions, finding ways to handle office jobs, warranty work and other tasks with fewer people as sales have declined, he said.
"That's been really tough," Smith said. "We've impacted some people negatively in that process. But we feel like it's most important that HearthStone, which has been part of the economy of Omaha for 40-plus years, to continue to move forward. We still have hundreds of families that rely on us for their livelihoods."
Potential buyers are still visiting the company's model homes in 14 area neighborhoods, Smith said. "Traffic was good last week. Hopefully those will translate into sales."
Contact the writer:
402-444-1080, steve.jordon@owh.com
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