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Developer stops work on Cascades community
Fallout from the housing slump takes a toll on the project.
By DAN DEWITT, Times Staff Writer
Published October 19, 2007
BROOKSVILLE - Levitt and Sons, builders and developers of the 925-home Cascades at Southern Hills project in Brooksville, announced a companywide construction shutdown this week.
Levitt, of Fort Lauderdale, said it will resume building new houses when it can raise operating money through new bank loans.
"We anticipate the situation is temporary and that our banks will respond to these requests promptly," the company said in a written statement.
Or maybe not, said housing analyst Jack McCabe.
"Any time a builder stops building, it's a bad sign," said McCabe, owner of McCabe Research & Consulting in Deerfield Beach.
Levitt's parent company, Levitt Corp., announced last week it had lent Levitt and Sons $84-million to prop up its stock price but refused to lend it any more money until Levitt and Sons renegotiates its bank loans.
Levitt and Sons failed to meet an Oct. 10 deadline to pay five banks $2.6-million in interest payments, the parent company said in its news release.
"Absent a restructuring of the debt which addresses Levitt and Sons' long term requirements, Levitt and Sons' viability is uncertain," said the statement from Levitt Corp., which owns all or part of several other land development companies.
The company has long acknowledged sales at Cascades at Southern Hills - its only project in the Tampa Bay area - have lagged far behind expectations.
In the less than two years the project has been open, the company has pulled permits to build 56 homes in Cascades, 15 of them models, according to Brooksville's building records; the city has issued eight permits for new houses since December.
McCabe said the company's main problem is one it shares with every other large builder in the state: the slumping housing market. But Levitt has been hit especially hard because it runs a "soup-to-nuts operation," McCabe said, from developing land to marketing and building houses.
"When things go bad, all those different divisions take hits," he said, adding that numerous suppliers have filed liens against the company for unpaid debts.
Levitt and Sons has operated as both a builder and developer since shortly after World War II, when it pioneered mass-produced homes in its Levittown communities on Long Island, N.Y., and in suburban Philadelphia.
But one new corporate strategy also left it more vulnerable to the downturn in the market, McCabe said.
Levitt and Sons, which now operates in only Florida, Georgia, South Carolina and Tennessee, builds mostly retirement communities. Demand for those "active adult" projects won't come until large numbers of the baby boom generation begin retiring in three to five years, McCabe said.
"They were somewhat ahead of the times," McCabe said.
Levitt and Sons announced plans for Cascades, a 55-and-older community, in 2004, when it bought 411 acres from the developers of the nearby Southern Hills Plantation development.
Bill Geiger, the city's community development director, said Levitt had not told him of its plans to stop construction. But the loss of income from property taxes should not hurt the city, he said, because the shutdown will also mean less demand for services.
For example, the city had planned to expand its sewage treatment plant this year to serve residents of Southern Hills Plantation and Cascades. It has now delayed the expansion until 2009, he said.
Council member Lara Bradburn said Levitt's announcement would not change the city's approach because the company has built so few houses.
"I'm not overly concerned about it," she said. "In practicality, there was a shutdown already."