October 29, 2007
Shaky foundation | Do troubles at Oxford Homes reflect a breakdown in Maine's once-dazzling modular home industry?
By Whit Richardson
Oxford Homes, a 30-year old company that until this year was one of the four largest modular home builders in the state, is no more. But much to its former owner's chagrin, its debt is as alive as ever.
On Aug. 13, Peter Connell, former president and owner of Oxford Homes Inc., sent a letter to the company's creditors to inform them Oxford Homes had "ceased production" and sold its operating assets to Eco-Building Systems, a new company also based in Oxford.
Oxford Homes, which employed roughly 100 people, had struggled for several months to stem slipping sales and pay off mounting debt. By Aug. 8, when Eco-Building Systems signed a purchase and sales agreement with Oxford Homes, Oxford Homes owed more than 100 creditors a total of over $1.4 million. Eco-Building Systems paid $300,000 in cash for Oxford's business assets, equipment leases, installment loans and tax obligations, according to documents filed later with U.S. Bankruptcy Court in Portland.
Eco-Building will retain Oxford Homes' workforce and continue to manufacture modular homes under the Oxford Homes' brand name. Connell, who had owned Oxford Homes since 1992, was made president of Eco-Building Systems by Eco's investors. Connell would not name the investors, but said he is not one of them.
On the surface, the sale seems to be a fortunate break for the company and the town it helps support. But nine unsecured creditors ˆ creditors with nothing but a promise from Oxford they'll be paid ˆ are petitioning the U.S. Bankruptcy Court to force Oxford into involuntary bankruptcy. The creditors claim Oxford Homes owes them more than $318,000 for unpaid materials and services. If successful, the petition would allow the court and a trustee to delve into Oxford's business transactions over the past 90 days ˆ including its sale to Eco-Building Systems ˆ and possibly make elements of the sale null and void, according to Matthew Goldfarb, the Portland lawyer representing the creditors, including Waterville Window Co. in Waterville, Wood Structures Inc. in Biddeford and Nelson & Small Inc. in Portland. Creditors contacted by Mainebiz declined to comment on the case.
"There is no legal right to transfer assets and shut down your business when you have creditors who are relying on those assets as a sign that your company is an ongoing business," Goldfarb says. "So the desire to file [the petition] was to plumb the depths of business dealings because we believe any transfer of assets from Oxford Homes to the new entity was preferential transfer or transfer in fraud of creditors."
Connell says the sale was a legitimate transfer of business assets and has counterfiled to dismiss the lawsuit. He says the press has made the sale out to be "a terrible thing, but quite frankly it saved 100 to 150 jobs by doing it the way I did it. And I don't apologize for that."
In addition to the nine petitioning creditors seeking payback in bankruptcy court, another of Oxford Homes' unsecured creditors, Universal Forest Products Inc., is seeking to recover more than $127,000 from the company in Oxford County Superior Court, according to the Sun Journal in Lewiston. The Georgia-based lumber company has asked the bankruptcy court to allow it to proceed with a civil action filed in September against Oxford Homes and Connell, who is being sued as a personal guarantor and has at stake his personal property, including a $600,000 home in Norway, the paper said.
All told, Oxford Homes' legal troubles amount to a small business version of a soap opera. But some in the industry say the cracks in the company's façade reflect a modular home downturn in Maine and around the country.
Mod squad
Anyone who has driven Route 26 through Oxford, past the modular home manufacturers and dealers populating this stretch of road, has witnessed the important economic role the industry plays in the area.
Maine's modular home industry has grown steadily since the 1980s, when modular homes first split from the trailer industry into a hot commodity of their own. By the mid 1990s, the industry had about five percent of the market share of new home construction in Maine, according to Richard Cromwell, former president of the Modular Home Builders of Maine. A decade later, manufactured homes ˆ mostly modular ˆ made up 41% of single family housing permits in Maine, according to the Manufactured Housing Board of Maine.
Between 2001 and 2005 alone, modular home sales in Maine increased by roughly 50%, according to Fred Hallahan of Hallahan Associates, a Baltimore consulting firm that follows the modular home industry. The growth of Maine's modular home industry kept pace with national trends.
But by 2006, the modular home industry had slowed down. Nationally, the number of modular homes built in the country dropped more than 10% from 43,000 in 2004 to 38,500 last year, and is projected to decrease to 33,000 this year, Hallahan says. But "as bad as that picture is nationally, Maine is even worse," Hallahan says. The number of modular homes built in Maine dropped 33%, from a peak of 1,500 in 2005 to roughly 1,000 last year ˆ on par with the industry's production six years ago, Hallahan says. One of the reasons for the drop, he says, is competition from cheaper Canadian imports.
David Cutler, president of Oxford modular home manufacturer Keiser Homes, agrees the industry has taken a hit. "The demand is not the same demand it was two years ago," Cutler says.
Robert LeClair, executive director of the Manufactured Housing Board of Maine, says Oxford Homes failed because it was on "the verge of collapse" before the market downturn. Cromwell, past president of the Modular Home Builders of Maine, says he doesn't know what happened behind the scenes, but that it was probably just "a perfect storm of stuff" that came together at the same time. He says, however, that Oxford Home's problems aren't from lack of leadership. "Sometimes when something goes wrong you can say, 'The guy running it was a jerk,'" Cromwell says. "This wasn't the case."
This is not the first time Connell and Oxford Homes have had financial trouble. The company filed for Chapter 11 bankruptcy in 1994 while under Connell, when it owed roughly $4.4 million to secured and unsecured creditors, according to court documents. Connell says the company emerged from that bankruptcy in 1995.
Connell says Oxford failed this time around because it "didn't have the capital some of the other entities have to withstand this downturn."
The mod housing slump has affected other modular home manufacturers, but not to the extent it has Oxford Homes. Ray Atkinson, general manager of KBS Building Systems in Paris, says his company saw the housing slump coming and adapted its operations accordingly. When asked why a company like Oxford Homes struggled while others didn't, Atkinson simply says: "Management, more than anything else. Just stay focused on where the market is going, and go after the market."
Three years ago, KBS began supplementing its residential modular offerings by building units for the commercial sector. Since then, KBS has landed some big contracts, such as a $5.5 million deal to build a 90-unit residential condo development in Concord, N.H. "We've just modified who we were selling to," Atkinson says. "The housing market dropped off so we picked up on the commercial end."
While modular home builders like KBS were picking up million-dollar deals, Oxford Homes chugged along on a bumpier path. In late April, Northeast Bank in Lewiston called in a $500,000 loan, signed the month before, which Oxford Homes couldn't pay, according to court documents. Desperate for funds to keep the company afloat, Oxford Homes' snagged a loan for an undisclosed amount on May 1 from New England Homes in Greenland, N.H., which put a lien on all Oxford Homes' business assets, according to Uniform Commercial Code filings with the Maine Department of the Secretary of State. Oxford Homes used the new loan to pay back Northeast Bank. But by this summer, the company realized it "would likely be unable to recover economically" and began negotiations with "several companies interested in acquiring all or a portion of Oxford's business and/or capital stock," according to court documents.
Enter Eco-Building Systems, a limited liability company incorporated in Maine on Aug. 7, the day before it bought Oxford Homes, minus Oxford's outstanding debt.
Oxford, in court
Oxford's new owner, Eco-Building Systems, is an affiliate of Eco Built Communities, a Boston-based group that Connell says is a trade name representing several residential developments in New England that are eco-friendly. According to Sept. 28 incorporation records in Massachusetts, the managers of Eco-Building Systems are Modular Investor LLC and Boston-based developer Steve Goodman. Goodman is also the manager of Modular Investor. (Maine incorporation records do not list a manager for Eco-Building.)
According to Eco Built Communities' website, one of EBS' residential developments is at the Old Marsh Country Club, a gated golf community in Wells that, according to the Portland Press Herald, is slated to open next year. Goodman did not respond to repeated calls for comment. According to court documents, EBS was "interested in acquiring Oxford to secure a construction facility to produce residential buildings for one of its projects."
Oxford used revenue from the sale to EBS to pay the loan from New England Homes, the salaries of its roughly 100 employees and unpaid taxes.
Connell's lawyer, Steven Cope, on Oct. 4 filed a motion with U.S. Bankruptcy Court to throw out the involuntary bankruptcy case. Oxford Homes was on the verge of paying an initial dividend of $137,582 to its unsecured creditors when the involuntary petition was filed, according to court documents. The motion says the nine petitioning creditors are under the misconception that they will only get paid in the event of a bankruptcy, "when the truth is that the bankruptcy will simply chew up a substantial portion of available funds and delay distribution for a year or more. Abstention and dismissal will be in the best interests of all creditors."
Goldfarb, the creditors' lawyer, says it's a little late for that. "To show concern for creditors is misplaced at this point," he says. "If there was ever a case where creditors deserve a fair shake it is a case like this one."
Goldfarb says he will be opposing Oxford Homes' motion for dismissal. A hearing on the case is scheduled for Nov. 13.
"We'll take whatever is left," Goldfarb says. "At least we'll know we got a fair shake, and that's essentially what bankruptcy is designed to do."
On Aug. 13, Peter Connell, former president and owner of Oxford Homes Inc., sent a letter to the company's creditors to inform them Oxford Homes had "ceased production" and sold its operating assets to Eco-Building Systems, a new company also based in Oxford.
Oxford Homes, which employed roughly 100 people, had struggled for several months to stem slipping sales and pay off mounting debt. By Aug. 8, when Eco-Building Systems signed a purchase and sales agreement with Oxford Homes, Oxford Homes owed more than 100 creditors a total of over $1.4 million. Eco-Building Systems paid $300,000 in cash for Oxford's business assets, equipment leases, installment loans and tax obligations, according to documents filed later with U.S. Bankruptcy Court in Portland.
Eco-Building will retain Oxford Homes' workforce and continue to manufacture modular homes under the Oxford Homes' brand name. Connell, who had owned Oxford Homes since 1992, was made president of Eco-Building Systems by Eco's investors. Connell would not name the investors, but said he is not one of them.
On the surface, the sale seems to be a fortunate break for the company and the town it helps support. But nine unsecured creditors ˆ creditors with nothing but a promise from Oxford they'll be paid ˆ are petitioning the U.S. Bankruptcy Court to force Oxford into involuntary bankruptcy. The creditors claim Oxford Homes owes them more than $318,000 for unpaid materials and services. If successful, the petition would allow the court and a trustee to delve into Oxford's business transactions over the past 90 days ˆ including its sale to Eco-Building Systems ˆ and possibly make elements of the sale null and void, according to Matthew Goldfarb, the Portland lawyer representing the creditors, including Waterville Window Co. in Waterville, Wood Structures Inc. in Biddeford and Nelson & Small Inc. in Portland. Creditors contacted by Mainebiz declined to comment on the case.
"There is no legal right to transfer assets and shut down your business when you have creditors who are relying on those assets as a sign that your company is an ongoing business," Goldfarb says. "So the desire to file [the petition] was to plumb the depths of business dealings because we believe any transfer of assets from Oxford Homes to the new entity was preferential transfer or transfer in fraud of creditors."
Connell says the sale was a legitimate transfer of business assets and has counterfiled to dismiss the lawsuit. He says the press has made the sale out to be "a terrible thing, but quite frankly it saved 100 to 150 jobs by doing it the way I did it. And I don't apologize for that."
In addition to the nine petitioning creditors seeking payback in bankruptcy court, another of Oxford Homes' unsecured creditors, Universal Forest Products Inc., is seeking to recover more than $127,000 from the company in Oxford County Superior Court, according to the Sun Journal in Lewiston. The Georgia-based lumber company has asked the bankruptcy court to allow it to proceed with a civil action filed in September against Oxford Homes and Connell, who is being sued as a personal guarantor and has at stake his personal property, including a $600,000 home in Norway, the paper said.
All told, Oxford Homes' legal troubles amount to a small business version of a soap opera. But some in the industry say the cracks in the company's façade reflect a modular home downturn in Maine and around the country.
Mod squad
Anyone who has driven Route 26 through Oxford, past the modular home manufacturers and dealers populating this stretch of road, has witnessed the important economic role the industry plays in the area.
Maine's modular home industry has grown steadily since the 1980s, when modular homes first split from the trailer industry into a hot commodity of their own. By the mid 1990s, the industry had about five percent of the market share of new home construction in Maine, according to Richard Cromwell, former president of the Modular Home Builders of Maine. A decade later, manufactured homes ˆ mostly modular ˆ made up 41% of single family housing permits in Maine, according to the Manufactured Housing Board of Maine.
Between 2001 and 2005 alone, modular home sales in Maine increased by roughly 50%, according to Fred Hallahan of Hallahan Associates, a Baltimore consulting firm that follows the modular home industry. The growth of Maine's modular home industry kept pace with national trends.
But by 2006, the modular home industry had slowed down. Nationally, the number of modular homes built in the country dropped more than 10% from 43,000 in 2004 to 38,500 last year, and is projected to decrease to 33,000 this year, Hallahan says. But "as bad as that picture is nationally, Maine is even worse," Hallahan says. The number of modular homes built in Maine dropped 33%, from a peak of 1,500 in 2005 to roughly 1,000 last year ˆ on par with the industry's production six years ago, Hallahan says. One of the reasons for the drop, he says, is competition from cheaper Canadian imports.
David Cutler, president of Oxford modular home manufacturer Keiser Homes, agrees the industry has taken a hit. "The demand is not the same demand it was two years ago," Cutler says.
Robert LeClair, executive director of the Manufactured Housing Board of Maine, says Oxford Homes failed because it was on "the verge of collapse" before the market downturn. Cromwell, past president of the Modular Home Builders of Maine, says he doesn't know what happened behind the scenes, but that it was probably just "a perfect storm of stuff" that came together at the same time. He says, however, that Oxford Home's problems aren't from lack of leadership. "Sometimes when something goes wrong you can say, 'The guy running it was a jerk,'" Cromwell says. "This wasn't the case."
This is not the first time Connell and Oxford Homes have had financial trouble. The company filed for Chapter 11 bankruptcy in 1994 while under Connell, when it owed roughly $4.4 million to secured and unsecured creditors, according to court documents. Connell says the company emerged from that bankruptcy in 1995.
Connell says Oxford failed this time around because it "didn't have the capital some of the other entities have to withstand this downturn."
The mod housing slump has affected other modular home manufacturers, but not to the extent it has Oxford Homes. Ray Atkinson, general manager of KBS Building Systems in Paris, says his company saw the housing slump coming and adapted its operations accordingly. When asked why a company like Oxford Homes struggled while others didn't, Atkinson simply says: "Management, more than anything else. Just stay focused on where the market is going, and go after the market."
Three years ago, KBS began supplementing its residential modular offerings by building units for the commercial sector. Since then, KBS has landed some big contracts, such as a $5.5 million deal to build a 90-unit residential condo development in Concord, N.H. "We've just modified who we were selling to," Atkinson says. "The housing market dropped off so we picked up on the commercial end."
While modular home builders like KBS were picking up million-dollar deals, Oxford Homes chugged along on a bumpier path. In late April, Northeast Bank in Lewiston called in a $500,000 loan, signed the month before, which Oxford Homes couldn't pay, according to court documents. Desperate for funds to keep the company afloat, Oxford Homes' snagged a loan for an undisclosed amount on May 1 from New England Homes in Greenland, N.H., which put a lien on all Oxford Homes' business assets, according to Uniform Commercial Code filings with the Maine Department of the Secretary of State. Oxford Homes used the new loan to pay back Northeast Bank. But by this summer, the company realized it "would likely be unable to recover economically" and began negotiations with "several companies interested in acquiring all or a portion of Oxford's business and/or capital stock," according to court documents.
Enter Eco-Building Systems, a limited liability company incorporated in Maine on Aug. 7, the day before it bought Oxford Homes, minus Oxford's outstanding debt.
Oxford, in court
Oxford's new owner, Eco-Building Systems, is an affiliate of Eco Built Communities, a Boston-based group that Connell says is a trade name representing several residential developments in New England that are eco-friendly. According to Sept. 28 incorporation records in Massachusetts, the managers of Eco-Building Systems are Modular Investor LLC and Boston-based developer Steve Goodman. Goodman is also the manager of Modular Investor. (Maine incorporation records do not list a manager for Eco-Building.)
According to Eco Built Communities' website, one of EBS' residential developments is at the Old Marsh Country Club, a gated golf community in Wells that, according to the Portland Press Herald, is slated to open next year. Goodman did not respond to repeated calls for comment. According to court documents, EBS was "interested in acquiring Oxford to secure a construction facility to produce residential buildings for one of its projects."
Oxford used revenue from the sale to EBS to pay the loan from New England Homes, the salaries of its roughly 100 employees and unpaid taxes.
Connell's lawyer, Steven Cope, on Oct. 4 filed a motion with U.S. Bankruptcy Court to throw out the involuntary bankruptcy case. Oxford Homes was on the verge of paying an initial dividend of $137,582 to its unsecured creditors when the involuntary petition was filed, according to court documents. The motion says the nine petitioning creditors are under the misconception that they will only get paid in the event of a bankruptcy, "when the truth is that the bankruptcy will simply chew up a substantial portion of available funds and delay distribution for a year or more. Abstention and dismissal will be in the best interests of all creditors."
Goldfarb, the creditors' lawyer, says it's a little late for that. "To show concern for creditors is misplaced at this point," he says. "If there was ever a case where creditors deserve a fair shake it is a case like this one."
Goldfarb says he will be opposing Oxford Homes' motion for dismissal. A hearing on the case is scheduled for Nov. 13.
"We'll take whatever is left," Goldfarb says. "At least we'll know we got a fair shake, and that's essentially what bankruptcy is designed to do."
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