Orleans builders reach sale agreement

An Orleans building site in Moorestown in 2006. The Bucks firm is to be bought for $170 million by NVR Inc., of Reston, Va.
An Orleans building site in Moorestown in 2006. The Bucks firm is to be bought for $170 million by NVR Inc., of Reston, Va.
Posted: April 15, 2010

Just 45 days into Chapter 11 bankruptcy, Orleans Homebuilders Inc., of Bensalem, said Wednesday that it had executed an agreement valued at $170 million with NVR Inc., of Reston, Va., for the purchase of what the company called "substantially all" of Orleans' assets.

The agreement is meant to establish a floor price that Orleans chief financial officer Garry P. Herdler said the company hoped would lead to "other, better, and higher bids."

Orleans, in a motion filed Wednesday in Bankruptcy Court in Wilmington, asked for bids to be due June 16.

NVR is the parent of Ryan Homes, which has 14 communities in Philadelphia's Pennsylvania and New Jersey suburbs, Trenton, and in Lehigh County.

As NVHomes, the company, which is traded on the New York Stock Exchange as NVR, builds in Delaware and Pennsylvania. Its stock closed Wednesday at $749.43, up 3.16 percent, or $22.93.

In 2009, NVR's revenue was $2.7 billion and its net income was $192 million, its annual report shows.

Orleans trading on the American Stock Exchange was suspended March 5.

In the 60-page motion, Orleans said NVR agreed to pay $17 million, or 10 percent of the purchase price as earnest money - half of which is now in escrow.

In announcing the agreement and the motion, which awaits approval by U.S. Bankruptcy Court Judge Patrick J. Walsh, Orleans emphasized that NVR was not the buyer involved in the nonbinding letter of intent its 17-lender consortium had rejected in February.

That decision, and the fact that the builder was unable to obtain an extension of its $350 million credit facility, led Orleans to file voluntarily for Chapter 11 protection March 1.

A hearing on the motion to approve the asset purchase agreement, as well as establish auction and bidding procedures, could be held May 4, Orleans said, if Walsh approves.

The deadline for objections is April 27 at 4 p.m.

In the motion, Orleans asked for authority to consider "bids from multiple parties" interested in acquiring fewer than its four regions of operation - North, South, Florida, and the Midwest.

In a footnote, Orleans said that, in addition to the prepetition party with whom the builder had signed the nonbinding letter of intent, the court had received a "letter of interest" from Traditions of America L.P., an active-adult builder based in Philadelphia.

If the motion and the bidding timetable are approved, the auction could take place as early as June 24, with the sale closing June 29, Orleans officials said.

Under the agreement, NVR would acquire substantially all of Orleans' land, work-in-progress home construction, and "intangible assets" for communities in the four regions. The exception would be 200 lots and units under construction at two developments in New York state.

Orleans has 4,300 lots and homes under construction.

NVR would also assume certain liabilities, including the assumption or replacement of an aggregate of about $52.6 million of bank letters of credit and external surety and other performance bonds related to those communities.

The assets to be sold exclude Orleans' community-property-management subsidiary; its mortgage-broker affiliate or income-tax refunds ($18.2 million has been received and an amended 2008 return could reap an additional $3.5 million).

The agreement provides for homes to be built and closed. Both builders would "honor the backlog contracts on homes under construction with home buyers throughout the process, including escrowed customer deposits," the motion states.

Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

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