Columbia condo tower faces risks

The Baltimore Sun

A controversial proposed 23-story condominium tower at the heart of redevelopment planned for downtown Columbia may be in jeopardy as its developer struggles in a challenging condo-building market.

Florida-based WCI Communities Inc. insists that the project is solid despite financial problems that caused it last week to announce 575 job cuts -- about a quarter of its work force. "We're going to move ahead and are moving ahead with the project," said James P. Dietz, WCI's executive vice president and chief financial officer.

But fresh questions about the feasibility of the Plaza Residences project near the downtown lakefront have come as WCI said more people are backing out of commitments to move into its existing condo towers and the company reported third-quarter losses that prompted stock analysts to say lenders will be increasingly less flexible with the company.

"I would be shocked if WCI could actually go forward with that tower in Columbia, Md.," said Susan Berliner, a senior managing director and analyst at Bear Stearns Co. who follows the company and the homebuilding sector. "To me, there's no way it's going to get built."

In addition to the job cuts, WCI reported that six board members, including billionaire investor Carl C. Icahn, will work without pay for the rest of 2007 and all of 2008.

Dietz said: "We've begun the utility preparations on the site. We're going to continue those and ramp up our selling efforts very shortly. We think it's a good market and a market that wants this type of product. Your readers should expect to see the tower coming out of the ground sometime soon."

But Berliner said that WCI did not mention the Columbia Plaza Residences project as one of the towers it has in the works during recent conference calls with stock analysts to discuss the company's performance.

"WCI is in talks with their banks to try to get more flexibility in their covenant to cover their interest costs," Berliner said. "I don't see how the banks would let them build another tower."

"Everyone is just waiting to see what's going to happen with them," she said. "WCI can't continue to exist in their current form."

In a company statement issued last week, Jerry Starkey, president and chief executive officer of WCI Communities, said: "Demand continues to be unpredictable from week to week, and we saw an increase in defaults and cancellations during the third quarter. We are focused on reducing our costs of operation and recently announced a restructuring that we expect will enable us to lower our annual salary and benefit expenses by about $46 million."

Daniel Oppenheim, an analyst at Banc of America Securities in New York, wrote that WCI will have only about $210 million in liquidity, "which is expected to erode quickly."

The company reported 89 defaults, in which buyers walked away from their deposits of 18 percent to 20 percent, according to Oppenheim's report on WCI's third quarter.

Founded in 1946, WCI was named America's Best Builder in 2004 by the National Association of Home Builders and Builder magazine. The builder serves primary retirement and second-home buyers in Florida, New York, New Jersey, Connecticut, Maryland and Virginia.

The company reports that it owns and controls land on which it plans to build more than 18,500 traditional and tower homes.

Some local people interested in the Columbia tower project are not surprised by WCI's financial troubles, given the overall housing market.

"It certainly has crossed my mind that WCI may not be able to build, simply by reading the market trends," said Del. Elizabeth Bobo, a Howard County Democrat. "I think it has occurred to people who want the tower and people who don't want the tower. Across the board, people have been asking, are they going to be able to pull this off in this market?"

Bobo's husband, Lloyd Knowles, is among four plaintiffs who filed a court action to stop the project. That case is pending.

Two bills that would have potentially blocked the tower died in the Howard County Council this month when there were not enough votes to get them passed.

County Executive Ken Ulman declined to comment on the recent developments with WCI and any potential impact on the tower project.

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