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Prudential Americana Group Is Filing For Bankruptcy

November 28, 2007

One of the largest residential real estate firms in the Las Vegas valley, Prudential Americana Group, is filing for Chapter 11 bankruptcy. The reason they give for doing this is so that they can reorganize their debts while continuing operations.

They company, which didn’t file the paperwork as of Tuesday, has 1,200 sales executives operating and has positive cash flow. However, the owner Mark Stark has said the Prudential Americana Group, which is the seventh largest real estate firm nationally in the Prudential network, needs to have the bankruptcy court protection so that they can restructure their debt.

Stark has also said that they are focused on business as usual. He said that the bankruptcy filing is only for debt restructuring and that they continue to grow market share.

The good thing is that the bankruptcy filing will not affect the 3,000 exclusive listings that Prudential Americana has in Southern Nevada. Stark has projected that the company is possibly the biggest residential real estate company in the area. They have 15 percent share of all the local home resales. Brokers who work under the Prudential Americana name also sell new homes and commercial real estate.

Prudential Americana Group is the second big real estate firm that has filed for bankruptcy protection in recent months. In August, Jimmy Dague, who is the president of Vision Properties who is doing business as Century 21 Advantage Gold, filed for Chapter 11 bankruptcy protection.

When Vision filed for bankruptcy they had reported $1 million in assets and $1.8 million in liabilities. The company has said that it had $54.6 million in gross income for 2005. Vision also reported its gross income fell to $40.3 million the following year and then to $15.8 million in the first eight months in 2007. The brokerage’s web site had reported that they had 500 agents.

Prudential Americana’s problems started in October 2004. Stark had borrowed the money to buy the company when residential real estate was exploding and home prices were rising quickly.

Stark had bought 75 percent of the company that he didn’t own from his partners and Prudential Real Estate, which is the national franchisor. To pay for the buyout, Stark borrowed $22.5 million from the Salt Lake City-based Zions Bank, which is an affiliate of Nevada State Bank, and the Peninsula Capital Partners from Detroit.

Zions, which is still owed $4.9 million out of the $10 million that was borrowed in 2004, is in the first position among the company’s lenders. Peninsula is actually an unsecured lender and was only receiving interest payments, pending a later balloon payment.

When Stark bought the company, he had anticipated a slump in the local real estate loan market would follow the explosion that sent home prices rising, but he had not anticipated the magnitude of the drop.
When the real estate market, Zions pulled the trigger on a loan agreement provision and they also ordered Prudential Americana to stop making payments to Peninsula. After that Peninsula executives pumped up the interest rate on their loan to 19 percent from an average 15 percent.

Prudential Real Estate said that they would take assume the Las Vegas real estate company’s debt but Peninsula would not accept the company’s terms. Prudential Real Estate plans on providing financing to Prudential Americana during their bankruptcy.

Written by admin · Filed Under Las Vegas News 

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