Rottlund Homes, a firm with deep Minnesota roots that once was one of the nation's largest privately held homebuilders, will cease operations by year's end, a victim of the brutal downturn in the local housing market.
Unable to secure financing to stave off the downturn or find a buyer, Rottlund confirmed Thursday that it has appointed a receiver to liquidate its assets.
"We fought the valiant fight," said Steven Kahn, the firm's chief financial officer. "For the past five years, we've tried to continue to build homes in what has become a very, very difficult housing market."
The Roseville company tried to work with three banks to secure financing but was unable to craft a deal, Kahn said. A search for a buyer proved futile, he added.
Rottlund Homes was founded in 1973, by David Rotter and Roy Lund. David Rotter's brother Bud joined the company within a year of its founding. The trio transformed the business into a national brand, expanding into Iowa and Florida and building some 25,000 homes along the way. Rottlund astutely predicted the emerging demand for nontraditional housing more than 30 years ago.
The company was an early builder of townhouses in the Twin Cities. It also was among the first builders to use broadcast media as an advertising vehicle for homes.
But the firm couldn't overcome the severe market pressures of the Great Recession, as demand for new housing slackened and foreclosures surged.
Sales of new homes are being held back by competition from lower-priced existing homes, as well as by renewed concerns by would-be buyers about their employment and income stability, a recent Wells Fargo Securities report states.
The report declares "the housing recovery appears to be going nowhere fast." In fact, housing starts aren't expected to pick up nationally until the latter part of the decade.
"The last five years have been a housing depression," said David Siegel, executive director of the Builders Association of the Twin Cities. "Some call it a recession. We call it a depression."
In 2006, Rottlund reported $130 million in gross revenue and closed on 512 homes, according to data distributed by the Builders Association. By the end of 2010, gross revenue had declined to $38 million, with just 190 closings.
Siegel said Rottlund was a "fixture in the Twin Cities building industry. It's a pretty sad day to have a longstanding builder who has given a great deal to the community" shut down.
Rottlund has already sold its operations in Iowa and is in the process of selling off assets at its Florida division, Kahn said. Just 18 employees remain at its Roseville headquarters, down from a high of 225 at the three divisions. Twenty homes in the Twin Cities will be completed around year's end, Kahn said, while promising all subcontractors will be paid in full. "This will be an orderly liquidation; no one will get stiffed," he said.
Builders try to hang on
Rich Riemersma, co-owner of Shoreview-based Imperial Homes and president of the Builders Association, said many builders have not been able to stay afloat due to the recession. "That's been the name of the game for the last number of years," said Riemersma, adding that Rottlund's closing "is very tough news."
Meanwhile, homebuilders continue to try to hang on, hoping for demand for new homes to pick up. But recent data suggest builders may be in for a long wait. The number of permits pulled for new homes in the 13-county metro area as of the end of October was 2,450, a far cry from October 2007 when 4,232 permits were pulled, according to a Builders Association report.
"There are pockets in the Twin Cities that are doing OK," Riemersma said. "But if you're not in one of those pockets, then you may not be able to make it."
Areas such as Plymouth, Maple Grove and Blaine have picked up in terms of new homebuilding. Still, Riemersma noted, "it all depends on the project and the amenities offered. We're still hoping to see an upswing."
Janet Moore • 612-673-7752