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For more than 30 years, the team of Kenneth Blood and Jerry Boose was known for being top developers of upscale subdivisions.
Taking the business moniker of B&B Enterprises, they developed nearly 19 communities of high-end custom homes, mostly in St. Charles, including Hidden Oaks, Three Lakes and Somerset. They would put in the infrastructure improvements and sell lots to private builders for home construction, according the company's Web site.
B&B developments called for large lots and houses with amenities such as parks, walking and bike trails, open space, ponds, club houses and a center for local businesses. In order to build Fox Mill, now within the new village of Campton Hills, B&B built a sanitary district to provide water and sewer services.
But as the economy soured and real estate took a beating, several banks filed foreclosure actions against B&B last year and this year, according to Kane County court records.
B&B has also put up 31 lots in a bulk sale in its unfinished Prairie Lakes subdivision in Campton Township, advertising the sale through Brian Coleman and Associates of Northbrook. Coleman said he could not comment about the sale.
The Village of Elburn sent a demand letter to finish roads in Blackberry Creek, another uncompleted subdivision with 100 unsold lots, Trustee Jeff Walter said. Walter lives in Blackberry Creek, one of about 600 homeowners.
"It's pretty quiet around here," Walter said. "The market is crashing with an over-abundance of supply. There are so many empty spec homes here – a ton of them are just sitting around empty. Builders cannot buy land, developers have no cash flow but still have costs to cover. It's unfortunate."
Walter's wife, Carrie Walter, is president of the new homeowners association board made up of residents.
When a subdivision is built, a developer will run the homeowners association until build-out and then turn it over to a board elected by the residents. Carrie Walter said when B&B company officials met with homeowners in October, they said they were not selling lots and the homeowners needed to step up and take over.
"I am a Realtor and I was surprised it took so long," Carrie Walter said. "I was looking and seeing no lots being sold and no building going on in all of 2009. The village had only one residential housing permit in all of 2009."
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Boose and Blood declined to comment about their business, as did Charles K. Blood, Blood's son and a principal in the company. But attorney Patrick Griffin, son-in-law to Ken Blood, company vice president and B&B's general counsel, said the company is not in bankruptcy and is negotiating terms with all the banks that are foreclosing.
Griffin said development loans are different from home loans. Instead of 15 or 30 years to pay off a home mortgage, development loans have a one-year term and are typically renewed every year.
"What has happened in the case of many developments, and ours are no exception, is that when lots don't sell for an extended period of time, the land is severely devalued," Griffin said. "The loans are either declared in default because the bank becomes under-collateralized or the loan is simply not renewed again, even if it's current."
For example, a development had an appraised value of $20 million and the developer put in $10 million in improvements funded by a development loan. When the loan comes up for renewal, the bank gets a new appraisal.
"Due to the economy, due to lack of sales and due to depressed lot prices, you might get a new appraisal that values the property at $5 million – maybe even less," Griffin said.
"So now the bank is under-collateralized by $5 million. As a bank, you want to balance your loan. As a developer, you either come up with that money or the loan is not renewed. Now multiply that scenario over several projects," Griffin said. "That's a tough hill to climb."
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In Prairie Lakes, B&B company officials also went to the homeowners last fall, explained their financial situation and got its homeowner-run association started. The subdivision has 150 lots, 31 that are vacant and unsold.
Association President Robert Young said homeowners are concerned about their investment as the community is not fully built-out. But they are taking hope that at least three houses are under construction.
"What are their concerns? That they have a safe place to live in and maintain their values," Young said of his fellow homeowners. "I do drive the neighborhood and there is activity. People are willing to invest in the community. It is what it is. We're making it work."
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According to court records, Benchmark Bank filed an $8 million foreclosure in June 2009 against B&B Properties of Illinois, Boose, Blood and others. The Illinois Department of Professional and Financial Regulation closed Benchmark in December and its accounts were transferred to MB Financial Bank.
Amcore Bank filed a $12 million foreclosure in August 2009 against Jerry Boose and Kenneth Blood and others. Harris Bank filed a $1.7 million foreclosure in February against B&B Enterprises, Boose, Blood and others.
While he could not discuss any loans his bank might have made to B&B, Bob Hoge, president of Valley Community Bank in St. Charles, praised Boose and Blood as honorable developers hurt by an unrelenting recession.
"I've known Jerry and Ken for almost 30 years," Hoge said. "They've done many, many, very, very nice developments in our area. Unfortunately, the current real estate market has had a devastating effect on their business. These are good family people – not people who came into the market to make a killing and then leave. They reinvested in our community and my heart goes out to them."
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Griffin said the company hopes to stay in business.
"I've heard we're dissolved. I've heard we've filed for bankruptcy and I've heard we've shut our doors," Griffin said. "None of that is true. We continued to invest our time and money into these projects long after the economic writing was on the wall … because we believe in our communities."
Despite the company's long track record, Griffin said the times are uncertain.
"These are unprecedented times for the development business and nobody has a crystal ball," Griffin said. "Nobody can tell you when people are going to start buying homes again. If you're still standing, you count your blessings and keep up the fight."
B&B subdivisions
B&B Enterprises of St. Charles has developed 19 subdivisions.
• Finished developments are Timber Ridge, Meadow Ridge, Farrier Point, Somerset, Cranston Meadows, Arbor Creek, Evans Glen, Hidden Oaks, Oak Glen, Norton Wood, Three Lakes and Fox Creek, all in or near St. Charles; Prairie Oaks in Marseilles.
• Current developments are Fox Mill in Campton Hills, Prairie Lakes in Campton Township, Blackberry Creek in Elburn, Heron Creek and Sycamore Creek in Sycamore and Stonebrook in Elgin.
Source: B&B Enterprises Web site www.bbhomes.com
Legal woes dog developers
In addition to its economic woes, B&B Enterprises owners Kenneth Blood and Jerry Boose were the target of recent lawsuits. Edward Fiala, president of the homeowners association board in the Fox Mill subdivision, filed a $3 million civil racketeering suit last year in federal court against the developer and Wasco Sanitary District officials, alleging the developer accepted connection fees that should have gone to the district.
Attorney Robert Villa, representing the developers, called it "a work of fiction."
This year, the current homeowner board of Fox Mill filed suit in Kane County seeking $70 million. The suit alleges that when the developer's employees and family members controlled the association board from 1994 to 2008, they used the association's dues for their own personal benefit, among other allegations.
Motions to dismiss are filed and pending in both cases.
Jerry Boose and Kenneth Blood have also filed their own lawsuit last summer against Joseph DeJure, a homeowner in Fox Mill, alleging defamation and seeking $600,000 in damages. The case is pending.
– Brenda Schory