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Nov. 28, 2007
Copyright © Las Vegas Review-Journal

Real estate company files for bankruptcy

Prudential Americana Group's move will not affect listings, owner says

By JOHN G. EDWARDS
REVIEW-JOURNAL

Prudential Americana Group, one of the largest residential real estate firms in the Las Vegas Valley, is filing for Chapter 11 bankruptcy so it can reorganize its debts while continuing operations.

The company, which had not filed the paperwork by press time Tuesday, has 1,200 sales executives operating under its auspices and has positive operating cash flow. Owner Mark Stark, however, said Prudential Americana Group -- the seventh-largest real estate firm nationally in the Prudential network -- needs bankruptcy court protection so it can restructure its debt.


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    • "We are focused on business as usual," Stark said. "This is a debt restructuring. We continue to grow market share."

    The bankruptcy filing will not affect the 3,000 exclusive listings that Prudential Americana has in Southern Nevada, he said. Stark estimated that the company is probably the biggest residential real estate company in the area, with a 15 percent share of all local home resales. Brokers who operate under the Prudential Americana umbrella also sell new homes and commercial real estate.

    Prudential Americana is the second big Las Vegas realty firm to seek bankruptcy protection in recent months.

    Jimmy Dague, president of Vision Properties doing business as Century 21 Advantage Gold, filed for Chapter 11 bankruptcy protection in August.

    At the time of the filing Vision reported $1 million in assets and $1.8 million in liabilities. The company said it had $54.6 million in gross income in 2005. Vision reported its gross income fell to $40.3 million the following year and to $15.8 million in the first eight months of 2007. The brokerage's Web site says it has 500 agents.

    Prudential Americana's problems started in October 2004.

    Stark borrowed money to buy the company when residential real estate was booming and home prices were soaring.

    Stark bought the 75 percent of the company he did not already own from his partners and Prudential Real Estate, the national franchisor. To finance the buyout, Stark borrowed $22.5 million from Salt Lake City-based Zions Bank, an affiliate of Nevada State Bank, and Peninsula Capital Partners of Detroit.

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

    When he bought the company, Stark said he expected a slump in the local real estate loan market would follow the boom that sent home prices soaring, but he was stunned by the magnitude of the drop.

    "I did not see a 67 percent downturn coming to the Las Vegas market," he said, referring to the drop in existing home sales over the past two years.

    Because of the real estate market, Zions pulled the trigger on a loan agreement provision and ordered Prudential Americana to stop making payments to Peninsula, Stark said.

    Peninsula executives in turn pumped up the interest rate on their loan to 19 percent from an average of 15 percent, Stark said.

    Prudential Real Estate, the national franchisor, offered to assume the Las Vegas real estate company's debt, but Peninsula was unwilling to accept the company's terms.

    The national company intends to provide financing to Prudential Americana during the bankruptcy, Stark said.

    "It's probably a good strategy," said Lanis O'Steen, who owns a residential real estate brokerage in Pahrump and is a business turnaround professional.

    The real estate firm, O'Steen said, can ask the bankruptcy judge "to do what's reasonable and maximize returns and recoveries for all of the creditors."

    O'Steen said the bankruptcy filing is further evidence that small businesses are getting hurt because of the popping real estate bubble. Small businesses are key economic drivers, O'Steen said, and their problems could lead to further economic declines.

    Prudential Americana operates as an umbrella company for independent real estate brokers who agree to pay a flat fee or a percentage of their commissions for administrative, legal and other support.

    Stark told about 600 real estate sales workers on Tuesday morning about the bankruptcy and plans to reorganize the company.

    "We had a standing ovation of support from the sales executives," he said.

    Stark hopes the company will be able to emerge from bankruptcy protection in about six months.

    "We're a great company. We've been here a long time," Stark said. "I want to be here another 100 years."

    Contact reporter John G. Edwards at jedwards@reviewjournal.com or (702) 383-0420.

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    Dave Eddy wrote on June 12, 2008 12:41 PM: Rhetorical question. Should the city of Pahrump be under RICCO ACT investigation? I have a neighbor who claims her sister is some kind of real estate bigwig there and that this sister has some kind of stranglehold on the local judges. There is a high crime mobile home park called Comstock in which certain police officers seem to be corroborating with the criminals as they admonish and accuse the victims


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    GoodBye wrote on December 05, 2007 05:03 PM: Prudential is the poster child for the real estate meltdown in the Valley. Greed, lying, single minded corruption by managemtent, skimming of profits, rope a dope dealings with the public and a workforce one step up from qualifying for work as a soda jerk in a carnival side show! Goodbye and good riddance! Anyone dealing with these clowns will regret ever becoming involved!


    Current Employee wrote on December 05, 2007 11:42 AM: First of all, I have worked for Prudential Americana for almost 9 years and cannot name another owner or management team who truly cares about their staff & agents the way this company does. Information is powerful however used without ALL THE FACTS is ignorant. We all can name several airlines, hotels ect. who have done just what we are doing - RESTRUCTURING - for whatever reason as they are all different & have been stronger & better because of it. This company is staying around for a long, long time. I for one am so proud to work for this great company! We will continue to flourish!


    Buyer/Seller wrote on December 04, 2007 10:09 AM: Prudential America needs to close its doors and the pond scum return to hopping cars and selling vaccum cleaners door to door! They went bust because of internal personnel corruption,corporate greed and graft!


    Supporter wrote on December 03, 2007 06:00 PM: Prudential Americana Rules!!!


    Prudential agent wrote on November 30, 2007 09:55 PM: Prudential Americana Group Realtors is a great company to work for. Although there will be changes in the near future, I still support our company 110%. We still are strong and will continue to control the market share with our presence. I am not one bit worried. We are not going anywhere........just a little bit of tweeking and life goes on....business is business....Focus on the NOW!!!


    Former Employee wrote on November 30, 2007 12:33 PM: Don't blame the Mormons, at least for upper management at Americana. They are members of a different religion, which doesn't have any bearing on their bad behavior. And to those who call former employees who left Americana, we're not "ignorant", we're not "bitter", we just have higher standards of ethics and behavior. And the ones I talk to are much better off since they left.


    Also a former employee wrote on November 30, 2007 02:28 AM: SSSF,
    If you will READ the posts here, it appears that none of the former employees were fired. I presume the others left for the same reason I did - working for a company with no conscience held no appeal. Our posts are neither cowardly nor cheap shots. I believe they are merely intended to inform an unsuspecting public that Prudential Americana may not be as wonderful as it purports to be.


    SSSF wrote on November 29, 2007 04:53 PM: I think you people are still missing the big picture. Blaming the Real Estate Agents and Prudential Americana for the nation wide Real Estate economy is just showing how stupid you really are. Also X employees now have an open door to complain how bad this company was to them, when the truth is probably they deserved to be fired....To me this is just a cheap shot, an act of a coward. Ask yourself this simple question, how many people will be affected if their attempts to save their companies fail? Think about it, Does your job depend on these companies? You may want these companies to fail, but what if they do, and your companies boss tells you that they now need to cut back because of this...Do you still want them to fail???? I think not. So smarten up and think of the big picture. Also Stop the bashing, it doesn't do any good except to show your stupidity.


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