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Subcontractors come to Estridge's aid with $10M investment

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One of the Indianapolis area’s most formidable homebuilders has received a $10 million investment to help it weather the severe housing downturn.

The infusion into The Estridge Cos. is unusual on two fronts. Few companies in the out-of-favor homebuilding industry are able to raise capital these days. And the source of the Estridge funds wasn’t traditional investors—it was subcontractors that have a long-standing relationship with the custom builder.

Estridge Matt Cohoat, Estridge chief operating officer, left, and CEO Paul Estridge Jr. are planning the Symphony project, which already features the Wood Wind Golf Club. (IBJ Photo/ Perry Reichanadter)

Owner Paul Estridge, 52, said the company is in no danger of becoming the latest casualty of the meltdown. Yet he acknowledged the difficulties of securing traditional bank financing at a time many have restricted lending.

“How are you going to raise capital?” he asked. “We’re not a public company; the banks are shut down. What do you do? You go to the people you’ve done business with.”

About 25 investors agreed to chip in from $25,000 to $500,000 in exchange for ownership stakes. Collectively, the subcontractors will own 35 percent of the company.

Estridge, the area’s largest custom builder based on homes constructed, expects to build 250 homes this year ranging in price from $300,000 to more than $1 million.

The launch of its most ambitious project, the proposed Symphony development in Westfield, hinged on the investment, Estridge said.

The public got its chance June 21 to weigh in on the builder’s plans for the nearly $1 billion mixed-use development, which could include a 5,000-seat multipurpose stadium, as well as 3,000 homes, condominiums and apartments. The builder is asking the city to put $70 million into the project to fund roads and sewers, as well as the stadium.

Estridge said that after his company survived last summer, which he called the worst part of the downturn, the need for additional capital became evident, in part to advance the Symphony project.

Shrinking with times

Estridge Cos. expects revenue of $75 million this year from its homebuilding, financing and land development businesses. The figure is about half its revenue in 2004, before the crisis hit.

Home sales are off 60 percent and the work force is down 50 percent, to about 125.

“It’s been very, very challenging,” Estridge said. “It’s tested us beyond ways we could have never imagined.”

The company completed its first round of funding in December, followed by another that closed earlier this month. Estridge said the response was so overwhelming, it “blew us away.”

Chris Kaiser, general manager of the locally owned T.A. Kaiser Heating & Air Inc., said jumping aboard was an easy decision.

“Paul’s a man of his word,” he said. “I don’t think I would do this with anyone but Estridge. I would do it 100 times.”

The funding will allow Estridge to pursue more projects, which should translate into additional work for subcontractors at a time business is slow.

Estridge facts“I’ve helped a few builders on a smaller scale, but nothing like this,” said Jesse Tremain Jr., president of Indianapolis-based Tremain Tile Marble & Granite. “You’ve got to go with your gut [feeling] more than anything, because it’s got to do with your livelihood.”

Tremain has worked for Estridge for more than 30 years. Estridge’s father, also named Paul, founded the company in 1967. The younger Estridge started the development arm in 1983 and bought his father out in 1992.

The company gained attention in the spring of 2009 when it volunteered to build a home in the Martindale-Brightwood neighborhood for the popular ABC-TV show “Extreme Makeover: Home Edition.”

No quick turnaround

The boost from investors helps assure Estridge won’t suffer the same fate of other residential builders that have failed or exited the market in recent years.

Indianapolis-based Hansen & Horn Group Inc. ceased operations and fell into bankruptcy early this year, and locally based builders Davis Homes and CP Morgan went out of business in 2009. National player KB Home left in 2007.

The local housing market this year began showing signs of improvement. But a Butler University economics professor is skeptical a true turnaround is imminent.

“With unemployment being high, it’s tough to be optimistic this year,” said William J. Rieber of Butler’s College of Business. “All that uncertainty weighs on the bigger purchases.”

Indiana’s unemployment rate hit 10 percent in April—marking a return to double-digit joblessness for the first time since September—and held steady in May.

Meanwhile, homebuilders are feeling the effects of the April 30 expiration of the homebuyer tax credit, which provided $8,000 for first-time homebuyers and $6,500 for existing homeowners.

F.C. Tucker Co. reported that, through the first five months of this year, pending home sales in central Indiana rose 9.3 percent. But they fell off a cliff in May, tumbling 32 percent.

According to the U.S. Commerce Department, national sales dropped 33 percent from April to May, to a seasonally adjusted annual sales pace of 300,000—the lowest figure since at least 1963.

Still, builders are gearing up for better times. Through May, building-permit filings in the Indianapolis area were up 35 percent from the same period a year earlier, according to the Builders Association of Greater Indianapolis. But the momentum is slowing. Permits were flat in April and increased just 2 percent in May.

A handful of homebuilders sees enough potential in the Indianapolis market to expand here.

Cincinnati builders Potterhill Homes and Fischer Homes, in addition to Ryan Homes of Reston, Va., have entered Indianapolis since last fall. The latest entry, Potterhill, is building with Estridge and Kentucky-based Drees Homes in the Heritage Hill subdivision straddling Avon and Brownsburg.

Estridge realizes a rebound will be slow to take hold, but he’s encouraged by activity from a recent weekend in which the company sold eight homes.

“It’s not turning around quickly,” he said, “but it’s starting to build back up.”•

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  • Highland Green
    Mr. Estridge,

    Please let Beazer Homes exercise their option to purchase the remaining home sites in Highland Green. The last 3 homes Estridge built were well below par for the neighborhood and less than the your own criteria as developer. Two of those homes have incomplete exterior work 4 to 5 months after closing.

    Beazer is currently building better "spec" homes on their lots on the same street. The lot next to me is marked "sold" by Estridge. I fear what you might build on this lot.
  • Estridge not paying contractors
    I have had 3 liens slapped on my house in 1 month from contractors Estridge didn't pay. I am having to take this one to court, because every week we get another lien. Estridge keeps making up excuses when we call.
  • class action lawsuit
    Pls contact me for a class action lawsuit against Estridge.
  • victim
    I hope Estridge will be exposed by all the false and broken promises he has made to his own customers. You know the type, the middle class guy, with a wife and child, working hard, but not able to buy a Estridge Custom Home. SO the middle class,hardworking guy, buys into the whole "Trust The Estridge Experience" marketing bit and we, the unsuspecting middle class, schmucks, are roped in by those slick sales people and those sweet speeches about "trust" and doing the right thing and before you know it we're living in a vinyl clad, slabbed town home. Then Paul had a vision, actually a marketing idea, he would find a congregation, build them a fabulous new england style church and the customers would come. It was also to prove (IMO)what a committed Christian he is. It even states that on the declaration of the Centennial Bible Church. He sold us and we paid our hard earned middle class money to Mr. Estridge and he came up with very fancy covenants for us to live by. Life would be good! Unfortunately,those pesky construction, issues started rearing its head, immediately.
    Like, say, for an instance, inadequate heat, so cold, we, as a family live and take our meals on the second floor, during the winter months and have done this since we moved in, 5 years ago. Some of you might think this is an exaggeration. So I invited Paul and one of his associates to stop by and experience living here on cold night, but, they declined. Actually, the heat, could be repaired a bit at an additional cost of $3 thousand dollars. Of course many of our dear, middle class, neighbors had to re-do their heating systems, I guess Paul wouldn't visit them either. Imagine our surprise walking out into the garage, the first winter we were here, to find our ceiling was on the floor and water every where. A cosmetic repair (By Estridge) was made with no explanation of why it happened. A few weeks later the floor in the master closet also collapsed with no reason given, cosmetic repairs made. One night I looked up at the living room ceiling and I noticed a crack going across the ceiling, but what really got my attention was the water pouring from the ceiling. A cosmetic repair was made by Estridge, no reason for the damage given. Remember we are talking a new home. Perhaps one of the more distressing incidents involved a huge, unexpected crash of shelving in my "gourmet" kitchen with the fancy glass doors, I was so proud of. I had previously decided to display a few items, from my grandmothers antique china, and of course the china was broken, gone, forever, after the shelving collapsed. Unfortunately for us, we immediately summoned an Estridge home life team member to take pictures. It seems the hinges or brackets to keep the shelving in place were installed upside down. A quick cursory check of our other shelves revealed the same construction error. Another customer, of Estridge, discovered the upside down brackets installed in the gourmet kitchen in the model town homes! What are the chances? MMM, that's what we thought to. Estridge of course ducked all blame, because we (the middle class guys) had missed it on the final walk through. Who knew to check brackets, inside of cabinets? I think the big problem was a language barrier, (for installers) as the instructions for assembly, were probably printed in English and not spanish. The customer lost out once again. It took over five years to get our town home gutters clean. I might add that was a yearly service promised by Estridge. The maintenance contractor found 2 inches of water in the gutter and it is has not rained in weeks, huh? Paul's attorney reported to the Attorney General last year the gutters are always cleaned. Hmm, I am confused. Turns out I've had 2 inches of standing water in the gutters for sometime. I also have an irrigation system that sprays towards the house instead the lawn, this resulted in paint being chipped, from our home, which ,cosmetically, was later repainted, but now, Micro Aire, after a full analysis, discovered we probably have mold growing in our southern, exposed bay window. Problems, problems, health problem, smell problems recovery and remediation problems. Our covenants, at closing, were an instrument dated 1999 and exterior damage was covered by the master association policy, but, Paul had a better idea, and he amended the covenants, of course to accomodate an expanding customer base, but he slipped in a little clause stating any town home owners exterior problem (other that natural disaster) is a homeowners interior problem. That little amendment occurred 4 months after we purchased the property. So you folks with potential mold problems out there, don't count on help from Estridge to resolve this even if you had 3 roof leaks, plugged gutters for over five years and a irrigation system that blew water all over your house to the point it had to be repainted. This is my "Estridge Experience", though, they need to redefine the word "trust"
  • Reply to Realist...
    I am privy to information regarding the partner contract. No actual cash was paid by the subcontractors.. It is simply an agreement to invest our unpaid accounts in the Estridge company with an agreement on receiving those funds in the future. I hope this works out for all of us and in regards to payment, things have been getting better for Estridge and us.
  • Estridge is a good company.
    I wish I would have built with Estridge. I built with Drees Homes. They are flat out liars and unethical. For my story go to: www.dreeshomesreview.blogspot.com
  • Be careful
    While on principle I agree that it is a good thing for Estridge to be in business and provide jobs. The issue that many of us have experienced is that this company does not keep it's promises. When the comments from Mr. Estridge include that he, and his company, always keep their word, it is important for those of us who have been impacted share our stories. If he has not kept his word before, why would he now? Case in point, ask those of us who received notices from Hamilton County that subcontractors have been forced to place liens on our homes because Estridge did not pay them. The one that was placed on our home was 6 months later and the subcontractor was still not paid. Any correlation to them now owning part of the company?
  • Honor Your Promises
    I live in Westfield and I do not have any personal issue toward Estridge I'm just a concern tax payer but I do have a trust issue.

    I think if Paul Estridge would honor the promises made the Estridge communities then the development of Symphony might be considered. If not then how can Estridge be trusted with a billion dollar project?

    At this point if I was one of the Westfield City Council members I would say no to the Symphony development.

    Honor your promises to these communities its the right thing to do.
  • Recession?
    If Mr Estridge (and cronies) can start to work on a $1B project in Westfield, why can't he honor his commitments to the communities where he has already taken the money but has yet to act in an honest manner? He builds a great home but I would have to question the ethics of this man and company given the lies that have been told to me and my neighbors over the past year.
  • Patience
    I find it hilarious that people are attempting to judge this company moreover this man on a few unfinished amenities and unpaved roads, when Estridge has built many homes and communities throughout the years â?? that are finished. Are they perfect, NO â?? Who is? I say this because when most of Indyâ??s hometown builders went bankrupt or simply decided to just quit, Paul is stating, â??Weâ??re not going anywhere.â?? The economy has sucked; some of you in Fishers, Carmel and Zionsville might not have noticed. But builders like Estridge depend of credit lines from banks who are not lending even to reputable stable companies, thus builders like Estridge either regroup or CP Morgan it. As they regroup I truly believe Paul is a man of his word and he will satisfy all of his commitments. What is needed from everyone is something that many of us donâ??t have, â??Patienceâ??.
    • Good man
      Paul is a good man just to keep the doors open and fight through it. Many others haven't, wouldn't and won't. Give the guy some slack, eventually when things turn he'll take care of all his commitments.
    • Man of his word?
      I can't believe this is happening. Estridge has made so many promises to developments that aren't even finished yet. Estridge promised to finish tree planting and walkpath developments, where are they now? Keep your eyes on what is actually realistic, Paul Jr.
    • Symphony is comical
      Zoning is not in place and not all current property owners are on board. This deal has about as much chance as the Colts winning the Stanley Cup. On the investment, I'd like to know how much is actual cash and how much is forgiveness of obligation where Estridge gave up a piece of the company in exchange for unpaid bills.
      • How about all the "small" people
        Glad to hear of local guy making good. But what you all neglected to uncover for your story is all the heart break the Estridge folks delivered to many, many "small" people who had unbelievable difficulties with getting Estridge to deliver on their promises as they almost went bankrupt during the last half of 2009. You neglected to talk about the banks freezing their lines of credit and their inability to pay their vendors/subs which then caused their vendors/subs not do any more work on Estridge properties, which then caused havoc with their clients wanting to build homes in their developments. Not a very pretty picture... I would never do business with them again... nothing but a bunch of lies and half truths covering up their messes!
      • New Home = New Car
        Buying a new home right now is the equivalent of buying a new car. It starts depreciating as soon as you take possession. New home prices a year from now will be lower than they are today. Save your money - stay where you are. The banks are still sitting on millions of bad loans that have yet to be foreclosed on and put on the market. Financial adviser in Hamilton County.
      • New Partners
        So I guess this means the new partners are now on the hook for any past project's existing liabilities?
      • Not So Fast Estridge
        That's all good and well there Estridge, but anytime you want to come back to Oak Hall and finish off the Paving and Street Trees that remain unpaid for and unfinished that would be greatly appreciated.

        You know that "unpaid bond" that remains on your books? How about we make that a "paid bond"?

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        1. Those of you yelling to deport them all should at least understand that the law allows minors (if not from a bordering country) to argue for asylum. If you don't like the law, you can petition Congress to change it. But you can't blindly scream that they all need to be deported now, unless you want your government to just decide which laws to follow and which to ignore.

        2. 52,000 children in a country with a population of nearly 300 million is decimal dust or a nano-amount of people that can be easily absorbed. In addition, the flow of children from central American countries is decreasing. BL - the country can easily absorb these children while at the same time trying to discourage more children from coming. There is tension between economic concerns and the values of Judeo-Christian believers. But, I cannot see how the economic argument can stand up against the values of the believers, which most people in this country espouse (but perhaps don't practice). The Governor, who is an alleged religious man and a family man, seems to favor the economic argument; I do not see how his position is tenable under the circumstances. Yes, this is a complicated situation made worse by politics but....these are helpless children without parents and many want to simply "ship" them back to who knows where. Where are our Hoosier hearts? I thought the term Hoosier was synonymous with hospitable.

        3. Illegal aliens. Not undocumented workers (too young anyway). I note that this article never uses the word illegal and calls them immigrants. Being married to a naturalized citizen, these people are criminals and need to be deported as soon as humanly possible. The border needs to be closed NOW.

        4. Send them back NOW.

        5. deport now

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