Cohousing-L Mailing List: Investing in Cohousing & DeGeorge Home Aliance

[fertilezone (fertilezone]

Re: Investing in Cohousing, responding to Hal Mead
Zev Paiss <zpaiss [at] earthlink.net> Wrote:

>In 1993 Robert Bruegel and myself started ..Support Financial 
Services ..a revolving loan fund to assist cohousing groups with 
needed financing. ..It has turned out to be VERY helpful to the 
groups and has provided a reasonable return for the investors.  
--------------

Indeed, intentional communities may do better by dealing with 
lender / developer arrangements that are nearer and dearer to their 
community or more familiar with their special needs.

Two recent reports have brought my investigation of DeGeorge 
Home Alliance to a close.  

After several years of financial losses, an SEC investigation for 
illegal accounting practices in Nov.97, getting kicked off the 
NASDAQ stock exchange, and a lawsuit by their primary lender for 
abandoning 2,134 customers with partly built homes, and finally 
laying off 426 people on April 29th 1999, DeGeorge Home Alliance 
plans to stay alive through bankruptcy court proceedings and will 
retain its 40 top executives. (WRA)

DeGeorge Homes visited with Carla McAuley's cohousing group 
last year.  Carla said, "they seemed to definitely be on the up-and-
up and eager to work with us."  "They were founded by ex-
salesmen of the Miles Homes corp., which has some of the same 
processes and procedures but more flexible floor plans."  

Carla also mentioned the Dirt Cheap Housing Catalog online, and 
another home company her group explored and liked.. "Eagles 
Nest Homes, which builds panelized homes on a jig in a factory, 
trucks them to the site and puts one up in four days.  This 
eliminates most of the labor costs in building."  

However, DeGeorge could return to target cohousing groups since 
there is a mutually beneficial exchange, which solves substantial 
financing and developer obstacles often encountered by intentional 
communities.

DeGeorge has a nice infomercial with TV personality Robert Urich, 
describing it's unique function as both lender and general-contract 
advisor. This arrangement involves selecting a DeGeorge floor plan, 
and describes relatively attractive costs per square foot, and rapid 
growth of owner equity, since the owner is involved in the building 
process. 

DeGeorge made it's money by modest mark-up of bulk-purchased 
materials, and with higher-than-average, mortgage-loan rates.  
Except for a lack of profits, there was no obvious faults with 
DeGeorge.

"DeGeorge and Hendel said company loss figures are deceiving, 
since most of the firm's proceeds are tied up in future accounts and 
investments in the company. Still, numerous customers have filed 
complaints with the Attorney General Richard Blumenthal and the 
state of Connecticut's Better Business Bureau." (New York Times)

My parents never needed to study financial statements before 
purchasing durable goods, and they never tought caveat emptor (let 
the buyer beware) as a native concept for consumption of legal 
products.

When I called the DeGeorge office in Connecticut a week before 
their April 29th layoff, the phone options were still switching me to 
enthusiastic sales reps that were sending information packets, 
apparently right up until they got laid off, a few days later.  

The remaining 40 executives appear to have taken care of 
themselves, and over-leveraged company debt and operations well 
beyond the means to repay loan obligations.

The top two officials at DeGeorge Financial Corp., Peter R. 
DeGeorge and Greg Hendel could eventually resume operations 
under a different business name.  For DeGeorge & Hendel to find 
new investors directly would be expensive and tricky, but perhaps 
not for a Johny-come-lately with better management skills. 

Roger Ruhle
roger [at] fan.net

Sources:
1) The (New York Times), April 29, 1999 Section B; Page 13, 
"Metro Business; Loan Company Layoffs"
2) Waterbury Republican-American, April 29, 99 "Real Estate 
Services Firm Blames Suit for Layoffs "
3) Carla McAuley <carlam [at] montana.campus.mci.net>