UDC Homes

UDC was founded by Gary Rosenberg in Chicago in 1968^[1] and began operating as a company by 1972.^[2] The firm began developing Fountain of the Sun, an adult living community in Mesa, in 1971;^[3] home sales began in 1976, with models named the Pima, Papago, and Hopi.^[4] Over the course of the 1980s, UDC expanded beyond the Phoenix area. As early as 1980 with homes in the Rancho Bernardo development near San Diego, UDC entered California;^[5] while it built single-family homes in Southern California, its two developments in Northern California by 1991 were adult communities.^[6] In 1983, UDC bought Mulvaney Builders and entered the Charlotte, North Carolina, market.^[7] That same year, the firm opened its first development in Florida, an adult community in Boynton Beach.^[8]

UDC Development renamed itself UDC Homes in 1986; the name change coincided with a reorganization as a limited partnership,^[9] ending four years on the public markets,^[1] and the relocation of its operational headquarters from Chicago to Tempe, Arizona,^[10][1] which was completed in 1987.^[11] In the late 1980s, UDC established a reputation in the Phoenix high-end "move-up" market for homes that backed onto golf courses, artificial lakes, and mountains.^[12] It was the second-largest homebuilder in Phoenix in the early 1990s, with 1,654 permits in 1994 alone; that year, it was the ninth-largest homebuilder in the country.^[13] Likewise, Phoenix represented more than half of UDC's revenue for 1993.^[4] In Charlotte, it peaked at third in market share in 1992, with more than 300 housing permits issued, though it slid to fifth in 1994.^[14]

UDC entered the Tucson, Arizona, market in 1994 with the purchase of land in the Rancho Vistoso development in Oro Valley.^[15] This was its first new market since its 1987 entrances into Atlanta and Riverside, California.^[16] Citing a more sluggish real estate submarket than expected, the company exited Tucson in 1997 to focus on higher-volume areas.^[17]

In 1992, UDC Homes converted from a limited partnership to a public corporation so it could issue stock. After going public, UDC was saddled with issues, including $340 million in debt and softness in its Southeastern submarkets. Preferred units in the limited partnership were converted to prime preferred stock, with a high annual dividend, draining the company's profits and leading to payments it could not afford; UDC had to pay its prime preferred shareholders in stock instead of cash, which only increased the dividend requirement.^[18] It also struggled with writedowns on land it bought, mostly in southern California, in 1989–90, prior to a national recession. In 1994, officials began searching for a buyer for the homebuilder as its stock price steadily declined.^[2] No deal was reached, and in May 1995, UDC filed a pre-packaged Chapter 11 bankruptcy. As part of a debt restructuring, the company announced its intention to exit the Southeast.^[19]

UDC exited bankruptcy in November as a subsidiary of DMB Property Ventures, LP, in a $108 million transaction.^[20] Shortly after, AEW Capital Management acquired half of UDC from DMB.^[21] Litigation from the bankruptcy outlived the company. Shareholders split $12.7 million in a 1996 deal with UDC's officers and $4 million in a 1998 settlement with accountants Coopers & Lybrand, both over claims that UDC officers sought to inflate the firm's stock price and concealed the company's actual financial condition.^[22] Also implicated was auditor Arthur Andersen, which was cleared of wrongdoing in a 1999 civil jury trial but paid a $755,000 settlement to the state two years later.^[23] Under DMB management, UDC continued developing homes, including an aggressive effort to buy land in Southern California.^[24]

Shea Homes and Standard Pacific made offers to buy UDC in June 1998,^[25] by which time it had become the number-one homebuilder in Phoenix with 1,041 starts over the first six months. Shea acquired UDC for an undisclosed price that July; it was billed as the largest transaction in industry history, surpassing D. R. Horton's $350 million purchase of Phoenix builder Continental Homes earlier that year.^[21] Standard Pacific bought more than 100 parcels from the company.^[26]