Developer Del Nordby files bankruptcy

<p>Another prominent real estate developer in Sonoma County has lost his financial footing as one of the worst construction markets since The Great Depression continues to linger.</p><p>Wendell “Del” Nordby III filed personal bankruptcy Monday, attempting to reorganize $52.5 million in debts and liabilities while retaining $1.6 million in assets.</p><p>The 46-year-old Sebastopol developer is chief executive of Nordby Construction, one of the largest general contractors in the North Bay. The company has not filed bankruptcy, said Michael Fallon, a Santa Rosa attorney representing Nordby.</p><p>However, a slowdown in business at the company, along with a drop in the value of his other development projects, forced Del Nordby to seek Chapter 11 bankruptcy protection, according to documents filed in U.S. Bankruptcy Court in Santa Rosa.</p><p>The documents show that Del Nordby is a partner in several real estate projects. When the value of those developments began plummeting due to the massive slowdown in construction, banks asked Nordby to pay down some of the loans.</p><p>“You've got to feed that hungry dog,” Fallon said.</p><p>The downturn also cut off Nordby's primary source of income. Business at Nordby Construction has dropped more than 50 percent, and the next 12 months look even gloomier, according to court documents. Nordby has forgone his salary for the past several months, leaving him without income to pay some creditors.</p><p>Founded in 1978 by Wendell Nordby Jr., Nordby Construction is known for building wine caves, luxury homes and commercial real estate, including the Lanahan & Reilly law office building in Santa Rosa and the Rohnert Park Community Library.</p><p>Del Nordby and his brother, Craig, took over the Santa Rosa company from their father in 2006, when the company had 80 employees and $70 million in revenue.</p><p>“The Nordby name is one of the top names in North Bay construction. If it can happen to one of them, it can happen to anyone” said Keith Woods, chief executive of the North Coast Builders Exchange in Santa Rosa. “This horrendously bad economy has overrun a lot of people.”</p><p>Clem Carinalli, the county's biggest individual landowner, was pushed into bankruptcy in September when a group of investors scuttled his attempt to restructure $191 million in debt in private negotiations.</p><p>Christopherson Homes, once the largest homebuilder in the county, was forced to lay off most of its staff and sell its headquarters when construction slowed. Several lenders sued the company last year, alleging it had failed to repay more than $18 million in loans.</p><p>The majority of Nordby's $52.5 million in liabilities stem from personal guarantees he made to cover loans if Nordby Construction or his other partnerships defaulted. Banks frequently require partners in development projects to sign personal guarantees when receiving loans, even if the money is technically going to a corporation or a limited liability partnership.</p><p>The persistent turmoil in the real estate market has left many developers on the hook for a lot more money than they have. In Nordby's case, he could potentially owe $52 million in debt, compared to his current assets of $1.6 million.</p><p>“I don't think it is that unusual today,” said Doug Provencher, a Santa Rosa bankruptcy attorney. “We are finding people in the real estate business deep into this situation. People have exhausted all their assets, and they still have all their liabilities.”</p><p>Nordby is trying to dissolve all of his $32 million in personal guarantees. At least one loan he guaranteed is in default — a $750,000 line of credit loan from Wells Fargo to a partnership called DDB LLC. The bank sued Nordby and his partners in Sonoma County Superior Court last May, attempting to force them to make good on their promise to cover the loan.</p><p>That lawsuit ultimately forced Nordby to seek bankruptcy protection, according to his court documents.</p><p>It is unclear how many other loans he guaranteed are now in default. Fallon said he did not know the status of those loans.</p><p>“For all I know, none of them are in default,” Fallon said. “He listed those liabilities because he had to.”</p><p>Calls made to Del and Craig Nordby were not returned.</p><p>Nordby has already proposed a restructuring plan to his creditors, who will have until March 12 to vote on it.</p>