Keystone Homes Inc., a well-known builder of entry-level townhouses and condominiums in Harford County, announced yesterday that it has suspended its sales and building operations at all six communities.
Keystone, which began operation in 1986, was the fourth-largest builder in Harford County through the third quarter of this year, with 100 sales and 11 percent of the market, according to Meyers Housing Data Reports, a publication that tracks and analyzes new-home construction.
Overall, the company was the 16th-largest builder of new homes in the Baltimore metropolitan area this year. It finished 1997 as the 11th-largest builder in the Baltimore area with 141 sales.
"Keystone Homes suspended operations on Monday, Nov. 2, having been notified by one of its lending institutions on Friday, Oct. 30 that it was in default of its loans," according to a prepared statement released by Robert W. McGee, a principal at Keystone. "The company had been experiencing financial difficulties over the last 45 days as a consequence of a decision, earlier this year, to shut down developments in Ocean Pines in Worcester County."
Keystone had two developments -- a waterfront townhouse and elevator condominium property -- in the Eastern Shore community.
The statement also said that at the time of the shutdown, the company had 65 homes under construction and that company officials had met Tuesday with several lending institutions and were awaiting "further instructions" from secured creditors. As of yesterday, the company had not filed for bankruptcy protection.
Keystone becomes the fourth new-home builder in the Baltimore area to cease operations this year -- a time when sales of new homes are up 24 percent over 1997. Manor Builders Inc., which also built townhouses in Harford County, abruptly shut its doors in March; Westbrook Development Inc. followed in June, and Regency Homes Inc. filed for Chapter 7 liquidation in July.
Employees got word of the shutdown in an internal memo dated Nov. 1 and obtained by The Sun yesterday. In that memo, McGee and his wife, Janice, blamed their situation on several factors, including operating losses that were "greater than we had originally forecast."
They also cited that the number of homes in their "Harford production pipeline" had "stressed our working capital greater than at any time in the past." McGee also said the recent failures of other builders had caused suppliers to be more cautious and forced the company's credit lines to be "contracted or the payment terms shortened."
McGee, in the memo, said he was forced to close sales centers last weekend in his communities after news of his financial difficulties reached "one of our banks and they declared a default" last Friday.
In addition to the Ocean Pines project, the company had townhouse communities in Constant Friendship, Waterford Commons, Spenceola Farms and Hickory Overlook, where Peggy Lord and her husband, Donald, had put down $2,000 in April for a $125,335 townhouse. Their home was scheduled to be finished in September, delayed until October and was never completed. And now they are in limbo.
"We just moved here from Tennessee and you can bet that we wish we were there and not here," Peggy Lord said. "I have never had anything like this happen to us."