Monday Q&A: ‘We’re working twice as hard for none of the pay’

The numbers are so big, they almost sound like pretend money.

Longtime developer Hank Wilton, who has overseen more than 30 major subdivisions in the Richmond metro area, has filed for Chapter 11 bankruptcy protection, claiming liabilities around $70 million. A handful of his projects have gone into foreclosure, and banks are looking at a huge financial hit if a personal guarantee he made doesn’t help fill in the gap between what they lent and what the properties fetch at auction.

But as Wilton goes to his first bankruptcy hearing this week, there are some small numbers, too: He has moved from a $5,700-a-month office to a $750-a-month office. Instead of driving a Mercedes, he’s driving a station wagon.

In advance of his hearing on Friday, BizSense sat down with Wilton to discuss his business operations and his plan to right the ship.

Below is an edited transcript.

Richmond BizSense: Where did things go wrong?

Hank Wilton:
I’ve been doing this since 1988. I’ve been running my own type of thing separate from the Wilton Companies, mostly residential development. The problem is I went out and bought a lot of property and obviously got caught with too much. The amount of property I had was excessive given the massive slowdown.

RBS: How did you misread the market? Do you feel like you missed signs that the real estate market was headed for darker days?

HW: The problem is the slowdown has been longer and deeper than anyone has ever expected. I’ve been through one before this, and it wasn’t this long. I closed 400 lots the year before things went downhill. The next year I closed 125 lots, and then 30 lots.

The market was so hot no one could believe it was hot for that long. It had never been that good for that long. So after a point I guess you talk yourself into believing that it would continue.

It was very easy to buy property. Banks were very willing to go ahead and lend you money, and you had contracts to sell the lots to individuals. Then everything came to screeching halt. You think of this as a 12-month period and things will start turning around — now they are talking about another two or three years before you start looking for normalcy. You are starting at ground level again.

RBS: So when did you begin to realize things were taking a turn for the worse?

HW: The problem is you had lots, and builders couldn’t get funding to buy it, and he certainly couldn’t get construction funds. A lot of these lots are sitting around. For two years I spent almost $8 million making sure all the interest was paid here and in Colorado. After you spend that much over a two-year period, you start running out.

RBS: Talk about your Colorado deal. That seems to be the first piece that began to fall into trouble.

HW:
Colorado was outside my realm. We had good people out there; my son was out there working for me. It was a resort development, and that was one of the first property types to fall. It was a mistake to go into Colorado. We had a good project out there, but the market wiped out any equity we had in those projects.

RBS: How did you reach the point where you decided that filing for bankruptcy was the best move?

HW: We had been working over the last two years to figure out the best way to go about it. We had all this property on the market for more than two years, but there was no market. We’ve been trying to get rid of property, selling pieces here and there, and giving it back to the bank when appropriate. It’s a lot harder work doing that than developing property and selling lots.

The running joke is we’re working twice as hard for none of the pay.

My personal bankruptcy is taken due to the fact I had signed personally on the land notes. Even though I turn in the land to the bank, the bank will sell the property. Any deficiency, I am responsible for. I bought too much land. If I hadn’t put the personal guarantee, I wouldn’t be filing for personal bankruptcy.

RBS: How will your operations be affected by the bankruptcy? Will you continue to develop any property? Is there property you want to hold on to?

HW:
There are a couple pieces I am trying to hold on to. I currently have a development in Chesterfield underway. That is one of the corporations not affected by this. We are still working, but we’ve cut our people down substantially. I have my secretary working half a day, a full-time bookkeeper and one guy in the field.  I am also working on keeping a planned development that is part in Hanover and part in Ashland with some partners. We’ll need to hold these properties for two to three or four years before the market returns.

RBS: What is goal of getting through this? What outcome do you want to see happen or make happen?

HW: It’s not easy to go through one of these. I’m gong to have to set up some kind of payment plan over a five-year period and basically get back to work doing some smaller things on a fee basis for some other people, putting deals together and selling them off. Bankruptcy obviously hurts you and your ability to get bonds, so I would need partnerships if I wanted to do another subdivision.

The bankruptcy holds them off while we try to make a plan and try to get everybody happy. It’s a tough job. It will take a number of months to get everything done.

RBS:
When things were hot, the banks were happy to lend. Do you feel they were too generous to you, that they should have known better?

HW: I like that they were generous. They did take a risk. But do I blame the banks? No, they did what the laws would let them do. Obviously that was a mistake as far as all those loans people got. But if people will loan you the money, you aren’t going to say no. They have corrected that with regulation, but now it has swung too far to the other side. It is so much harder for people to get loans.

All the money the banks got through TARP, they used that to stabilize their balance sheets. None of that money made out into the market. I understand the regulation made that choice. The banks’ hands were tied.

RBS: How have your financial troubles affected your personal life?

HW: It changes when you don’t have all this money coming in. You change what you do, and you change how you live. I had always contributed to charities and had to cut that back. I went from a $5,700-a-month office to a $750-a-month office. Instead of driving a Mercedes SL, I am driving a station wagon. It changes quite a bit when your income disappears.

RBS: What would you say is the biggest lesson you learned from all of this?

HW: Leverage isn’t always the best thing.

Al Harris covers commercial real estate for BizSense. Please send news tips to [email protected]

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Brick Smith
Brick Smith
9 years ago

Wilton is dead on about the length of this slowdown. Past 18 month slowdowns were more the norm here. August ’06 marked the zenith with real decline starting ’07. Now this foreclosure moratorium is going to make a bad market worse.

Daniel
Daniel
9 years ago

This was a very interesting read. It’s refreshing to see someone who takes responsbility for his mistakes, instead of pawning that responsibility off on others. Mr. Wilton seems to take a very realistic and honest approach to his work and this crisis. I have a lot of respect for him because of that.

Jim
Jim
9 years ago

Hank speaks for us all in many respects. While we all saw signs that this cycle would be different, far too many, including the banks, seemed to believe that the prosperity would last forever. Now we need to find a way to have a real recovery by looking forward to how to rebuild not just our balance sheets, but also our relationships with the talented people like Hank who can actually play a big role in that recovery.

x
x
9 years ago

Don’t take an article like this at face value and think this is all just some guy honestly telling his story.This man is the son of one of the most ruthless land/slum lords Richmond has ever known.Hank was a part of that operation and was as ruthless as the old man.I would bet anything there’s a lot to the story you don’t know.Yes the economy turned and the market died but never expect a Wilton to tell you all his secrets.I can only hope tough times have humbled this man because when times were good he and his old man… Read more »

Rich
Rich
9 years ago

Talk about candor! He tells it like it is and I respect him for it. I don’t know Hank, but my sense is that this man will recover.

Jamie Lee Chafin
Jamie Lee Chafin
9 years ago

I applaud Hank for granting the interview and his candor about his current situation. Hank has described a situation that is applicable to many in the real estate industry as well as the small community banks. Until such time as the Fed’s determine that they have tightened to much on current lending guidelines, it will contiue to be tough sledding. I believe the underlying issue concerning our recovery if one of jobs (or lack therof) and a realization that in order to move forward with an orderly recovery we all will need access to capital to bring about growth and… Read more »

Charlotte
Charlotte
9 years ago

Mr. Wilton has conveniently forgotten to mention all the small businesses and vendors that he stiffed as a result of his bankruptcy. The banks will absorb his failure to pay, and he will work with them in a self-serving attempt to gain their trust for future projects. He NEEDS them. The small guy that he used for the last three years in an attempt to continue to develop his property has truly been left holding the bag. Before you nominate him for sainthood, don’t forget that he doesn’t give a rat’s a** if a small business he blantantly used lays… Read more »

Jeff Wiesman
Jeff Wiesman
9 years ago

This man is a loser. Do not believe what you read here. He is and will negatively ruin a lot of people and their businesses will fail.

He cut off more than he could chew.

This is how our economy got into this mess – from people who are showboaters like him!

He should pay everyone back and sell all his slumlord properties.

insider
insider
9 years ago

He left out the part about how daddy wouldn’t bail him out AGAIN, thus causing his current situation. It’s okay to be reckless at least a couple times if your poppa is mr wilton, i guess. Nothing more than a family’s black sheep getting a harsh dose of reality.

nan
nan
9 years ago

There are two sides to every story and Mr. Wilton has done a great spin job. Funny he didn’t mention giving up his country club memberships and the big expensive house on the river or the expensive dinners at the nice steak places around town. Don’t be fooled, people. You should talk to the business people and bankers, etc. who suffered because of his greed.

Mr powers
Mr powers
9 years ago

Man……….haters around here!! He can do whatever he wants with his money. He has filed chapter 11……a right that he has. It is a strategy to protect his assets!!! If you haters only knew how many jobs and opportunities he has created for Richmond and beyond! I have never hated productive people that CREATE WEALTH! Yes it is called creating wealth you morons! I’m a Hank Wilton but on a smaller scale and I didn’t get into trouble like he did but maybe I will the next time around………….but who cares at least I will be able to say I… Read more »

Debra
Debra
8 years ago

Hank you funny,handsome man! So many love you, those that claim to know you, are jealous! I will always support anything you dream! Just like you always supported mine! Thank you for being you! You deserve the best! Those who put this man down, better think twice, this man doesn’t know how to fail! So he hit a speed bump, and his ride is a station wagon, he is not out of the race! can’t stop a winner!