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Cash without flow.

Cash Without Flow De Haven Turns Down Sales Spigot, While Seeking Banking Assistance

There will be fewer tours by prospective lotbuyers at Maumelle over the next few weeks until DeHaven, Todd & Co. can obtain the banking services it needs to translate phenomenal sales into cashflow, Jay DeHaven says. Dehaven has already cut sales staff by 40 percent and probably will cut another 40 percent by the end of this month. The problem? No liquidity.

Some observers say DeHaven has a serious problem with his inability to find financial institutions to give him loans on the project's remaining raw land. Or buy his self-financed mortgages on the secondary market. But the indefatigable DeHaven talks about his predicament in terms of frustration and inconvenience, rather than gloom and doom.

"We are not in any financial trouble," he says. "Our payables are very manageable. Our receivables are substantial and by cutting back sales, I lower my general overhead somewhat, but primarily I reduce my cash outlays to create leads and prospects and commissions on our sales."

Since the beginning of the year, people have flocked to the project northwest of North Little Rock and built an enviable sales record. DeHaven & Todd sold 138 lots in February and March, he says. The developer posted lot sales of more than $1 million a week for five weeks so far this year.

Despite the success, DeHaven says, "We need some liquidity to maintain normal business operations."

Credit Search

He is continuing to pursue banking relationships - to provide lines of credit, deposit and escrow services and secondary markets for his mortages - but the most hopeful prospects are out-of-state and that frustrates DeHaven.

"We have been unable to establish a full-service banking relationship in the local financial community," he says. "Why? In my opinion, there are no solvent S&Ls, and the banks in this community are very cautious about any business related to real estate," DeHaven says. "I feel the cautiousness could possibly even be compounded by banking regulators' new and highly restrictive positions on banks and real estate-related loans."

"We did $20 million in sales last year and could easily do $40 million this year. A company of that size with that volume needs a large bank or a number of medium-sized banks. There are no very large banks in this marketplace, and for whatever reason we have been unable to establish the necessary relationship in this community," he says.

While local bankers may not be working directly with him, Twin City Bank and Worthen Bank are giving him references and helping arrange out-of-state financing with a couple institutions, he says.

Bankers Balk

Twin City Bank has extended more than $2.5 million in credit to DeHaven & Todd, but has not been able to provide any more assistance, he says.

DeHaven says Worthen Bank, which sold him 3,200-plus acres in the Maumelle project for nearly $15 million, would do business with him if bank regulators would allow it.

He also says he wonders why other Little Rock banks would support large residential projects in west Little Rock and not offer him the same banking relationship.

William Garner, a spokesman for First Commercial Bank, declined to say if the bank denied a loan application from DeHaven. The bank does not buy many loans on the secondary market, but is very active in residential mortgage lending as well as commercial real estate lending, Garner says.

"If Jay DeHaven is trying to blame his problems on Little Rock banks, that's just inappropriate," says Curt Bradbury, chairman of Worthen Banking Corp.

"Complaining about banks is a lot like complaining about Kenny Hatfield not passing. They're easy targets," Bradbury says.

"Banks have standards and evaluate the credit requests against those standards," he says. "We make them [loans], if they meet these standards and don't, if they don't," he says.

As for criticizing the regulators, Bradbury says, "That's an attempt at rationalization. I don't agree with it."

A footnote comment by the Worthen executive: "Jay DeHaven has one of the most fertile minds of anybody I've met. He'll think of something."

PHOTO : JAY DEHAVEN: Is confident in making his project work.
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Title Annotation:DeHaven, Todd, & Co. seeking banking assistance to provide cash flow
Author:Kern, David F.
Publication:Arkansas Business
Date:Apr 9, 1990
Words:690
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