Hilton Head homebuilder files for bankruptcy

Model Homes of Hilton Head built top-quality homes all over southern Beaufort County for years, its founder said.

That didn't matter when the real estate market collapsed.

Model Homes filed for Chapter 7 bankruptcy protection last month. Founder Tom Jacoby characterized the filing as bad luck for a good builder.

He said he had borrowed about $25 million to buy about 100 lots in recent years as the island's stock of undeveloped land dwindled.

Now that property values have tumbled amid a global recession, those lots are worth about $10 million, and banks have foreclosed on all of them, Jacoby said.

"The company and the value were intertwined," Jacoby said. "It took the company down."

Jacoby said he moved to the area in 1971 and has long bought up prime lots. That strategy worked well for 25 years as property values climbed consistently, he said.

Jacoby has been involved in building more than 1,100 homes on the island and developed several residential projects, such as Bermuda Pointe, Hanahan Place and Berwick Green, according to the company's Web site. The company has built "just about every type of home imaginable" in more than a dozen neighborhoods on the island and in Bluffton, according to the site.

As recently as two years ago, banks extended credit readily, Jacoby's lots were worth about $35 million, and he was considering expanding more into Bluffton, he said.

Then came a swift, nightmarish downfall.

"It's only been in the last 30 months that we've seen ridiculous reductions in value on Hilton Head Island," he said.

When he saw business slow down, Jacoby attempted to sell the land he had stockpiled.

He moved some lots at discounted prices for about six months. After that, he said, selling became almost impossible.

"It wasn't like we didn't try," he said.

The company filed for bankruptcy April 21 after Jacoby ran out of cash to keep up with combined monthly payments of about $250,000, he said.

Kevin Campbell, a Mount Pleasant lawyer charged with liquidating the company's assets and distributing the proceeds to creditors, said he won't know details of the case until he meets with Jacoby and creditors in separate meetings later this month.

Jacoby said he probably will start another construction company in the future but doesn't plan to hold as much land.

"It's a sad story," he said, "but I believe in Hilton Head."