65 pennies for your stock

Dominion Homes, Inc., a 55-year old publicly traded developer and builder of homes and condos in Columbus, Ohio and Louisville and Lexington, Ky., is going private. Shareholders will get 65 cents per share, "which represents a 38 percent premium over the company's closing stock price on January 17, 2008," Dominion said in a press release Friday. And an 89 percent discount from its 52-week high of $6.05, we might add.

The company's last quarterly report to investors is a sort of microcosm of the housing boom and bust. After selling 2,243 homes a year from 2002 through 2006, Dominion was caught with a lot of land and inventory when the slowdown hit Ohio and Kentucky.

By the time sales slowed to the rate of 852 homes a year last September, Dominion's inventory of 13,255 lots "represented an approximately 15.6 year supply," company officials said in explaining to investors how it came to pass that they had breached their financial covenants with lenders on $197 million in debt, triggering a 2 percent default interest rate increase. 

As it slashed inventory from a peak of 22,395 lots in the fall of 2004 (a 26-year supply, at the rate of sales last year) Dominion Homes lost money every quarter of 2006 and 2007.

"Our business strategy is to be the developer in substantially all of the communities in which we build homes," the company told investors. "The process of acquiring land, obtaining entitlements and developing communities is a multi-year process and once we have begun the development of a new community, it is difficult and, at times, impractical to discontinue development activities.".

Going private allows Douglas G. Borror, a principal of BRC Properties Inc., which is Dominion Homes' largest shareholder, to remain chairman of the board of directors and chief executive officer. Other companies in the buyout group are Angelo Gordon & Co., L.P. and Silver Point Capital, L.P.

Dominion Homes' creditors have agreed to lend the company another $3.5 million.

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