A prominent multifamily builder in the Northeast has followed in the footsteps of WCI, which filed for bankruptcy in August. Yesterday, Tarragon Corporation, a public real estate developer and multifamily investor, filed Chapter 11 bankruptcy for itself and related entities, citing the usual suspects: slowing sales, an uncertain mortgage market, and difficulty obtaining financing.

"Historically, Tarragon's principal sources of cash have been proceeds from sales of for-sale or for-rent housing, borrowings, rental operations, and proceeds from the sale of rental real estate developments," Tarragon CEO William Friedman explained in an affidavit filed with the U.S. Bankruptcy Court in New Jersey. "Throughout 2007 and 2008, however, the decline in home prices and concomitant increase in sales discounts and sales incentives ... strained the company's liquidity. Tarragon's liquidity has been further impacted by an increased cost of labor and supplies, resulting in reduced margins for homes sold. Moreover, the volatility of the mortgage lending industry has adversely affected the ability of Tarragon's buyers to obtain affordable home mortgages, detrimentally impacting Tarragon's sales."

Finally, the turmoil in the credit markets has made it hard to Tarragon to finance its own projects.

According to court documents, Tarragon has $1 billion in liabilities and $841 million in assets as it enters bankruptcy and attempts to restructure its business. It has between 5,001 and 10,000 creditors, the largest of which is Taberna Capital Management. Tarragon owes the New York financial firm $126 million.

The filing represents a tough blow for Tarragon, a multifamily developer that has been trying to reposition itself as an "urban homebuilder" through building condos and doing condo conversions. Based in New York, Tarragon maintains offices in Connecticut, Texas, and Florida, the last of which has been particularly battered in this housing cycle. Before the downturn, though, Tarragon was soaring. In 2006, it delivered more than 2,600 homes, making it one of the largest multifamily builders in the country.

That level of activity didn't last long. In 2007, Tarragon's closings dropped to 1,539, a downward trend that continued this year. In 2008's third quarter, Tarragon closed just 70 homes, compared to 315 for the same period one year ago. And, in the first nine months of 2008, it posted a net loss of $104.5 million on consolidated revenues of $275.8 million.

Alison Rice is senior editor, online, at BUILDER magazine.