Kimball Hill chief's role developed over 15 years as 'sounding board'

C. Kenneth Love spent 29 years as a CPA and executive with Deloitte & Touche LLP, a tenure that led him to meet extraordinary people. One would change his life.

Years ago, Love encouraged David K. Hill, chief executive of national home developer Kimball Hill Inc. in Rolling Meadows, to become a Deloitte & Touche client. He did, and the two men struck up a friendship that lasted 15 years, even though Love had no direct involvement with the Kimball Hill account after that first meeting.

In 2005, Hill broached an interesting prospect. Would Love be interested in taking over after he left? With little knowledge of the housing industry, Love signed on to the idea, little knowing he was entering a dying industry or that his friend was about to enter a fight for his own life.

"It has been a roller coaster and very stressful, but gratifying at the same time," Love said in an interview last week.

It's a far cry from anything the chemistry major could have predicted when, in the 1970s, he dropped out of the University of Texas because he didn't want to take a required five semesters of German. Instead, he went to work for a bank, where an executive encouraged him to return to school and take accounting. He did and graduated in 1976.

Love got a job after graduation with Deloitte & Touche and worked his way up the ladder, serving clients here and abroad. In 1987, he left Houston and moved to the Chicago office, where he and his wife and later their two daughters made a home.

Deloitte wanted to woo more clients and eyed Kimball Hill. So Love volunteered to make the contact with David Hill, the son of the company's founder. Afterward, a Deloitte team took over the Kimball Hill account.

Love still kept in touch with Hill. Over the next 15 years, the two men met once or twice a year for breakfast, often near O'Hare International Airport. At first, their breakfast meetings just involved kibitzing about life, politics or current events. Over the last five years, though, talk turned to the internal functions of Kimball Hill.

"He was one of the most interesting people I've ever met," Love said. "He dominated the conversation, but I enjoyed it.

"He talked about the challenges he faced and asked for my thoughts. I was mostly a sounding board for him."

Hill sought Love's thoughts on more substantive matters, too, such as an equity participation program for senior managers.

"We talked about providing restricted stock and options and how those should be structured," Love recalled.

Hill didn't always follow Love's advice. "He was very independently minded," Love said.

Soon, their conversations focused on a succession plan, and Hill hired Love in 2005.

"I didn't have any insider knowledge of the company, but more of a better measure of David, and I came to know his wife Diane, and I better understood them and the values they held."

While Love held little experience with the homebuilding industry, he learned quickly. And his succession into the CEO's seat came faster than anticipated.

In January 2007, Hill told Love, very matter of factly, that he had a melanoma, a malignant cancer that required aggressive treatment.

"He said 'I have a health challenge and it's a significant one, and I'm going to go through a period of time when I'll dedicate myself to my health,'" Love said about Hill.

It was an aggressive disease. "He was absolutely in a fight for his life," Love said.

In the meantime, the housing market was crashing. The sales of both new construction and existing homes slowed dramatically amid a record number of foreclosures and a slumping economy. The mortgage industry was restructuring and bankers were under financial pressure.

Still, Kimball Hill remained a player in the Chicago and suburban market. Since 1999, the company ranked between No. 7 and No. 14 in sales among homebuilders in the Chicago market, said Tracy Cross, principal of Tracy Cross & Associates, a real estate research firm in Schaumburg.

"The Achilles' heel for Kimball Hill has been its regional expansion and the vulnerability of the markets it entered that collapsed faster than Chicago," said Cross.

The homebuilder exited markets in Florida, Ohio, Oregon and Wisconsin. It continues doing business in Illinois, Nevada, Texas and California. They develop little land now and instead rely on finished lots from other developers, Love said.

Kimball Hill sold only about 1,800 homes from October 2007 through Sept. 30, compared to 3,200 for the same period the year before.

Bankruptcy was inevitable. And Love faced his first bankruptcy filing with Hill's support. Kimball Hill filed for Chapter 11 in April, during one of the country's worst housing markets in decades. The documents listed assets of $795.5 million and debt of $631.9 million as of last Dec. 31.

As Love's decisions became more prominent, workers were concerned about their futures and whether Hill would still have a hand in the business. The ranks already dwindled from 1,100 to about 400. Hill then died in July, while the corporation fought to survive.

Love and his managers sought a plan to exit Chapter 11 and worked diligently with creditors.

"I believe the company was land-heavy and over-leveraged when I joined it," Love said. "We worked toward de-leveraging and reducing our years of land supply. ... We had commitments we couldn't fulfill."

They also listened to buyout offers from about five equity investors and homebuilders.

"We're looking at all possibilities, and it will be a matter of weeks, not months, when we'll have our restructuring plan in place," Love said.

After seeking two extensions in bankruptcy court, the company is poised to announce its fate in late November, Love said.

Love's own fate also hangs in the balance.

"I've committed to the board and the banks that I'm here to see us through to the best outcome," Love said. "Up to the point when the reorganization is confirmed (in court), I'll be here. After that, I'm not sure what I'll choose to do."

While he works on sealing the deal for Kimball Hill, Love doesn't regret leaving his Deloitte career behind.

"I think when David became incapacitated, I felt I had a special role to play and was entrusted with that," Love said. "He bequeathed something of value and his passing gave me a special role to play in his life."