Chapter 11 bankruptcy: Gemcraft Homes Files Bankruptcy

Posted at the Baltimore Sun on 12 November 2009

As the US recession continues to hammer the housing and building industry, a large East Coast home builder files for backruptcy. Below is a snippet of the article found in the Baltimore Sun. This is relevant because it could force the liquidation of much of their housing inventory which in turn may drive home prices down even further in their region.

By Lorraine Mirabella

Harford County-based Gemcraft Homes Inc., one of the largest independent home builders in the mid-Atlantic, has filed for Chapter 11 bankruptcy protection.

Gemcraft, which once built more than 1,200 town houses and single family homes a year in Maryland and four other states, listed estimated debts of $50 million to $100 million in documents filed Monday in U.S. Bankruptcy Court in Baltimore.

New home builders have struggled amid the recession and mortgage crisis as sales have slowed and the inventory of homes and building lots has piled up.

William R. Luther Jr., Gemcraft's president, could not immediately be reached Wednesday.

The Forest Hill-based company said in its Chapter 11 filing it owes $8.1 million to the 30 creditors with the largest unsecured claims, among them Eighty-Four Lumber in Joppa, Bustamante Concrete in Abingdon and Dixie Construction in Churchville.

In Maryland, Gemcraft has new home communities in Harford, Cecil, Dorchester, Wicomico and Washington counties, according to the company's Web site. Gemcraft also builds homes in Delaware, Pennsylvania, Virginia and West Virginia.

Seven of Gemcraft's affiliated companies filed separate Chapter 11 petitions, including Gemcraft Homes Group Inc., Gemcraft Homes Forest Hill LLC, Gemcraft Chesapeake LLC, Harkins Property LLC, The Preserves at Jefferson Creek LLC, S&M Properties LLC and DLM LLC.

During the housing boom of 2005 and 2006, many home builders had expanded to meet a spike in demand. But in the aftermath of the credit crunch, builders have struggled as potential buyers lost financing and lenders reappraised builder-owned properties at lower values and accelerated loan payback provisions. Those home building companies with high debt loads have found themselves especially vulnerable to the big drops in market demand and property values.