Chicago Area Homebuilder Files for Bankruptcy

Area homebuilder closes, files for bankruptcy


October 23, 2007
By David Roeder sun-times news group

The crash in the Chicago-area market for new homes has claimed its biggest casualty. Suburban builder Neumann Homes Inc. said Monday it will file for bankruptcy and has laid off most of its employees.
Warrenville-based Neumann, the Chicago area’s ninth largest builder, blamed its predicament on a drop of more than 50 percent in annual sales within the Chicago and Denver markets. It also pointed to a decision in 2005 to invest in the Detroit market, a move it said cost the company more than $60 million.
Neumann said it will file for Chapter 11 bankruptcy and that its lenders have agreed to provide limited additional funding so that its assets can be evaluated and sold.
It also said the earnest money of customers whose new homes haven’t started construction is safe in escrow. Neumann said it will ask a bankruptcy judge to approve refunds from those accounts.
It also said it will work with lenders to ensure that homes will be completed if construction has started.
Kenneth Neumann, the chief executive officer, could not be reached for comment. The company faxed some details about its plans in response to inquiries from the Sun-Times.
In the fax, Neumann said it has closed its sales, production and customer service offices. It gave no figures concerning layoffs.
“The market downturn in the Chicago and Denver housing markets [is] now in excess of 50 percent, with home prices dropping from 10 percent to 25 percent in some submarkets,” Kenneth Neumann commented in the fax. “Even after the significant help we have received from our lenders this year, the company can no longer weather this storm.”
Steven Hovany, president of the housing consultancy Strategy Planning Associates Inc., said Neumann fell victim to an overaggressive and mistimed expansion into new markets. “As a result, they’ve got a lot of projects and few sales,” he said.
Its problems in the Detroit area, a market hit hard by auto industry layoffs, stem from its early 2005 acquisition of Tadian Homes. At the time, Neumann said the deal would make it the 35th biggest homebuilder in the United States.
The Sun-Times said that in 2006 Neumann ranked as the ninth busiest builder in the Chicago area, with 833 closings representing $231.2 million.
It has 15 active developments in the Chicago area, including in Plainfield, Joliet and Minooka. Most are in towns on the fringe of the six-county Chicago region such as Antioch, Grayslake and Oswego. Among the newest are a transit-oriented project near the Illinois 59 Metra stop in Naperville and a subdivision in Gilberts that was planned for 985 houses.
Neumann has concentrated on the moderate price market. Its most expensive advertised price is $411,495 for a house in North Aurora. The last Chicago-area homebuilder to file for a bankruptcy is believed to be United Homes in 2000.

Two of the largest buildlers in Jefferson City, Missouri had to file for bankruptcy, this year.