Neumann Homes, which has been on a downward trajectory for more than a year, succumbed to market conditions and its own aggressive expansion when it announced yesterday afternoon that it would file for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. Neumann gave every appearance of a company that is shutting down for good, as it has laid off most of its employees, has closed its sales, production, and customer services offices, and has reached an agreement with creditors for loan relief while company officials evaluate Neumann Homes' assets for their eventual liquidation, according to several news reports.
Attempts to reach Ken Neumann, the company's CEO, over the past several days for comment were not successful. The company sent out a fax about its bankruptcy filing yesterday, but had not posted anything about it on its website as of 9:30 this morning.
The Warrenville, Ill.-based builder, which was founded in 1980, had 46 active developments in the Chicago, Denver, and Detroit markets, as well as in Wisconsin, with 5,485 homes in inventory, according to Tracy Cross & Associates, a real estate research firm. Neumann Homes said it will ask a bankruptcy judge to approve refunds of earnest money to buyers for homes purchased but not yet started. The company also said it planned to complete homes it has started, although did not provide a number for how many it would be. Neumann Homes has 2,619 sales in its pipeline, according to estimates from the research firm quoted in the Daily Herald of Chicago.
"Even after significant help we have received from our lenders this year, the company can no longer weather this storm," said Ken Neumann, in a prepared statement about the pending bankruptcy filing. The company's business in Chicago and Denver was off 50 percent this year. And Neumann Homes lost more than $60 million in Detroit alone over the past two years, which corresponds with the time period after Neuman Homes acquired Tadian Homes in that market. Detroit is generally considered to be one of the weakest housing markets in the United States because of massive layoffs by the auto industry.
Learn more about markets featured in this article: Chicago, IL.