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

The builder listed estimated debts of between $50 million and $100 million and assets of $100 million to $500 million in documents filed Monday in U.S. Bankruptcy Court in Baltimore. Gemcraft once built more than 1,200 townhouses and single-family homes a year in Maryland and four other states, but that number has fallen to an average of 400 a year, Gemcraft Vice President Dale Hevesy said in an interview Thursday.

"We've fought our way through the last three years and settled up with a lot of our lenders, but it got to the point where market conditions called for this choice," he said.

Gemcraft is one of many home builders struggling amid the recession and mortgage crisis as sales have slowed and the inventory of homes and lots has piled up.

Hevesy said the company has been able to secure $32 million worth of financing by renegotiating deals with two of its major lenders. That will allow the company to fulfill homeowners' home warranty needs and to continue building homes in Gemcraft's 40 communities, which include seven developments in Maryland - in Harford, Cecil, Dorchester, Wicomico and Washington counties.

The Forest Hill-based company said in its Chapter 11 filing that it owes $8.1 million to the 30 creditors with the largest unsecured claims, among them 84 Lumber in Joppa, Bustamante Concrete in Abingdon and Dixie Construction in Churchville.

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, potential buyers have lost financing and lenders reappraised builder-owned properties at lower values and accelerated loan payback provisions. Companies with high debt loads have found themselves especially vulnerable to the big drops in market demand and property values.

Caruso Homes, based in Anne Arundel County, filed for a voluntary bankruptcy in 2008 with debt of more than $100 million and hundreds of empty lots. The company was able to successfully emerge from Chapter 11 after scaling back and working through the court to settle obligations to multiple banks and creditors.

At least two local companies, Columbia-based Dale Thompson Builders and Altieri Homes, also based in Columbia, have gone out of business.

Even so, Maryland has been spared the widespread builder bankruptcies seen in other parts of the country.

"Locally, our housing market has held up better than others," said Kenneth Wenhold, an analyst for housing market research firm Metrostudy

He said a Chapter 11 restructuring will allow Gemcraft to "put their books back in order ... so they can hopefully turn around and get a fresh start" as Caruso did.

Hevesy said Gemcraft had seen continuing sales declines in all five states where it builds: Maryland, Delaware, Pennsylvania, Virginia and West Virginia.

As lenders continued tightening loan requirements, "people have a more difficult time getting loans today than in the past," Hevesy said. "As regulations continued to get tighter and tighter, fewer people qualified to get housing."

The company has had to lower prices accordingly. Gemcraft single-family homes that would have sold for about $450,000 four years ago are now selling in the $300,000 to $325,000 range, he said.

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