From the Asbury Park Press:
Bankruptcy is met with uncertainty
BY MICHAEL L. DIAMOND AND DAVID P. WILLIS
Kara Homes’ bankruptcy filing has left scores of customers and creditors wondering if the troubled builder is going to complete the developments it has under construction and make good on its debts.
In Old Bridge, Ira Cohen, a homeowner living in one of Kara’s more recent developments, Horizons at Birch Hill, said the community’s clubhouse, swimming pool and landscaping remain incomplete.
In Marlboro, Peter Rallis, owner of All About Construction Inc., said he was forced to lay off 35 of his 50 employees because Kara has not paid him $239,500 it owes him.
“It has taken us down to the bottom,” Rallis said.
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David Bruck, the company’s bankruptcy lawyer, said the company laid off 100 workers this week, leaving it with 70, but it would take steps to continue operating. Among them: It wants to find financing to finish developments currently under construction and sell two or three uncompleted projects to other developers.“It was a product of slowing sales and difficulties in the field,” Bruck said of the bankruptcy, referring to the time it takes for municipalities to approve projects.
Experts, however, said Kara is an example of what can go wrong to an aggressive builder when the real estate industry collapses. After paying top dollar for land, it is not able to sell its homes at a high enough price to pay off its debts, they said.
“This was part of what we were looking for — and I don’t use the word “bubble’ — but a housing sector slowdown,” said David H. Downs, a professor at Virginia Commonwealth University School of Business in Richmond, Va. “The question is, who was going to be overleveraged?”
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The fallout from Kara’s bankruptcy is far-reaching. The filing lists thousands of creditors. Among the largest unsecured creditors — those with no collateral to rely on — in Monmouth and Ocean counties are: RWZ Inc. Stairs & Rails of Lakewood, which is owed $890,654; Benchmark Inc., also of Lakewood, owed $876,585; and Michael J. Wright Construction Co. Inc. in Dover Township, owed $780,309.Among the other creditors: Kara’s laid-off employees who are owed back wages.
From the APP:
Home furnishings store in Brick closing Nov. 30
Christian Fine Home Furnishings on Chambersbridge Road is closing its doors on Nov. 30, a liquidator for the store said Friday.
The home furnishing store, which has been in business here for 4 1/2 years, is closing because of poor economic conditions, said Hector Mustafa.
“You see a lot of furniture stores like this going out of business these days,” Mustafa said. “I guess this may have to do with the housing slump.”
Mustafa said the decision to liquidate was made early in September.
From the APP:
Turn bears into bulls
Gasoline prices are down. The stock market is up. But before New Jerseyans get too giddy about their good fortune, they should reflect on the Federal Deposit Insurance Corp.’s sobering news: The state’s economy is still sputtering. Employment growth is lower than the national average and home sales have dropped again, the sharpest decline in 15 years.
Gov. Corzine and the Legislature had better take notice. The economy is not apt to improve anytime soon unless the state becomes more business-friendly and lowers or eliminates taxes that make living in New Jersey so expensive.
The job total grew by only 0.9 percent in the second quarter of this year, the FDIC reported Thursday, with factory closings and layoffs in northern New Jersey wiping out gains in other parts of the state.
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The latest report should light a fire under all legislators to make this state a more affordable place to live. The cost of government and the taxes that support it are hampering the state’s economic growth and the jobs and prosperity that go with it.
Great piece on Kara from the NYC circa ’03:
Home Builder Sets a Fast Pace in Pursuit of Growth
Grim,
Great find. Loved this qoute; ”I understand what the masses want, and why shouldn’t they have it?”
You’re right, why not??? Just one question, how do the masses pay for this?? You may have been listening to the masses but you have not been listening to the market.
When a private form declares bankruptcy the question is how much capital was taken via management thru wages and bonuses that could have been used to have prevented the bankruptcy from happening. Your hope is the people who might have been able to prevent the bankruptcy don’t turn out to be the winners.
” Kara’s laid-off employees who are owed back wages.”
So, are these x-employees going to miss their mortgage payments and potentially lose their own homes? Possibility.
SAS