Homebuilders' woe: Even Fla. Lt. Gov. Kottkamp's suing over Chinese drywall
UPDATE: Sept. 3: Builder Hovnanian Enterprises Inc. said its exposure to the Chinese drywall issue is not material to earnings, and it didn't take any additional charges in its fiscal third quarter related to the issue. It has had a "whopping total" of five cases in Florida, executives said in the results call Thursday, reports the Dow Jones wire.
Wake up and good morning. Here's an unexpected poster child for the slogging effort to deal with toxic Chinese drywall found in thousands of homes in Florida and elsewhere. Our very own lieutenant governor.
Florida lieutenant governor and North Fort Myers resident Jeffrey Kottkamp (foreground in photo with Gov. Charlie Crist) and wife Cynthia filed a federal lawsuit Monday against Knauf Gips KG and Knauf Plasterboard Tianjin Co. LTD. The claim? The companies "manufactured, processed, distributed, delivered, supplied, inspected, marketed and/or sold" defective drywall that's inside their home.
According to the Fort Myers News-Press, the couple seeks more than $75,000 in damages because they allege the drywall corroded air conditioning coils and other interior fixtures and has caused family members to have allergic reactions, coughing, infections, irritation and breathing problems. Here's the News-Press story.
That ought to rekindle at least some political fire on the drywall fiasco. The Wall Street Journal says analysts are closely eyeballing builders like Hovnanian Enterprises Inc. -- which reports fiscal third-quarter results today -- for signs of exposure to drywall liability. It's not Hovnanian, per se, that's exposed but the Florida homebuilding business it acquired.
As the housing market peaked in 2005, Hovnanian snapped up the assets of First Home Builders of Florida. The cash deal, says the Journal, gave Hovnanian the top market position in what was then a booming Fort Myers-Cape Coral region.
Alas, some 1,200 drywall complaints have been received from 24 states, says the U.S. Consumer Product Safety Commission, which is leading a federal investigation (here's an August 2009 update on the agency's investigation). But more than three-quarters come from Florida, with many cases in the Fort Myers area.
The Journal story also offers a quick update on other builder's potential exposure:
* Miami-based Lennar Corp. has confirmed that about 400 homes it built in Florida, mostly during its 2006 and 2007 fiscal years, have defective drywall. The company has set aside $40 million to repair these homes and has said it believes it will recover $20.7 million from insurance.
* WCI Communities, a Florida-based developer emerging from Chapter 11 bankruptcy proceedings, estimates it has more than 160 potential cases. Its reorganization plan includes the formation of a trust to administer and satisfy homeowners' Chinese drywall claims. WCI will contribute $900,000 to administer the fund. In court filings, WCI estimates that its claims could run as high as $97.3 million.
* D.R. Horton Inc. identified 75 homes in Florida and Louisiana that could have the problem. It set aside $6 million for repairs.
* Ryland Group Inc. confirmed it has between 50 and 60 homes in three Fort Myers communities, with repair costs estimated at $4.5 million to $6 million.
* Beazer Homes USA Inc. has disclosed drywall problems at 30 homes in southwest Florida.
"The Kottkamps are just one of many of our clients - about 700," Scott Weinstein of Fort Myers, the Kottkamps' attorney, told the News-Press. Weinstein is one of 13 attorneys appointed by U.S. District Judge Eldon Fallon in New Orleans to spearhead the efforts of plaintiffs in drywall cases.
The first of the drywall cases may go to trial early next year, but Weinstein doesn't know if the Kottkamps' case will be one of them Said the attorney: "They're not being treated differently."
-- Robert Trigaux, Times Business Columnist