Perry Homes’ Woodridge Village Investment Could Be Costliest Ever
Usually when you make an investment, the worst thing that could happen is that you lose all your principle. But Perry Homes could loose a hundred times more than they paid for Woodridge Village land. That takes special talent.
The land that Woodridge Village sits on didn’t cost much; much of it was wetlands and many streams converged there. Regardless, a Perry Homes subsidiary, Figure Four Partners, bought the land. Montgomery County Appraisal District values the two main parcels at less than a million dollars. Together they comprise more than 80% of the 268-acre project. (See screen captures below from Montgomery County Appraisal District website.)
Real Costs Could Be 100X Greater
Now let’s look at the real costs to Perry. Just to screw up the land, they paid for:
- An engineering study that underestimated drainage needs by at least 40%
- Clearcutting and grading 268 acres
- Filling in natural drainage
- Excavating two detention ponds (out of five they promised)
- Soil tests and a geotechnical report
- A mile of pavement to the middle of nowhere
- Two large box culverts
- Storm drains
Let’s say that cost another five million.
But all of that contributed to the flooding of approximately 200 homes in May and 350 in September. Let’s assume the damage to each home totaled $100,000. That comes to about $55,000,000.
Furniture, appliances, rugs, window coverings and other contents? Let’s assume an average of $40,000. That would total another $22,000,000.
Let’s also assume that 300 cars flooded. Average cost – $30,000. Bingo. $9 million.
Now let’s estimate the reduced marketability of homes that flooded. To do this, let’s assume an average price of $200,000 per home and a 20% reduction. That would cost homeowners $40,000 each in the market value of their homes. That’s another $22,000,000.
And we haven’t even factored in the legal fees of J. Carey Gray, counselor extraordinaire.
If juries rule in favor of the flood victims, that million dollar investment could add up to more than $100 million in potential liabilities…before any penalties for negligence and/or gross negligence kick in.
Corps Now Investigating Wetland Violations
Perry Homes bought wetlands and must have thought that no one would notice when they filled them in. They didn’t even bother to request a jurisdictional determination from the Corps for the wetlands. That reduced costs even more. It’s a proven formula in business; minimize costs to maximize profits.
But perhaps Perry Homes went too far. People did notice. The wetlands that they conveniently ignored fall under the jurisdiction of the Army Corps. And the Corps is now investigating potential violations of Section 404 of the Clean Water Act. That could get expensive all by itself.
Like Building Homes at the End of a Gunnery Range
It just keeps getting worse for Perry. This was kind of like buying land to build homes at the end of a gunnery range. A little risky.
But it’s too late to rethink that decision. No one will ever want to buy a home on this site. It’s less marketable than swampland near Chernobyl.
There’s another rule of thumb in business. When you find yourself in a hole, stop digging. And that’s exactly what Perry has done. They have stopped work on the site for months. Work on detention ponds that would help protect people downstream from future flooding is going undone.
That means the numbers above could balloon with the next big rain. Or a negligence ruling by a jury. Yep, we’re in double Jeopardy now.
Whoever made the decision to develop Woodridge Village definitely made a CLM (career-limiting move). At this point, even Perry Homes employees not associated with the decision must worry about their Christmas turkeys. Few careers or companies survive blunders that become case studies for how not to do something.
Eroding Profit Margins
Because of faulty assumptions and corner cutting, Perry Homes put itself between a rock and a hard place. They’ve managed to turn a million dollar investment into a potential $100 million liability. They can’t develop this property profitably now. And they can’t sell it. Who would want to buy this land and inherit the liability every time a storm cloud floats by?
To protect downstream homes from flooding, they would have to expand the detention ponds by at least 40%. And that would eliminate so many homesites that costs could exceed income. I say “at least” because the issue is not just Atlas-14 compliance. While digging the S2 detention pond, contractors hit water that’s not going away.
That means they can’t achieve their detention goals by going deeper; they’ll have to go wider. And that will cut into marketable land even more.
Toxic for Perry Homes
Let’s face it. When Perry Homes bought this property, Kathy Perry Britton swallowed a poison pill. Woodridge Village now has a toxic reputation that will infect the rest of Perry Homes. No one will ever be able to trust anything Perry Homes says again.
Just imagine how bad this could get for Perry Homes if Montgomery County and the City of Houston really started scrutinizing their permit applications in the future.
But what to do with this land? If you’re Kathy Perry Britton trying to spit shine the legacy of dear old dad, you can’t keep it. And you can’t sell it. You can’t even give it away. No land conservancy organization would take it until the damage done to wetlands and streams was remediated. That could take decades.
The Real Value of Wetlands
However, there are two pieces of good news in this mess.
- If Perry Homes implodes, it won’t take a lot of investors with it; the company is private.
- Perry Homes may serve as a lesson to other developers and teach them that the real value of wetlands is their downstream legal costs.
Time To Be Decisive
Just remember, Ms. Britton. Historically, 85% of Houston floods are non-tropical. So if you think you have eight more months to figure this out, think again.
Posted by Bob Rehak on 11/15/2019
808 Days after Hurricane Harvey and 57 after Imelda
The thoughts expressed in this post represent opinions on matters of public concern and safety. They are protected by the First Amendment of the US Constitution and the Anti-SLAPP Statute of the Great State of Texas.