Executives at Iowa-based Regency Homes effectively shut down home building operations late last Friday, April 25, halting construction and laying off more than 100 workers. The company has operations in Ames, Cedar Falls, Cedar Rapids, Des Moines, and Iowa City.
Management's decision came after it was unable to renew a lending agreement with Wells Fargo that had expired in December. Without access to that capital, the company ran into a critical cash crunch, leaving management unable to pay its home building employees or continue building. The company had more than 300 homes in inventory at the time of the announcement; much of the standing inventory was concentrated in townhomes and condos, according to local sources.
Turmoil in the financial markets has caused lenders to pull back on residential construction financing, leaving many builders with liquidity problems. Although credit tightening has become a nearly national trend, the fact that Regency failed to strike a deal with Wells Fargo surprised many local stakeholders; Wells Fargo had been an original financing source for Mike Myers when he co-founded the company with Richard Moffitt in 1986.
"They worked with [Myers] when all he had was a pick-up truck and a secretary," said one Realtor who'd worked with the company for many years, serving as a listing agent for roughly 250 Regency homes.
However, in Iowa, this development has significant economic consequences. Regency may have been the largest home builder in Iowa, but Wells Fargo is the state's largest employer. The financial institution's mortgage origination business is headquartered in Des Moines and employs roughly 12,900 people.
Regency's growth hit a peak in 2005, when it closed 958 homes. Since then, however, the housing downturn has taken its toll on the company's performance.
In January, president Jamie Myers predicted a sales slide of 43% to 550 homes in 2008. But he was confident the company would remain a going concern. Moreover, management cut 27 positions at the time and hired executive vice president Harold Brand to help the company restructure.
Myers told the Des Moines Register that management would be meeting with lenders next week to begin negotiating a solution for the company's financial situation--and bankruptcy has not been ruled out as an option. "We've talked about everything under the sun," Myers told the local newspaper.