Executives at Iowa-based Regency Homes effectively shut down home building operations late Friday, April 25, halting construction and laying off more than 100 workers. The cuts followed a 27-position layoff earlier this year.
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, according to local sources.
Turmoil in the financial markets has caused many lenders to pull back on residential construction financing, leaving many builders with liquidity problems. However, the situation could be exacerbated in Iowa, where Wells Fargo is also the state's largest employer.
Three years ago, Regency had been Iowa's largest home builder, with communities in Ames, Cedar Falls, Cedar Rapids, Des Moines, and Iowa City. The company closed 958 homes that year. 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 also 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.
Learn more about markets featured in this article: Des Moines, IA.