Home builder Reynen files for personal bankruptcy protection

After months of wrangling with lenders over huge debts accumulated during the housing boom, prominent Sacramento-area home builder John D. Reynen filed Wednesday for personal bankruptcy protection.

Reynen, co-founder of Reynen & Bardis Communities, took the action to prevent San Francisco-based Bank of the West from seizing his house and other personal assets for a $26 million debt owed by his company, said Michele McCormick, spokeswoman for the builder.

She said the filing will not affect the operations of Reynen & Bardis Communities.

Still, John Reynen's Chapter 11 filing in U.S. Bankruptcy Court in Sacramento is the second such action to rock a local privately owned building empire. In November, Dunmore Homes of Granite Bay filed for Chapter 11 bankruptcy protection after a half-century in business. It has since liquidated its assets.

Rumors have swirled for months inside the region's home building industry about an impending bankruptcy action at Reynen & Bardis Communities. The 35-year-old company – named Sacramento-area builder of the year in 2004 and the same in northern Nevada in 2005 – struggled through 2007 with the debt used to expand its operations throughout the Central Valley and Nevada.

Analysts say the value of thousands of acres the company bought at high boom prices three and four years ago has collapsed at the same time the firm's home sales have fallen. The company has since halted much of its home building.

Reynen & Bardis also has been embroiled in recent controversies over allegedly defective homes in Rancho Murieta and failing to replace 500 mature oak trees cut down for the new neighborhood there. In Elk Grove the builder and its related entities owe nearly $2 million in back property taxes and fees.

On Wednesday, McCormick characterized Reynen's personal bankruptcy filing as a necessity that allows the company to continue its restructuring efforts with its lenders. She said all the firm's creditors have agreed to equal shares of Reynen's personal assets as a condition of trying to work out a financial solution to his company's debts.

"However, the fly in the ointment is the Bank of the West action to personally take attachment to the personal assets of John Reynen," McCormick said.

In court filings, the bank asserts that John Reynen and company co-founder Christo Bardis personally guaranteed more than $750 million in loans to various lenders and have failed to pay them. That means lenders have the right to seize their personal property.

That's what Bank of the West did in February, filing a writ of attachment to seize homes owned by Bardis and his wife, Sara, in Gold River, Pebble Beach and Los Angeles; and homes owned in Sacramento, El Dorado Hills, Truckee and Mendocino by Reynen and his wife, Judy. Sacramento Superior Court filings show the bank also obtained a writ on the company's headquarters by Mather Airport.

Public records indicate that Reynen's 8,900-square-foot home in Sacramento County is assessed for property tax purposes at $2 million.

McCormick said Bardis has no plans to file a similar bankruptcy action.

"I think the commitments John makes through this will satisfy the creditors," she said. She said the firm is determined to meet its obligations and survive.

Reynen, in a statement Wednesday, called the filing a "difficult decision." He said it was "an essential step in continuing to demonstrate that we take very seriously our obligations to creditors."

Bank of the West attorney Walter Gouldsbury III of San Francisco declined comment.

Reynen's bankruptcy court filing estimates the number of creditors at 1,000 to 5,000 and puts his personal assets at between $50 million and $100 million. It estimates his liabilities between $500 million and $1 billion.

Among the 20 largest creditors listed in the filing are Wells Fargo Bank, which is owed $29.3 million, and IndyMac Bank, owed $26.9 million. The filing also includes $6.7 million owed to Sacramento's River City Bank and $6.3 million owed the Bank of Sacramento.

Reynen & Bardis Communities has sold nearly 600 homes since 2004 in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties – 140 of them last year, according to Costa Mesa-based researcher Hanley Wood Market Intelligence.

That was less than half its 2005 sales as the firm lost ground to the publicly traded national builders that now dominate Sacramento's new-home market.

Reynen & Bardis recently laid off about half of its 180 employees. McCormick said the firm controls 18,000 home-lot acres in California and Nevada.

Kathryn Boyce, a Sacramento-based Hanley Wood analyst, said the firm's massive land holdings are still a source of strength. "There's still land they're sitting on they haven't done anything with," she said. "They're going to be OK."

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• Call The Bee's Jim Wasserman, (916) 321-1102. Read his Home Front blog at www.sacbee.com/blogs.