Friday, February 22, 2008

Rancho Murieta residents left on shaky ground

Just ran across this article on Sac Bee's website:

Dozens of Rancho Murieta homeowners have been left with cracked walls and listing foundations after local builder Reynen & Bardis said it can no longer afford to fix their defective houses.

Thirty-six residents have hired a law firm and begun filing lawsuits against the company, already reeling from the real estate downturn. Two lawsuits were filed in December and January, and more are planned.

The residents decided to take legal action after Reynen & Bardis suspended its effort to shore up foundations under homes in its Blue Oak Estates subdivision in Rancho Murieta South.

Over the past five years, Reynen and Bardis had worked to avoid such a lawsuit. The company bought back 52 houses in the subdivision. It pounded piers deep under the foundations of over two dozen more, said spokeswoman Michele McCormick. Another 24 homes await foundation work.

Then, in November, Reynen & Bardis crews simply disappeared, residents said.

"The balance of us are just kind of left out there," said retired banker Robert Lynn, who was waiting for his foundation to be fixed.

Lynn and other residents hired the law firm Anderson & Kriger in hopes of recovering money for repairs from Reynen & Bardis' insurance company.

"Reynen & Bardis says they can no longer be of any help, that their financial situation is such that they are pulling out," Lynn said. "The only recourse we have is to file a lawsuit."

When it rains, Lynn said, his house on Murieta South Parkway starts to move. Moisture expands the Ione clay soil on which the house is built. Then the concrete under the house starts to crack and shift.

"We heard a pop the other night, and this opened up," said his wife, Kay, pointing out a jagged crack extending from a corner of a dining room window.

Her husband has run around patching, spackling and painting to keep up with the cracks, but they keep coming. In the kitchen, the baseboard now sits about an inch above the floor. At one point, an entire wall broke free from its footings.

Francis Furtado, president of Reynen & Bardis' home building division, said the firm doesn't intend to abandon the Rancho Murieta residents. For the moment, it can't afford further repairs.

Furtado said the company already has spent $28 million to buy back houses in Rancho Murieta and more than $3 million on remediation.

"We are in a very tough market," he said. "There's no profit in home building. There's no profit in land development. Our income shut off. We had to hunker down. Our intention is to go back in, but right now the finances aren't there."

McCormick, a local public relations person, called Reynen & Bardis "a good company caught up in a whirlpool of events."

Reynen & Bardis, headed by longtime local developers John Reynen and Christo Bardis, was flying high just a few years ago. It invested heavily in land in the Central Valley and Reno. Today, it controls 23,500 potential home lots in the Sacramento area, or 9,215 acres, McCormick said.

Since the bottom fell out of the land market, the firm has faced mounting pressure from creditors. It has shut down home building and recently furloughed 89 of its 180 employees.

Earlier this month, Bank of the West obtained a tentative ruling in Sacramento Superior Court encumbering the personal residences of Reynen and Bardis as security for a $26 million debt.

In court documents, Bank of the West asserts that John Reynen and Christo Bardis personally guaranteed more than $750 million in loans from various financial institutions and "are not generally paying their debts as those debts become due."

Furtado said the company is negotiating with its lenders to reduce the debt and hopes to resume home sales soon. When the money starts flowing again, the Rancho Murieta repairs can get back on track.

Rancho Murieta residents said they haven't been told of the company's plans to return. "They've told everyone they're not fixing any homes, that they're not going to do anything more than what they've already done," said resident Matt McGuire.

6 comments :

Patient Renter said...

That sucks, though I do have to take issue with this statement:

"There's no profit in home building. There's no profit in land development."

I bet if you let me tour the properties of Reynen & Bardis executives, I could find some of that missing profit.

Looks like the bank is one step ahead of me.

Ed said...

What do you call a system where new money coming in is used to pay old investors or creditors? What's that called again?

"As long as money kept flowing in, existing investors could be paid with the new money, but colossal liabilities were accumulating."

http://en.wikipedia.org/wiki/Ponzi

Husmanen said...

Ed - that was a great catch regarding Ponzi, one could not make up a better historical quote.

wannabuy said...

Ponzi's supporters were outraged at the officers who arrested him. 17,000 people had invested millions, maybe tens of millions, with Ponzi. Many who were ruined were so blinded by their faith in the man or their refusal to admit their foolishness that they still regarded him as a hero.

My... history does repeat itself.

Got Popcorn?
Neil

Santa Fe NM Real Estate said...

Couldn't agree more with Wannabuy. History sure does repeat itself!!

Stop Foreclosrue said...

Wow things are tough all over, they did not do their homework prior to development. Great article!