Garnaas, Ladco seek cover from creditors

Developer Jon Garnaas and his wife, Faith, dropped a whopping 175-page, $457 million document off at the U.S. Bankruptcy Court for the Southern District of Iowa after yielding to debts accumulated by his far-flung development and investment operations. Before the filing, companies falling under the Ladco umbrella had accumulated more than $1 million in unpaid property taxes in Polk and Dallas counties. According to court documents, Garnaas also had been trying to negotiate with lenders for the disposal of some properties, including Westbrooke Condominiums in the Village of Ponderosa in West Des Moines. So far, five banks have received permission in bankruptcy court to lift automatic protection from creditors that kicked in when the Garnaases sought the protection of a bankruptcy filing. Meanwhile, the couple’s attorney, Steve Wandro, said the collapse of real estate markets will force other developers to bankruptcy court.

Annual income from rentals dropped dramatically in the course of two years

Before being indicted for bank and wire fraud, developer Randal Walters filed for bankruptcy protection for one of his companies, then filed a case for himself, claiming $4.7 million in assets and $4 million in debts. According to the filing, gross income from rental properties had dropped to $41,200 through March from $288,000 in 2009.

Randal Walters, John Kline indicted

By year’s end, Randal Walters and development partner John Kline had been indicted by a federal grand jury on bank and wire fraud charges in connection with loans for projects in Des Moines and West Des Moines. Both men pleaded innocent when they were arraigned Dec. 14. According to the indictment, the two men had used $6.7 million in loans on a variety of expenses, including the purchase of a condominium in Florida, payment of overdue property taxes in Johnston, payroll accounts for separate entities they controlled and other expenses. The banks, including First Bank and First National Bank Midwest, along with their subordinate lending partners, lost about $3.9 million, according to the indictment. A trial is scheduled for Jan. 30, 2012.

Construction weak above and below ground for Miller the Driller

Gene Miller Co. – a 63-year-old, family-owned fixture in Greater Des Moines – also suffered because of a drop in development activity. The company filed to reorganize its finances under bankruptcy laws, citing $2.3 million in assets and $6 million in debts. Valley Bank said in a court document that the underground construction company’s audited financial report for 2009 and 2010 noted negative net income. A bankruptcy court judge dismissed the case in June.

Developer’s recent income derived from tax refunds, according to bankruptcy filing

David Walters also sought bankruptcy protection, citing $586,954 in assets and $27 million in debts, with the majority of that owed to banks that loaned money on development projects. Walters said that the majority of his income in the past two years came from tax refunds: $104,000 this year and $198,000 in 2009. Walters recently won an appeals court ruling resulting from a state court foreclosure, but the bankruptcy filing made the case moot.

Home builder folds, files for bankruptcy

The Garnaas bankruptcy filing might have been the most eye-catching of the year, but the couple had plenty of company. Joel Goodman filed for personal bankruptcy after also seeking bankruptcy protection for the companies falling under his Triton Group LLC residential construction company. The filing gave an indication of just how far real estate development had dropped since the financial crisis of 2008. The company and its related entities reported $1 million in income on receipts from townhouse construction of $38.1 million in 2007. It lost nearly $1.2 million on receipts of $19.3 million in 2008, and lost $3.1 million in 2009.