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This is a story about a company buried in debt, but in the end you can blame its demise on dirt.

Richard Moffitt and John Gamble can testify to the debt that has rolled into court judgments totaling more than $40 million, parceled out in percentages against the many companies and individuals that operated under the Regency name for 22 years before the company’s collapse in April 2008.

The lawsuits outline nearly $80 million in development deals that went awry, many of them because chunks of land bought at high prices could not be filled with houses and townhomes rapidly enough to satisfy bank debt.

That land is the “dirt” that Gamble, Regency’s former chief financial officer, refers to when he talks about the causes of the developer’s failure. Count dirt as the root cause.

Moffitt and Gamble took some time recently to talk about the company’s collapse. They have not sought the spotlight. Most of the attention generated by Regency’s demise has focused on brothers James and Robert Myers, sons of the late Michael Myers, who co-founded a much simpler version of Regency with Moffitt in 1986.

James and Robert Myers have declined repeated requests for interviews with the Business Record. Robert Myers recently allowed his attorney, Steve Wandro, to confirm that he moved to England to start life over again. James Myers recently declined to be interviewed, again through Wandro.

Moffitt and Michael Myers

Moffitt, now 56, brought his carpentry tools to Greater Des Moines from Woodward in the late 1970s, when home building there was grinding to halt because of a weak economy.

Michael Myers was running his own company, Stylesetter Homes, and hired Moffitt for contract work.

“Mike was known for being very frugal,” Moffitt said. “I really didn’t want a steady deal with him because I knew I was always going to make a little less.”

But Myers had an approach to building houses that Moffitt came to appreciate. Where Moffitt typically worked on a unique design for each house, Myers would work off of four or five designs. Once you learned the designs, a house could be completed in a shorter period of time, increasing profits.

By the mid-1980s, Myers had considered leaving the residential market to focus on commercial development. A business partner told him he could do both if he put Moffitt in charge of building houses.

The partnership resulted in Regency Builders Inc., which was formed in November 1986.

Myers brought insight into the future of the home building industry; Moffitt brought a tradesman’s desire to build a quality product.

“One of the key elements was that Mike really didn’t have a lot of strong knowledge of the construction trades,” Moffitt said. “I had grown up with it. I’ll be honest, the last thing I wanted to do was meet with bankers and real estate agents. Mike loved it.”

With one partner savoring the dealmaking and the other relishing the process of building something, the company prospered.

They would travel the country, looking for different approaches to home building, and they were always willing to try something new.

Moffitt said Regency was one of the first companies in the state to drop cheap mahogany molding from their designs, substituting oak in its place. That might seem commonplace now, but “oak wasn’t very common back then,” Moffitt said.

In an effort to upgrade the quality of the windows in its houses, Regency made a deal with Pella Corp. to buy its product in quantity, providing the price was right.

“We set the tone for what a lot of builders would do. We would adopt something; then it would become standard in the area,” Moffitt said.

Bittersweet memories

Michael Myers died at age 57 in December 2006 after a seven-year struggle with a debilitating neuromuscular disease. After his death, Robert and James Myers worked with Moffitt to oversee Regency operations.

Those memories of working with Michael Myers are bittersweet for Moffitt. Before Myers’ death, Moffitt would sound some alarm bells that the company was becoming too diverse.

It was part of the give and take that marked their relationship. Michael Myers was not interested in slowing down; he was looking to the future.

“But you have to understand that with Mike, when a problem occurred, he worked on it until it was resolved,” Moffitt said. “He was like that guy on Ed Sullivan who would juggle plates on sticks. He had a million different deals going.

“Mike was good at finding the right people, and he wasn’t greedy. He would get a business established, then he would share the ownership. It let him do other things, and from time to time he would come back and spin the plate.”

Moffitt refuses to criticize the management style of James and Robert Myers.

What Moffitt will not discuss, others have talked about, but always on the condition that they remain anonymous. A summary of those comments is that James Myers shared his father’s enthusiasm for making deals, but not his talent for pulling them off.

All Moffitt will say is this: “We were all responsible. We all signed our names to the (loan) papers.”

Regardless of deal-making acumen, Moffitt and Gamble say that tight credit and overzealous development schemes added up to Regency’s undoing.

Two of the first apartment complexes that Regency built were sold in 2007 and 2008 as the company attempted to generate enough cash to say afloat.

And many of the commercial properties that Michael Myers built or invested in with Moffitt and, in some cases, with other partners are part of a mortgage-backed security originally created by JPMorgan Chase & Co. in 2007 that was meant to help the company avoid a meltdown.

As an indication of the collapse in real estate markets and the resulting tightening of credit that led to Regency’s downfall, Gamble noted that the $26 million JPMorgan loan was about one-third of the amount originally sought earlier in 2007, when negotiations began with the lender.

In other words, $78 million “would have come close to stopping this mess,” Moffitt said.

The mess began to gather when Wells Fargo & Co. notified Regency in the spring of 2007 that it would cancel a line of credit that had been the cornerstone of the company’s development efforts.

Land records indicate that at the time, the line of credit was about $47 million, secured by mortgages on properties scattered across the state. Moffitt and Gamble said the company had paid it down to about $10 million.

The Wells Fargo notice also meant that Regency officers could no longer use the national lender as a stick to prod local banks into providing development loans, according to more than a dozen Business Record interviews with people familiar with Regency and its lenders.

In January 2008, Wells Fargo had not only called in its line of credit, but also filed lawsuits against Moffitt, Gamble and the Myers brothers seeking repayment of more than $5 million in personal loans.

In response to the lawsuits, the men argued that calling in the loans would deprive them of the ability to remain solvent.

Moffitt said all of the partners were making personal loans to Regency in order to meet payroll and pay vendors.

The spring of 2008 was spent trying to work out compromises with other lenders and find “angels” who might rescue the company. One private investment group backed out of a deal that might have kept Regency afloat, including providing financing for the Michael’s Landing development in West Des Moines that was named after Michael Myers and now is largely owned by banks.

In addition, Regency officials attempted to strike deals with their lenders in which the company would build out properties and give lenders the proceeds from the sales of those properties.

The officers said they would not take any salary from the sales of the land, but did ask for enough of the proceeds to cover payroll, Gamble said.

The banks weren’t buying.

Bankers Trust Co. is one bank that was heavily invested in Regency’s success, yet it has not filed a lawsuit seeking to recover any loans to the company.

Bankers Trust President and CEO Suku Radia said his company had little to gain by dragging the developer through the courts, and he acknowledged that all of Regency’s lenders might not have been paying enough attention to the details of the company’s finances.

“In my 35 years of experience in the industry of banking and accounting, I will tell you Regency was one of the most complicated credit assessment situations I have ever seen,” Radia said. “The challenge for lenders was that there were so many different entities and joint ventures within Regency. Quite simply there were so many parts and pieces that it was incredibly difficult to get a global sense of cash flow. Without that global sense of cash flow, all of the lenders involved were at risk.”

A personal risk

After Michael Myers’ death, Moffitt was left as a 50 percent partner in many, but not all, Regency-related deals, meaning that the majority of court settlements fall on his shoulders.

He estimates that at the height of Regency’s success, his net worth was between $40 million and $60 million. Now, he works for a wage at Destiny Homes LLC and struggles to find sponsors to keep his son’s car-racing career alive.

By way of comparison, Robert Myers said in a court deposition in Minnesota that his net worth dropped from $34.5 million in 2007 to negative $12 million in 2008.

Moffitt does not respond to questions about bankruptcy.

Gamble noted that after the first judgment, whether it’s for “$200,000 or $300,000 or $1 million, you’re bankrupt.”

When asked about the more than 200 limited liability companies that were supposed to shield Regency investment partners from exposure to lawsuits and other liabilities, Moffitt said: “Those were Mike’s idea as a way to protect everyone. In the end, I guess no one was protected.”