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New Home Company Inc (NYSE:NWHM)

Q2 2014 Earnings Conference Call

August 08, 2014 10:00 AM ET

Executives

Analysts

Operator

Greetings and welcome to the New Home Company’s Second Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Mr. Rodny Nacier with ICR. Thank you. You may begin.

Rodny Nacier

Good morning. We would like to thank you for joining us today for The New Home Company’s second quarter 2014 earnings conference call. This morning we distributed a press release detailing our second quarter financial results which can be found on the Investor Relations section of our Web site at thenewhomecompany.com. We expect to file our Form 10-Q today after the close of the market. During our call today, management's remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

Examples of forward-looking statements includes statements regarding expected performance especially expectations with respect to revenue, gross margins, operating income and expenses, cash flow and liquidity as well non-GAAP financial measures, operational expectations including number of new community openings and home deliveries and the role of C building in our overall business plan. These statements which may occur during our prepared remarks or during the question-and-answer session maybe identified by words such as expect, should, anticipates, intend, estimates, believes or similar expressions that are used in connection with any discussion of future financial and operating performance. As a reminder, forward-looking statements represents management’s current estimates and the company assumes no obligation to update any forward-looking statements in the future.

We would encourage you to review the company’s past and future filings with the SEC including without limitation the company’s Form 10-K which identified for specific factors that may cause actual results or events to differ materially from those described in these forward looking statements. This morning’s conference all is hosted by Larry Webb, the company’s Chief Executive Officer and Wayne Stelmar, the company’s Chief Financial Officer. They will make some prepared remarks after which they will be joined by Tom Redwitz, the company’s, Chief Operating Officer to open the call for your questions. Now I will turn the call over to Larry.

Larry Webb

Thank you for joining us today for our second quarter 2014 earnings conference. I will provide a summary of our operating and financial highlights for the quarter and Wayne will then discuss additional details on our financial results and balance sheet. Overall, The New Home Company story is a good one. Our strategic operating platform focuses on wholly-owned JV and fee building activities to grow our business. This business approach has allowed us to scale up our operations for a disciplined allocation of capital and to maximize our return on equity. Our unconsolidated joint ventures allow us to own larger more unique communities in some of the strongest markets in the U.S. Through our fee building activity, we have increased visibility in our core markets, gained access to the best trade partners, had greater purchasing power and most importantly produce meaningful earnings.

However, the primary purpose of our recent IPO in January is to raise capital to invest in wholly-owned projects to take advantage of an improving California housing market. Together with our JVs we own and control over 6,100 blocks in premier locations providing all of the lands are projected to leverage through 2016. These locations have a specific focus on coastal Southern California and the Western portion of the Inland Empire as well as high demand markets in metro Sacramento, the Bay area and Silicon Valley. We offer a wide range of homes across all price points that result from extensive market research, designed to ensure we deliver the most innovative housing programs in our markets.

During the second quarter of 2014, we expanded our operations, increased our backlog, strengthened our capital base and positioned our business for future expansion. The second quarter meant another strong quarter of growth with total revenues increasing 18% year-over-year. We also increased a number of new home deliveries by 14% to a 131 homes across all operations including 13 from our wholly owned communities, 44 from JVs and 74 from fee building. During the quarter, we opened three new communities in our wholly owned operation as well as one JV community and end the quarter with 11 active selling communities including four wholly owned communities and seven communities owned by our JVs.

In addition, we completed model homes for five new fee building communities in Irvine, bringing our total to nine overall. Finally, we increased our total backlog 58% for 166 homes as a result of higher order activity in our wholly owned E&JV communities. This overall improvement in deliveries and backlog is encouraging. And we look forward to continuing our progress with our experienced team, unique strategy and solid foundation to further expand our operations.

Our California homebuilding markets remain strong and we are pleased by the well qualified traffic we are seeing across our communities. In May we opened two wholly owned communities, Amelia and Trevi pricing to 1.8 and 2.9 million in Airline California which crafted of 7,000 shoppers and are opening we get. These two communities have been a tremendous success with 29 new orders since opening. In our JVs we continue to experience solid results especially in Meridian Terra Metro and Rose Lane communities which combined accounted for the 101% increase in the number of homes in our JV backlog compared to a year ago.

Our fee building revenues increased 22% in the second quarter compared to a year ago. We achieved this growth despite some delays to project starts which were pushed into the third quarter. To that end, our fee building business has a strong base of activity that has accelerating in the second half of 2014. Our land acquisition strategy partly [indiscernible] lane constraint markets has strong demographic profiles coupled with high job growth. Our relationship continued to provide land opportunities for new home in prime locations.

We have a strong balance sheet and with the closing of our $125 million unsecured credit facility in June we have additional capital to pursue opportunities to support the growth in our community count. We plan to open three new JV communities for sale during the second half of 2014 in the very strong San Jose market area. While wholly owned communities are the primary focus for company’s future growth, communities owned by JVs and fee building activities also allow us to generate significant homebuilding activity and further enhance our returns.

Finally, early this week we announced the plan to acquire the 276 acre Arantine Hills site to a joint venture with Tricon Capital Group, a leading residential real estate investment company and a shareholder of our company. Arantine Hills is located in Corona California and is expected to contain over 1,300 lots within an upscale master plan community. We expect the acquisition of the site to close in December of this year. This transaction highlights the strengths of our operating strategy and expertise and strategic relationships. The addition of this master planned community will enhance growth across all of our business activities.

As we are doing at the Cannery and Davis we will develop and sell improved blocks to other homebuilders as well as build homes and block we acquire. In addition in Corona we will potentially engage an fee building activity in lawns acquired by [indiscernible]. The community is expected to begin selling blocks in mid to late 2016. We are excited by our achievements during the first six months as a publicly traded company. We enter in the second half of 2014 well positioned to expand on our success as we move ahead in the coming years. Quite simply I believe our future is very bright.

I will now turn the call over to CFO, Wayne Stelmar, or provide additional details on our financial results.

Wayne Stelmar

Thank you, Larry and good morning. During the second quarter of 2014, we expanded our operations and strengthened our balance sheet. The highlights for the second quarter, include; first, the opening of three new wholly owned communities responsible for the significant increase in dollar value for backlog to 40 million; second, the continued success of our housing and JV strategy with an increase in backlog to 141 homes with a dollar value of 142 million; third, the completion and delivery of five model home complexes in our fee building arrangement with airline company; fourth and finally, the closing of our $125 million unsecured credit facility with U.S. Bank.

While the positive activity boards well for future results it did not have a meaningful impact on results for the second quarter and which reported a net loss of $1 million or $0.06 per share.

I’ll now provide an overview of our second quarter operating results. Revenue in the second quarter which includes our communities and fee building activities increased 18% to 22.5 million from 19.1 million prior year period. Home sales revenue from our communities increased to $9.6 million compared to $8.6 million in the prior year period. This revenue growth was driven by a significant increase in the average selling price of homes delivered to $739,000 compared to $389,000 in the prior year period. As we mentioned last quarter we expect average sales selling prices to vary from period to period as we bring new communities to market...

** Our four actively selling communities currently have prices that range from $430,000 to $2.9 million. Our home building gross margin for the second quarter improved to 17.6% compared to 17% in the prior year. In our fee building business revenue increased 22% to $12.9 million for the second quarter of 2014 compared to $10.6 million in the prior year quarter primarily due to an increase in number of fee building communities and related construction activity.

As a reminder of fee building revenue includes management fees collected from our JVs which were $1.6 million for the second quarter of 2014 compared to $1.5 million in the prior year period. For the quarter we reported net loss of 0.1 million from fee building activity compared to $0.7 million of income in the prior year period. This loss bares an explanation; during the second quarter models were completed and delivered for five community which opened in early June.

However Irvine Company, our fee building client made a decision to start up production homes to July. We believe this decision was strategic and not an indication of a weakened sales environment. As a point of reference during the second quarter we started eight homes in the fee building community. And the five week period ended August 3, we started a 152 homes. I want to emphasize that this situation represents a timing difference and the fee build business remains extremely meaningful. The delay in starts however did have a significant impact on earnings for second quarter.

Our SG&A increased to $3.4 million for second quarter of 2014 was 35.6% of home sales revenue compared to $1.6 million or 19.3% for the same period a year ago. Selling and marketing expense accounted for $350,000 of increase and rose primarily from the acceleration of expenses related to the opening of three new communities in the second quarter of 2014. The strength of the new orders in growth and backlog dollar value from this community confirmed strategy was effective.

G&A expense increased by $1.4 million primarily related to public company and cost including stock based compensation expense, legal and accounting fees and board related expenses. Personnel costs also increased for the quarter compared to the prior year quarter related to the significant growth at our home building activity. As deliveries and revenue increased from our communities we expect SG&A as a percentage of home sales revenue to normalize.

Moving on to JV communities. The JV structure continues to provide us an opportunity to earn an economic return in excess of our capital percentage as well as significant management fees. As a reminder the results of our JVs are not consolidated and are recorded in equity and net income of unconsolidated joint ventures in our financial statements.

The JVs reported second quarter of revenue of $30.9 million from 44 home deliveries compared to $34.9 million from 25 delivers a year ago. The average selling price of homes in JV communities was $703,000 compared to $1.394 million in the prior year period, it was impacted by lower priced homes and newer communities.

Our share of net income from JVs for the second quarter of 2014 was 0.2 million compared to $0.4 million in the prior year period. Home building growth market from JVs was 21.3% compared to 26.2% in the prior year period. The second quarter of 2013 included deliveries of home and our highly successful Lambert Ranch community, which closed out in January 2014. The second quarter of 2014 included first deliveries from our three Rose Lane communities.

The backlog

Of homes and JV continued to grow at a strong pace, at the end of the second quarter there were 141 homes in backlog from nine communities representing a $142 million of backlog dollar value compared to 70 homes from two communities at the end of the prior year period representing $107 million of backlog dollar value.

This growth that rose from the increase in average selling communities which produced 84 new homes owners compared to 36 in the prior year period. We’re pleased with this growth in communities and backlog which will lead to revenue and earnings in the second half of 2014. Our land pipeline remains strong and well positioned to support our growing operations across all our activities.

During the quarter we increased our loss supply by acquiring 945 lots including 574 lots by our [indiscernible] JV and 336 lots by our McKinley Village JV. At the end of the second quarter together with our JVs we owned during over 6,100 lots representing a 59% increase from a year ago.

Now moving onto the balance sheet and liquidity. We ended the quarter with $52 million in cash and $95 million in availability under our credit facilities. As I mentioned earlier in June we closed that $125 million unsecured credit facility which replace our existing $30 million secured credit facility.

We expect the use of capital to invest in attractive lo an opportunity currently in our pipeline. Additionally they expect cash flow from existing JV ** to accelerate in 2015 which will be reinvested primarily in wholly-owned communities. Our outlook for 2014 and coming years remains very positive. We expect the growth in our community count through 2015 to be primarily driven by wholly-owned communities. We maintained our outlook to end 2014 with 14 active selling communities, consisting of four wholly-owned communities and 10 JV communities. We expect to report revenue from our wholly-owned community to $50 million to $55 million and in our fee building activities we expect revenue of $70 million to 80 million for the full year 2014.

We anticipate our equity and net income from unconsolidated joint ventures to be $7 million to $8 million for the full year of 2014. As a reminder, our earnings will be weighted forwards the fourth quarter. I will now turn the call back to Larry for his concluding remarks.

Larry Webb

Thanks, Wayne. As I previously mentioned, our story is a good one. As a growing California based homebuilder, we have a leadership team that has a proven track record of creating value. This management team has a very strong financial alignment with the company’s shareholders. And on a personal note, I believe so strongly in our future that I purchased approximately $1 million of additional New Home stock during the second quarter. Since our founding in 2009, we have been executing our unique operating strategy and capitalizing on our attractive growth opportunities. We are enthusiastically building our business and strengthening our operation in California‘s strongest housing markets. We remain focused on acquiring, enhancing our operations, opening new communities and generating value for our shareholders.

Thank you for joining us today. Operator, we are now ready to open up the line for questions.

Question-and-Answer Session

Operator

Thank you. At this time, we will be conducting a question-and-answer session. (Operator Instructions). Our first question comes from the line of Alan Ratner with Zelman & Associates. Please proceed with your question.

Alan Ratner - Zelman & Associates

Larry, question on the margin, if we look at the wholly owned and the JV business both the gross margins came in a little bit later than we were looking for and I know it’s hard to really get a clear read on what’s going on there given the low base of closings. But the way we have kind of thought about it is that the consolidated business longer-term should generate margins somewhere in that 20% range while the JVs should be more in the mid-20s given more development activity going on there. So, I just want to make sure those are kind of still good assumptions thinking about the longer term of those businesses?

Larry Webb

I think they are and what we had and what you are seeing right now is as a startup it’s a mix issue and we just have so few wholly-owned that the few number of deliveries we get sometimes skew our margins total lower fashion meaning we think we are going to join the long run. Wayne do you want to add anything to that?

Wayne Stelmar

Well, again you are correct in saying that our wholly-owned community today consists of two communities in Sacramento, the three communities we opened in the second quarter will be then closing homes in the fourth quarter of 2014. Our joint ventures when you start doing comparisons, prior year we were closing all new homes in Lamber Ranch, very successful community. We had a first closing in our Rose Lane community in the second quarter which are closing new joint venture community.

Larry Webb

Overall Alan, we totally agree with you and we believe exactly what you are saying is going to be in our future.

Alan Ratner - Zelman & Associates

Great, thanks. And second I guess just on that note on the pricing environment, wondering if you can comment just in general the trends for the quarter and into July within your community openings and just generally in your markets what you are seeing on the pricing side. Have the actual results come in, in line with your expectation as these communities have opened and are you seeing anything concerning from other builders on the incentive side?

Tom Redwitz

Hi, Alan, it’s Tom Redwitz. There were a couple of questions let me give you just some color overall and we alternately adjust your questions specifically. Our experience is that certainly the coastal Orange County and Bay areas have had a strongest pricing trends, example really is Orchard Hills. In the markets near Silicon Valley where we are planning to begin the sale of three new communities, John Bruens has been calling at white, so we are very optimistic about the prospects there. Sales rates throughout nearly all communities remained healthy, generally consistent with Q2 in our expectations. Your question I think was also related to do you see any competition ahead, is that correct?

Alan Ratner - Zelman & Associates

Just on the incentive environment, what you are seeing from other builders and has there been any increase in county?

Tom Redwitz

So, I have mentioned Southern California and Bay area specifically remaining very healthy ** ...if there was a soft area within our business and we really have to play towards sacramental and in [indiscernible] specifically we do have one community where we have begun offering incentives in the 3% to 4% range.

Unidentified Analyst

Is that a wholly owned community or [indiscernible]?

Unidentified Company Representative

It is a wholly owned community.

Unidentified Analyst

And so how should we think about the margin impact from that 3% to 4% I mean is that straight to the bottom line or is there are there gross price increases that offset part of that or just kind of give us some inside onto how to think about the margin impact?

Unidentified Company Representative

Sure. The incentives were given to those units that were leased with are located within the community. So, certain to answer your question with those that between overall impact will be to the bottom line yes so lower rate but it’s not across the board it’s really incentives to move out those less discernable units where we have more discernable units to take on view an open space those continue to sell at full price.

Unidentified Analyst

Great, thanks a lot.

Operator

Thank you. Our next question comes from the line of Michael Rehaut with JPMorgan. Please proceed with your question.

Michael Rehaut - JPMorgan

Good morning and congrats on another quarter as a public company. First question I had was on just reviewing some of the guidance there Wayne the sort of make sure I got all the expectations down in terms of full year wholly owned 50 million to 55 million fee revenue of 70 to 80 and also the JV income of 7 million to 8 million. Those are did I get those down correctly and was that any change versus a quarter ago in terms of expectations or guidance?

Wayne Stelmar

Michael the numbers that you have are correct and in the prior quarter we didn’t give guidance as to our wholly owned revenue that’s a new piece of guidance. So when you look at top line revenues plus the combined the revenue from the wholly owned communities with the fee building activity we’re looking for top line revenue somewhere in the 120 to 135 range.

Michael Rehaut - JPMorgan

Okay. And the JV income guidance was that I apologize I don’t have it in front of me was that similar to what you communicated last quarter or?

Wayne Stelmar

Yes, it is.

Michael Rehaut - JPMorgan

Okay. I guess just also looking forward and I know it’s tough decline of there is a lot of moving pieces kind of looking through ’15. But if there is any ability to give us a sense of what you’re thinking right now in terms of wholly owned community count as you work through ’15 and perhaps a range of where you might expect to end 2015 and also in terms of orders what type of sales pace on average on a kind of consolidated basis are you guys shooting for?

Wayne Stelmar

Michael to you point is premature for us to provide that guidance only because we’re effectively in a startup mode and many of our communities both wholly owned primarily wholly owned not quite so much as the joint ventures our beginning models as we speak in the second half of 2014 and we’ll have better clarity as we make our way into the latter part of 2014 related to that type of guidance.

Larry Webb

Michael, this is Larry. We totally understand your question and we’re anxious to be giving you that guidance. We just think by fourth quarter we’ll be able to be elect more clear, we don’t want to overpromise but we do feel very optimistic that the ground works being laid and we’re going to be in a really good position all of us feel like that here is we’re just not clear we’re need to be very specific.

Michael Rehaut - JPMorgan

I guess maybe ask another way without necessarily putting you down at this point in terms of what might be in the future for 2015. Perhaps you could give us an overview of your overall lot position in terms of the wholly own business in terms of the number of communities you currently control that you expect to open over the next two to three years? I think that might be helpful as well.

Wayne Stelmar

Well again we have provided information in the queue related to the wholly owned business and lots that are owned lots that are controlled. Our wholly owned business really has a total number of lots of little over 800 that are represented in 19 different communities. Now those will again, as I mentioned, we’re starting models and several of those communities in the fourth quarter and those models will open in the first half of 2015 other models will start in the first quarter of ’15. But until we have again clarity with respect to the specific timing it’s hard for us guess compared as to quarter to quarter community counts in ’15 until we actually have the model start behind us and have some experience and understanding of the demand in each of those respective communities. ** I guess just lastly Wayne there has been a few announcements or press releases in terms of different activity that you have been able to close upon including the recent JV with Tricon. I was hoping maybe you could kind of given a review of some of the more material ones since the end of the first quarter just to give us a sense of what’s incremental to the overall opportunity that you have over the next two, three, four years. And if you kind of break that down between obviously wholly owned JV and our fee building and kind of timing around those new projects.

Wayne Stelmar

There are three significant press releases that were issued. One related to the success of Orchard Hills which we talked about to some extent in our earnings call. The second related to the activity at the Cannery and I’ll let Larry comment a little bit more about the Cannery but again in the second quarter we acquired the ground began development, the site located in Davis, acquired the site, began development and also kicked off an event for builders in connection with lot sales. So that was a lot of activity with one project and one quarter. Then last but not least, we have the Arantine Hills joint venture formation to acquire the site in December of 2014.

Now let Larry comment on both Cannery and Arantine Hills.

Larry Webb

One of the big questions when we’re doing our IPO road show from in particular the investment community on the East Coast -- okay you’re coming in with the bunch of lots but can you ever get anymore prime models. And what we said at the time and we meant was we believe very strongly that our 30 year plus experience and relationships will continue to give us opportunities in the best locations in California. In projects like Davis and Arantine Hills are perfect examples. We have other projects as we sit here today that we control but we still aren’t quite ready to bring to the marketplace or discuss because we haven’t finalized our negotiations. But big picture we believe we’re in a great position in California and by using the IPO funds practically we can continue to grow our business, and that’s what we’re going to do.

Michael’s other question regarding wholly owned versus joint ventures. The majority of our proceeds from the IPO are going into wholly owned communities. Our JVs that we’re doing are for larger land deals. But big picture we’re very confident that we’re going to continue to add this.

Operator

Thank you. (Operator Instructions). Our next question comes from the line of Will Randow with Citigroup. Please proceed with your question.

Will Randow - Citigroup

In terms of just wanted to understand the fee building gross margin piece. It sounds like it is timing but can you kind of walk us through from a revenue and cost perspective how the cost came in a little bit heavier relative to revenue coming in because I didn't fully understand that point?

Wayne Stelmar

This is Wayne. We signed up a number of opportunities with Irvine Company in the fourth quarter of 2013. And that point the expectation was we will build model homes and prior to the completion of model homes we will start production homes. Well the model and the plan changed at some point in the second quarter and we started, we continued to build the model homes so we continue to do all the upfront work necessary to start the production homes, however the timing of those production homes was differing into the third quarter.

The economic model looks something like we get paid based upon cost incurred in connection with build the model house production homes. All related cost there. We also have a cost an internal cost associated with managing this fee business which includes an allocation of our office G&A cost. Those in-office G&A cost are effectively given the nature of the number of homes and number of communities in the fee build relationships, those are effectively fixed and continue with or without revenue.

Will Randow - Citigroup

So does that mean from a third-quarter perspective we should expect an uptick there on fee building gross profit relative to kind of your run rate as of recent?

Wayne Stelmar

It will have an effect, a small effect on or some effect on the third quarter only because the starts occurred in the month of July and not in the second quarter. But it will not be merely as dramatic as it was in the second quarter.

Larry Webb

And Will we really will be kicking in this fourth quarter, that’s just the way it is as to how to get finished, get more construction than we get paid. That’s the way it’s going to be.

Wayne Stelmar

And we have to remember it’s a timing difference not a permanent difference.

Will Randow - Citigroup

And then ** …and then Larry, you already own 1 million shares, you wanted a little bit more of the Company. Can you talk about what gives you more incremental confidence today? And I definitely respect the fact that you are willing to dig in there?

Tom Redwitz

Well, I just look at where our stock has valued and where I can -- the company is going and following the big opportunity. And I am really confident in adding and I think all of -- three of my partners and I want it to be a one with the shareholders just as the same as everybody else. And so, it’s not a big deal, this is a good thing and we all believe in it. And I am very confident.

Operator

Thank you. Our next question comes from the line of Michael Dahl with Credit Suisse. Please proceed with your question.

Michael Dahl - Credit Suisse

Hi. Thanks. Larry, Wayne, Tom congrats on the progress and in finalizing a partner for Arantine Hills there, I was wondering now that there is a little more clarity on kind of the deal structure and who your partner is going to be, is there any more detail that you can give us around what you think your total capital contribution or commitment is going to be? And as currently contemplated, I know you mentioned that you have got up to 30%, you can buy out of the project and then you will be a fee builder for some others. Any thoughts on how -- what the magnitude of the fee building part will be?

Wayne Stelmar

Well, Michael, this is Wayne. You asked a number of questions. The first relates to our capital we structured this at the lot development joint venture with opportunity for us to by lock as well as for Tricon to buy lots and for and plus engage in a fee bill opportunity with Tricon, but the capital structure is at 95.5 structure we put in 5% of the capital there’s no debt, but still going this project other then potentially at CFD. So it’s an all equity joint venture that will overtime, if you make a way to do the entitlements in the second quarter and close on it. I am sorry -- second half and close it in the second half at the end. Will provide us a bit more clarity as to the number of lots and the opportunity that might be available for the New Home Company we think that they are their significant.

Michael Dahl - Credit Suisse

Got it. Thanks. And maybe just a quick then clarification on a second question. I think you mentioned that you took in 28 new orders at the two community openings in Orange County. I guess given there were only 23 orders for the quarter on a consolidated basis, so could you just clarify how many of those occurred in 3Q?

Tom Redwitz

Well, I believe I look here quickly. 14. I am sorry, correct.

Michael Dahl - Credit Suisse

14 in 3Q?

Tom Redwitz

Correct.

Operator

Thank you. (Operator Instructions) Our next question comes from the line Alex Barron with Housing Research Center. Please proceed with your question. Mr. Barron your line is live on our end.

Alex Barron - Housing Research Center

Congrats on the huge ramp up in orders this quarter. I guess my question as it pertains to your two or three communities in Orange County, the Amelia, Trevi and the one in Newport Beach, how are you guys thinking about pace versus raising the price there?

Tom Redwitz

Hi, Alex its Tom Redwitz. The intensity of demand does allow us to cautiously increase our sales price on face by face basis. It’s of course as you know more than art than a pure science. But the interest is very deep to give you an idea at Trevi and Amelia alone we have a interest list, well over 500. Over 100 on a pre call list which gives us a lot of confidence that we can again cautiously without shutting up the tap increase licenses. We’re really in Newport Beach we have to-date been able incrementally increase prices, some we’ve anticipate going forward we would.

Alex Barron - Housing Research Center

Okay. Got it. And then I guess, I wanted to just ask on the fee building units, I guess you guys disclosed the orders for the JVs and for the wholly-owned but what was the orders and backlog for the fee building side of the business?

Wayne Stelmar

This is Wayne. We’re not response for any of the selling activity, so we don’t have that information on a current time basis. So we don’t report it.

Tom Redwitz

That said, at Orchard Hills, all five of the housing programs were under constructions on have sold out…** …pulled out in a first, two or three phase. So sales are very strong there, but we just don’t have the daily, weekly results.

Alex Barron - Housing Research Center

So I guess to understand the way to model the fee building is more off of I guess orders, start activity, rather than closings?

Wayne Stelmar

It all based upon the start of house, you get paid on first dollar of cost we incur over the life of the construction period.

Alex Barron - Housing Research Center

Got it. And then if I could ask one last one on the wholly-owned side as we look towards third quarter, is it fair to say there is going to be a bit of an air pocket there, I guess while the other communities kind of start ramping up towards 2015 in terms of closings?

Wayne Stelmar

That’s correct. We already be closing our two community in the third quarter, both in the Metro Sacramento area.

Larry Webb

You know our two big new wholly-owned Trevi and Amelia which we talked about in Orchid hills and Irvine, we don't get our first delivery turn on into fourth quarter. So we won’t see that impact until we get to there?

Operator

Thank you. Ladies and gentlemen we’ve come to the end of our, time for questions I’d like to turn the floor back over to Mr. Webb for any closing comments.

Larry Webb

Well, I just wanted to thank all of you for listening to our story and certainly thank you for your questions. We look forward to this journey we’re going to continue on. And any questions you have please direct them to Wayne or me. Thanks again.

Operator

Thank you. This concludes today’s teleconference. You may disconnect your line at this time. Thank you for your participation and have a wonderful afternoon.

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Source: New Home Company's (NWHM) CEO Larry Webb on Q2 2014 Results - Earnings Call Transcript

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