Quote of the Day
"The days of the flipper are gone." – Homebuilder KB Homes CEO Jeffrey Mezger. (LA Times, Jan. 9th)
Homebuilders, Housing Stocks and Housing-Related Stocks
Keeping the Housing Slump at Bay "Entrepreneurs who either have long experience in real estate or have carved out a special niche... have been able to ride out the worst [of the downturn.] HouseRaising of Charlotte, N.C., [is] a custom builder that caters to the rich... Since mid-2006, when it began using a patented computerized system for overseeing every aspect of the building process, HouseRaising has completed 12 houses and has 30 more in the works... Last year, it doubled its work force to 35. “We are going to be successful no matter what the economy does, because of who we serve,” said Greg Wessling, HouseRaising's CEO."
Doctor in the House "Every month, when the S&P/Case-Shiller Home Price Indices are released, builders everywhere cringe. Another month of data these days means another month of price declines, which, in the minds of many builders, creates yet another month of price declines... So when Dr. Robert J. Shiller tells a major newspaper that he expects home values to fall by as much 30%–or that he thinks they could fall as far as a Great-Depression-esque 50%–builders go into a deep funk, and an angry one at that."
America's First Home Files for Receivership in Florida Court "America's First Home LLP, a Florida-only builder, is asking a judge to let it turn all the company's assets over to a receiver, who would liquidate the company and then divvy up the proceeds among its creditors... The company's three largest creditors are three mortgages totaling $28.9 million to Bank of America (BAC), one for $18M to Wachovia (WB), and another to Fifth Third Bank (FITB) for $4.5M. The petition says America's First Home has real estate assets worth $24M pledged to BAC, $16.6M to Wachovia, and $5.9M to FITB. It says it has land worth $1.7M that is unmortgaged."
Brookfield to Take Write-Downs Amid Housing Slowdown "Brookfield Homes Corp. (BHS) plans to take impairment charges and write-downs of $1.05 to $1.24/share in Q4 amid the ongoing housing slowdown. The homebuilder said net new orders fell 50% to 104 in Q4'07 from Q4'06. For the year, net new orders declined 23% to 735, from 960 in 2006... In 2007, Brookfield closed on 839 homes and 1,328 lots, including joint ventures, for a total of 2,167 closings, up 7.5% from 2006. The company's backlog on Dec. 31 was 155 homes, down 104 homes from the same time last year."
KB Home Will Reduce Communities by 25% in 2008 "KB Home (KBH), the industry's fifth-largest builder, will trim back its active communities by between 25%-30% this year from the 380 neighborhoods with which it ended 2007, when the Los Angeles-based builder's earnings loss was steeper than what many analysts had expected."
WCI Gets More Leeway from Lenders "For the third time, WCI Communities' (WCI) lenders have waived its covenant violations while they negotiate a longer-term amendment [to help] the beleaguered Florida builder survive. The holders of its senior secured credit and its term agreement initially gave the company an extension for violating its fixed charge requirements on Nov. 7, 2007, then extended it on Dec. 7, then again on Monday, Jan. 7, 2008. The new deadline for reaching an agreement is Jan. 16. If negotiations fail, the company had $7.1 million at the end of September... to keep it going if its loans are pulled... compared to $41.9M at the end of September 2006."
KB Home Loses $773 Million; CEO Is Gloomy "KB Homes (KBH) reported a Q4 loss of nearly $773 million, or $9.99/share... That compares with a loss of just under $50M, or $0.64 in Q4'06. Q4 Revenue fell to $2.07 billion, down from $3.01B the previous year, because of lower home sales and prices. For fiscal 2007, KB posted a loss of $929.4M, or $12.04/share, compared with a profit of $482.4M, or $5.82, in fiscal 2006. Revenue fell 32% to $6.42B... The firm has cut its debt by $759M and increased its cash balance by $625M. KB has cut jobs and construction and is focusing on building smaller, lower-priced houses."
Levitt and Sons Seeks to Borrow $3.5M "Homebuilder Levitt and Sons LLC is seeking approval from a bankruptcy judge to borrow up to $3.5 million to finish building homes in South Carolina, Georgia and Florida. In [court] papers... Levitt said it would use the proceeds of the loan from pre-bankruptcy lender Wachovia Bank to restart construction halted when [it] sought bankruptcy protection in November. Levitt can seek to increase the financing to $10M. Levitt and Sons, a unit of Levitt Corp. (LEV), plans to use the proceeds from the sale of the homes to repay its lenders [like] Wachovia [to whom it owes] $103.9 million, as of Nov. 9."
Standard Pacific Offloads 2,500 San Antonio Lots "Standard Pacific Homes (SPF) is selling off its assets in San Antonio... Forest City Enterprises Inc. (FCEA) and its venture partner Covington Capital Corp. are said to be buying more than 2,500 single-family home lots in San Antonio from Standard Pacific. San Antonio Business Journal: The land and lots include finished lots as well as future plotted lots... Last week SPF announced that Miramonte Homes, a newly created firm based in Tucson, is buying Standard Pacific’s assets in the Southern Arizona region."
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