California Municipalities Helping Homebuilders - Housing Tracker

by: Judy Weil

Homebuilder Stocks

KB Home Cut To 'BB' From 'BB+' On Weak Q1, Difficult Market Conditions - S&P. “Standard & Poor's Ratings Services said it lowered its corporate credit and senior note ratings on KB Home (NYSE:KBH) to 'BB' from 'BB+', reflecting the company's weak first quarter and very difficult housing market conditions in the U.S. The outlook remains negative reflecting S&P's expectation that housing conditions for KB Home and its peers will continue to deteriorate, blocking efforts to rapidly right size operating platforms… S&P also lowered its rating on the company's senior subordinated notes to 'B+' from 'BB-'. The rating actions affect $2.15 billion of rated notes.” (Forbes, May 20th)

Palm Harbor Homes 4Q Net Loss Widens, Revenue Falls. “Palm Harbor Homes Inc. (PHHM) late Tuesday reported a fourth-quarter net loss of $12.7 million, or $0.55/share, versus a net loss of $7.23M, or $0.32/share, in the year-earlier period. Analysts estimated loss was $0.34/share. Results for the most recent quarter include $8.3M, or $0.36/share, in restructuring charges. Results for the year-earlier quarter included $4.1M, or $0.18/share, in restructuring charges. Q1 revenue fell to $126.5M from $135.9M a year earlier.” (Forbes, May 20th)

California Towns Postpone Impact Fees. “A push for local governments to defer the collection of impact fees gained steam in California last week when elected officials in Orange County, Calif., agreed to postpone collecting fees for housing construction projects until those projects are finished. The county, which wants to provide temporary relief to the ailing housing industry, will defer collections for a year and then revisit the issue in light of existing business conditions. Orange County's decision came only weeks after the city council of Anaheim, Calif., voted unanimously to delay impact fee collections as part of a stimulus package that includes green-building and affordable-housing incentives.” (Big Builder Online, May 20th)

Levitt Buyers Offered Deal on Lost Deposits. “Bank of America (NYSE:BAC), a creditor owed $103 million in loans related to eight Levitt properties, [have] invited deposit holders [for] Levitt & Sons (LEV) homes to a three-day private sales event, beginning May 19. Deposit holders were allowed to apply the amount of their original deposit as a credit toward the purchase of a Levitt & Sons model or spec home in four select communities in Florida... Under the program, deposit holders may not end up with the home they had contracted for when they originally handed over their deposits, but at the end of the day, it ensures that their deposit money was worth something.” (Big Builder Online, May 20th)

Ruling Near On Anthem Water And Sewer Case. Arizona: “Administrative Law Judge Teena Wolfe issued an order May 12 which would allow Arizona-American Water Company to raise its monthly rates… Arizona-American filed the water rate case in June 2006 to offset an upcoming series of balloon payments ["true-ups,”] it owes to Anthem's developer, Pulte Homes (NYSE:PHM). When Del Webb, which Pulte purchased in 2001, built Anthem in the 1990s, it fronted the costs of building the infrastructure Arizona-America now uses. When Arizona-American purchased Anthem's original water company, Citizens Utilities, in 2002, it inherited the tens of millions of dollars in true-ups owed to Pulte. It is now seeking to recoup those costs through higher water and sewer rates.” (AZ Central, May 20th)

Monday’s Biggest Stock Stars. [Two weeks ago,] CAPS All-Star icanpickm pieced together these bearish bits on Beazer Homes (NYSE:BZH): First, why haven't they produced a financial statement since July. Secondly, these guys were still grading lots on a large subdivision last summer in the town where I live. This would not be alarming if it was not one of the top five highest foreclosure markets in the country. Thirdly, my company did some business with them this winter. Getting paid was worse than pulling teeth ...Shares of the embattled homebuilder plunged yesterday after posting a second-quarter loss of $230 million, as the housing market continued to deteriorate.” (Motley Fool, May 20th)

Has Housing Turned? “About 90 days ago, Beazer announced that it would cease to originate mortgages. Instead, it points its customers in the direction of Countrywide (CFC) for mortgage assistance.” (Motley Fool, May 20th)

Developer Sets Sights On Daly. San Francisco: “Lawyers for Lennar Corp. (NYSE:LEN), the developer tapped for efforts to redevelop the Bayview-Hunters Point neighborhood… filed a complaint with the Ethics Commission… alleging a series of violations involving Supervisor Chris Daly — an outspoken critic of Mayor Gavin Newsom — and his efforts to win over voters to support Proposition F on the June 3 ballot. That ballot measure would require 50% of the housing created in the redevelopment of Bayview-Hunters Point to be offered at below-market rate.” (Examiner National, May 20th)

Lennar Agrees To Low-Income S.F. Housing Pact. “Under its deal with the powerful San Francisco Labor Council and other groups, Lennar Corp. vowed to make 32% of the 10,000 new homes it builds [at] Hunters Point Shipyard and Candlestick Point, affordable. The company also agreed to make more of the units big enough for families and to set aside $35.5 million over the next several years to fund homeownership and job training programs for neighborhood residents… In exchange, Lennar gets the labor council's important endorsement for Proposition G on the June 3 ballot. That measure asks for the public's support of the redevelopment project.” (SF Chronicle, May 20th)

Locality Wants To Continue In Lawsuit. Virginia: “The town of Front Royal wants to remain part of a lawsuit over the relocation of Mary's Shady Lane.… The lawsuit originally included national home builder Centex Homes (CTX) as a plaintiff along with F&R Limited. At the time, Centex was pursuing a 1,862-home development off Happy Creek Road in Warren County. Centex withdrew its development application in December 2006 because of a cooling housing market. Yet it remained a plaintiff in the lawsuit because Centex needed the road moved since it also burdened a proposed 99-home by-right subdivision in Front Royal. Centex is no longer pursuing the subdivision, and wants out of the lawsuit.” (Northern Virginia Daily, May 20th)

Lennar's Super Saturday A Hit With Buyers. “Jassy Friddle, marketing manager with Lennar Tampa: Lennar's May 3… Super Saturday Sale… builds on a special plan from Universal American Mortgage Co. featuring a 2.88% interest rate the first year, a 3.88% rate the second year and a 4.88% fixed rate for the remainder of the mortgage (annual percentage rate is 5.4% over life of loan), Lennar added an incentive for the sale. "On Super Saturday, home buyers had the option of no mortgage interest payments for six months on conventional loans as well as FHA loans," Friddle says, adding [that] the Super Saturday event was a success nationally and locally.” (Tampa Bay Online, May 20th)

Hovnanian Enterprises $1.5 bln notes cut to 'CCC+' from 'B-' - S&P. “S&P said it lowered its issue-level rating on Hovnanian Enterprises Inc.'s (NYSE:HOV) $1.5 billion senior unsecured notes to 'CCC+' from 'B-' following the successful execution of Hovnanian's $600 million senior secured note offering and concurrent credit facility amendment. Concurrently, the ratings agency affirmed its 'B-' corporate credit rating assigned to Hovnanian acknowledging that, despite the higher debt load and interest burden resulting from this costly (11.5% coupon) refinancing, the recent senior secured note and common equity issuances and the amended credit facility enhance the company's currently weak liquidity position. The outlook is negative.” (Thomson Financial via Hemscott, May 20th)

Trust Land In Phoenix Up For Bids. “Phoenix: The Arizona State Land Department is [auctioning] the 64-acre site southwest of 40th Street and McDowell Road for a minimum bid of $20 million, [on] June 17… The L-shaped parcel of state trust land is zoned for a mix of uses. Offices and retail building would be allowed under the current zoning, along with single-family homes, apartments or condominiums… Centex Real Estate Corp. was the [original?] applicant and prepared a development report about the property. Mark Winkleman, state land commissioner, does not expect the homebuilder to be among the bidders because of a slump in the new-housing market.” (AZ Central, May 20th)

Newland Buys 3,000 Acres in Planned Community Outside Phoenix. “Newland Communities late Monday confirmed the purchase of roughly 3,000 acres of land in the metro Phoenix-area planned community of Estrella. The company says the sale reflects its ongoing commitment to expand in the development, which is located in the city of Goodyear. The acquisition price for the property was $51.3 million, or $17,000/acre. The price represents a new floor for the area, which had been fetching $21,000-$23,000/acre. "At $17,000/acre, that's barely above agricultural prices for the area," said John Fioramonti, senior managing director of Meyers Builder Advisors, who is familiar with pricing in the area.” (Big Builder Online, May 20th)

Beazer Homes USA "Market Underperform," Estimates Reduced. “Analysts at JMP Securities reiterate their "market underperform" rating on Beazer Homes USA Inc., while reducing their estimates for the company. The target price is set to $8.00… The analysts mention that the company has reported its F2Q08 EPS short of the estimates. Beazer’s gross margins contracted by 530bps on a sequential basis in the quarter due to weak market conditions, mix issues and the efforts to reduce inventory in areas, from which the company is exiting, the analysts say. The EPS estimate for FY08 has been reduced from -$7.00 to -$13.40 to reflect slower sales momentum, the substantial gross margin contraction and impairments.” (NewRatings, May 20th)

Fitch Rates Hovnanian's Sr. Secured Notes 'BB-/RR1'. “Fitch Ratings has assigned a 'BB-/RR1' rating on Hovnanian Enterprises, Inc.'s (HOV) $600 million 11.5% senior secured notes due 2013. In addition, Fitch affirms the following ratings for HOV: Issuer Default Rating at 'B-'; Senior secured revolving credit facility at 'BB-/RR1'; Senior unsecured notes at 'B-/RR4'; Senior subordinated notes at 'CCC/RR6'; Series A perpetual preferred stock at 'CCC-/RR6'. HOV's Rating Outlook is Negative.” (Fox Business, May 19th)

Ryland Group (NYSE:RYL) NewsBite - Ryland Down on Negative BZH Outlook. “Ryland Group Inc. (RYL) stock hit its 52 week high of 48.61 in May and set its 52 week low of 19.51 in November. RYL has traded higher since October of last year... Technical indicators for the stock are neutral and improving while S&P gives RYL a neutral 3 STARS (out of 5) hold rating. If you’re looking for a hedged play on this stock, consider a July bear-call credit spread above the $40 range. RYL stock could rise up to 21% before expiration and this position would still be profitable.” (Market Intelligence Center, May 19th)

Gurus Dig Homebuilders, Ditch Burger Joint. “Online investors, Marketocracy's M100: Standard Pacific (SPF) was murdered after the company turned in [its latest] results… Shareholder wealth has evaporated over the past year, with the stock now off more than 86% in just the past 12 months. But the M100 now feel like this is one homebuilder worth a second look. SPF gets praise from analysts for working hard on geographic expansion and product diversification, including building more homes in lower-cost markets. Compared with competitors like Centex, D.R. Horton (NYSE:DHI) and Lennar, SPF has larger operating margins over the trailing 12 months and higher earnings before interest, tax, depreciation and amortization.” (Forbes, May 19th)

M/I Homes CEO Sells 20,000 Shares. “The president, chairman and chief executive of homebuilder M/I Homes Inc. (NYSE:MHO) sold 20,000 shares of common stock, according to a SEC filing Friday. In a Form 4 filed with the SEC, Robert Schottenstein reported he sold the shares Thursday for $17.15 to $17.31 apiece. He reported owning the shares indirectly through family companies and trusts.” (Forbes, May 19th)

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