WCI Stops Some Major Building Projects [Housing Tracker]

Quote of the Day

"We've always said we were a home builder and not a land speculator. We probably got a little bit off our basics because we were being a little greedy." - Larry Seay, EVP and COO of Meritage Homes. (AZ Central, June 1st)

Homebuilder Stocks

Meritage Homes, After Losing Millions, Says It Has The Strength To Endure. “Some stock-market analysts have [recently] placed Meritage Homes (MTH) on their investor-warning lists… A few have [actually] upgraded Meritage stock, citing the company's recent… lowering of its land holdings book value… to match market conditions. [Leading] to $130.5 million… in write-down charges for H2’07 on top of operational losses totaling $247.4M… Q1’08’s net operating loss [was] $45.3M. Meritage also paid off… bank debt - about $80M - with proceeds from an April stock offering… Five of the six states in which the company builds homes are stricken with overvalued, oversaturated housing markets in steep economic decline. [It’s] only stable market is Texas.” (AZ Central, June 1st)

Pre-Construction Prices And Incentives Offered At Parkview At Tinton Falls. NJ: “Home buyers who act now can save money at Parkview at Tinton Falls in Monmouth County during the community's pre-construction phase. And qualifying buyers will also receive up to $20,000 toward options when they use NVR Mortgage, a subsidiary of developer Ryan Homes (NVR).” (Asbury Park Press, June 1st)

Developers Reassess Plans To Change With Times. “NY: The housing recession [is] beginning to rattle a few of the major commercial and residential developments in Westchester and Rockland counties, altogether valued at more than $4 billion. In April, WCI Communities Inc. walked away from Encore Palisades, a 500-unit housing and retail project… in Haverstraw. WCI has posted six straight quarterly losses… At least one Wall Street analyst said WCI runs the risk of bankruptcy… The collapse of the Haverstraw project, estimated at more than $100 million, was a blow to the town. It had counted on the $35M that WCI was planning to pay for the land.” (LoHud News, June 1st)

Growing Pains But Some Gains. Plant City, Florida: “About a year ago, the local real estate market went south, and a number of projects - residential and commercial - didn't get beyond the planning stages. The largest of the proposed residential developments, Lakeside Station, is slated to become a business park. Out of 30 uncompleted residential projects listed in city records, only nine have homes under construction. Residential properties under development by D.R. Horton Homes (DHI) are among the exceptions. DHI’s Walden Woods developments… "are moving without interruption," said Bill Sullivan, a land and project director working for the developer.” (Plant City Courier & Tribune, May 31st)

Ashley Farms Project On Hold. Florida: WCI Communities Inc. (WCI) has pulled the plug on Ashley Farms… an upscale gated community of more than 1,000 homes… The company might revisit the project next year, said Terri Keogh [who] represents the Castro family... [who] was working with WCI to develop a retail and commercial project adjacent to Ashley Farms. Keogh: Because WCI didn't own all the land for the project, "It's just not a viable deal structure," she said… WCI's prospects for survival look grim. The Bonita Springs-based publicly traded company recently announced an $84.1 million loss for Q1’08.” (Ocala.com, May 31st)

Developers Claim D.R. Horton Behind In Payments. “[Developers] November 2005, Land Investors LLC and Summerset Development Services LLC filed a lawsuit Wednesday, [claiming] DRHI Inc., a subsidiary of D.R. Horton has failed to pay more than $4 million in costs related to the [master-planned community] Park Highlands development in North Las Vegas. November 2005 is a partnership including Olympia NLV Associates and divisions of American West Homes, Astoria Homes and Standard Pacific Homes (SPF). The group is developing a 2,675-acre, 16,000-home residential community in the suburban outskirts, 15 miles north of the Las Vegas Strip.” (AP via Chron.com, May 30th)

Olympia Group Sues Home Builder D.R. Horton, Claims Contract Breach. “The November 2005 Land Investors group sued after DRHI missed three payments of slightly more than $1 million due at the end of January, February and March, court documents say. A payment for April is also due, the 11-page filing claims.” (Las Vegas Review Journal, May 30th)

Arizona Firm Wins Bidding for Bankrupt Trend Homes. “Arizona Bankruptcy Judge George B. Nielsen Jr. late Thursday approved the sale through auction for the home-building assets of Trend Homes. Encountering no competitive bids, Najafi Cos., a Phoenix, Ariz.-based private investment firm, won the auction in a deal structure that included some initial cash and an assumption of debt… Trend Homes CEO Reed Porter: The original cash offer for $65 million "morphed into a complex deal, mostly an assumption of terms, between the Najafis and secured creditors." He noted that most of the assets were encumbered by Franklin Bank and that the eventual acquisition cost will be near $77M.” (Big Builder Online, May 30th)

Dominion Homes Shareholders OK Deal To Go Private. “Dominion Homes Inc. (DHOM) investors… approved a merger with Silver Oak Capital LLC, a private-equity affiliate of Angelo Gordon & Co. LP, hedge fund Silver Point Capital LP [and] principal shareholder BRC Properties Inc., controlled by the Borror family that founded Dominion. The two firms will pay $0.65/share. BRC will receive no proceeds from the buyout. Based on the estimated 4.5 million Dominion shares outstanding and not controlled by BRC, the buyout group would pay about $2.9 million to remaining shareholders. SEC filing: BRC holds 39.7% [of] the company, while Silver Point and Silver Oak each own 7.6%. After the buyout, both firms will own 45.2% each, while BRC will retain a 9.6% stake.” (Business First of Louisville, May 30th)

Toll Brothers Files Suit Over Local Building Codes. Pennsylvania: “In a lawsuit filed in Bucks County Court, attorneys for Toll Brothers (TOL) say Buckingham is wrongly applying outdated township building codes to its projects which is costing the Horsham builder thousands more on each home built. The state code, they believe, should take precedence. According to [Toll] the outdated local code is adding some $7,000-$8,000 to the price of each home. Specifically at issue is a provision in the township building code that requires the use of number two grade lumber and the installation of automatic fire suppression systems in all new residential construction.” (Philly Burbs.com, May 30th)

Lennar Corp Newly Added By Vanguard Balanced Index Fund. “Vanguard Balanced Index Fund added the Lennar Corp (LEN) company to their portfolio, by buying 46,760 shares as shown by filings made public on 2008-05-30. The stock is currently owned by 86 funds/institutions with a total activity score of 0.00. With 45.83 % of owning funds reported recently buying shares, 8.33 % maintaining existing share level and 45.83 % selling shares.” (MFFAIS, May 30th)

KB Home Founder: We're Not At The Bottom Yet. “Bloomberg: Eli Broad, founder of homebuilder KB Home: U.S. home prices likely will drop another 10% from their peak before the housing market begins to recover. Broad said the U.S. economy is "in a recession no matter how you want to measure it," and recommended that investors put their money in the energy industry, multinational companies with the largest stock-market capitalizations, and emerging economies such as Brazil, Russia, India and China. The return on U.S. stocks likely will "be in low single digits'' this year, he said.” (Clusterstock.com, May 30th)

Kb Home (KBH) Dumped By Alliancebernstein Value Portfolio. “Alliancebernstein Value Portfolio completely dumped all -87,900 shares they owned of Kb Home (KBH) as shown by filings made public on 2008-05-30. The stock is currently owned by 399 funds/institutions with a total activity score of -0.01. With 43.05 % of owning funds reported recently buying shares, 11.17 % maintaining existing share level and 45.77 % selling shares.” (MFFAIS, May 30th)

More Than 70 Holly Township Lots Up For Auction Saturday. Michigan: More than 70 lots in Holly Township will be up for auction Saturday. Plots of land in three subdivisions on Fish Lake Road and Academy near Grange Hall Road built by Pulte Home (PHM) will sell for a third of [their] worth. Residents are concerned this could change the face of their neighborhood. Existing neighborhoods paid $65,000 for their lots. [A] neighborhood association group says this is a sign of the times… Pulte built homes in the Woodlands, Preserve of Riverside and Deer Lake subdivisions. Neighbors say the homes weren't selling. The master plan included 900 homes, but only 300 were built.” (ABC Local, May 30th)

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Comments

[CarlosSlim]

Shorting residential home builders or commercial REITs (SRS PROSHARES TR ULTRA SHORT REAL ESTATE PROSHARES) would seem like a sane thing to do now.

However....you're fighting against a vast number of traders who have drank the GOP Purple Koolaid.

GOP Purple Koolaid causes severe delusions and magical, wishful thinking.

[Tom Lindmark]

Meritage got a "little greedy". That's the understatement of the year so far.