Homebuilder News: Lawsuits, Bottom Calls... [Housing Tracker]

by: Judy Weil

Homebuilder Stocks

WCI Reaches Agreement With Lenders For $150 Million In Financing. “Florida luxury homebuilder WCI Communities Inc. (WCI) has reached agreement with a group of existing secured lenders to provide $150 million in secured financing for the Chapter 11 reorganization. WCI said… that the loan will be used for working capital except $49M to repay a credit referred to as the Tower loan. WCI said that the Tower loan is fully secured by collateral and would be repaid anyway during the course of the reorganization. The new loan will have a security interest before the banks’ existing secured loans… WCI already has permission from the bankruptcy court and the lenders for the use of cash.” (News Press, Aug. 27)

Horton Opens Desert Ridge Models. “D.R. Horton Co. (NYSE:DHI) has opened three model homes in northeast Phoenix's Desert Ridge neighborhood, the first models to open in the area since Pulte/Del Webb's Fireside at Desert Ridge first went on sale more than a year ago. The Horton development, Cielo at Desert Ridge, will eventually have more than 500 single-family homes… The area has been slow to develop, a pace that has not been helped by the recent economic slowdown. Horton held its property for more than four years before building and opening models. Other large parcels have been vacant for more than three years.” (Arizona Republic, Aug. 27)

Analyst's Comments Boost RYL. “Ryland Group (NYSE:RYL) [closed at $21.96, up 5.32%. Over the last 52 weeks the stock has ranged [between] $18.11-$37.85. Shares of RYL are rising with other homebuilders after a Wachovia analyst said Wednesday that the housing market is approaching a bottom, which could be reached late this year or early next year… Technical indicators for the stock are bearish and S&P gives RYL a negative 2 STARS (out of 5) sell ranking. If you are looking for a hedged play on RYL the stock seems like it could be a candidate for a September out-of-the-money bull-put credit spread below the 17.50 range.” (Market Intelligence Center, Aug. 27)

Beazer Homes Shows Off Its Chef’s Dream Kitchen With Help From "Top Chef" Winner. “Beazer Homes USA (NYSE:BZH) has announced the addition of chef and restaurateur Harold Dieterle, winner of the Bravo network’s first season of “Top Chef,” to its SmartDesign team of experts… Dieterle, who owns Perilla Restaurant in New York City, also is serving up some of his favorite recipes at Beazer communities in selected markets… Earlier this year, Beazer teamed up with professional organizer Monica Ricci, who reviewed floor plans with the in-house architects to add organizing features... It also rolled out a set of green building practices called eSmart; those include Energy Star appliances [and] water-saving plumbing fixtures.” (Builder Online, Aug. 27)

Has Housing Bottomed? Mortgage Data Lifts Toll Brothers, Others. “Now could be a good time to look at… a bullish hedged play on Toll Brothers (NYSE:TOL). I would consider an October bull-put credit spread below the $17.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns… We will make an 8.7% return in just seven weeks as long as TOL is above $17.50 at October expiration. Toll would have to fall by more than 25% before we would start to lose money.” (Blogging Stocks, Aug. 27)

Kibel Companies, Toll Brothers Develop Green Condo In Manhattan. “Glenmere Capital Partners, LLC in conjunction with Katz/Cunningham Mortgage and Real Estate Advisory, has arranged a joint venture between The Kibel Companies, LLC and Toll Brothers, Inc. for the development of 303 East 33rd Street, a 12-story green condominium building located in Manhattan's Murray Hill neighborhood at the corner of Second Avenue. Kibel assembled the approximately 17,500-square-foot site over the past several years. Construction has already commenced and completion is scheduled in the fall of 2009.” (Construction & Maintenance, Aug. 27)

Centex Pullout May Leave Liberty Ranch High And Dry.  Colorado: “Centex has announced it is “winding down” its operations in Colorado. According to one resident, Centex (CTX) notified Liberty Ranch subdivision’s 60 or so homeowners about three months ago that it was going to stop building new homes in what was originally planned to be a 408-home development. On Monday, Centex representatives met with about 50 homeowners and told them it would not be building a “brown water” system that the homeowners say was promised… To complete the system, he said, Centex would have to build an additional pipeline, a transfer pond and a pump station. That would cost $700,000.” (Times Call, Aug. 27)

Homeowners Weigh Legal Action After Developer In Edison Refuses To Close Exit. New Jersey: “Homeowners at Center Place at Edison are considering their legal options after property owners Lennar Corp. (NYSE:LEN) and Edgewood Properties refused to relocate an exit that threatens to increase traffic within the residential community. At a meeting, facilitated by the township on Wednesday, Aug. 27, homeowners were told by officials from Lennar Corp., which owns the residential complex, that Lennar doesn't want to bear the costs and that nothing could be done about the exit.” (My Central Jersey, Aug. 27)

Egg Harbor Township Faces Multiple Fronts In Affordable-Housing Fight. Atlantic City, N.J.: “A suit was filed against the township last month by the Fair Share Housing Center, a housing rights group. The nonprofit sued township government, the Planning Board and Pulte Homes (NYSE:PHM) to overturn the building approval Pulte Homes got in April to create 657-homes in the Farmington section. Adam Gordon, an attorney for the group, said the Pulte project does not have any affordable units and the nonprofit wants the township to create affordable homes.” (Press of Atlantic City, Aug. 27)

Home Builder ETFs Enjoy Rare Uptick. “The home-building industry appears to working through its excess inventory and data from earlier in the week indicated existing homes rose as well, albeit less than expected. Mortgage applications are up. With Freddie and Fannie shares, investors are once again buzzing about a possible bottom in the beleaguered housing sector. The iShares Dow Jones U.S. Home Construction fund (NYSEARCA:ITB) gained 4.8%. The SPDR S&P Homebuilders ETF (NYSEARCA:XHB) moved up 3.7% Wednesday.” (Smart Money, Aug. 27)

Large Homebuilder May Be Near Bankruptcy. “Woodside Homes… the third largest private homebuilder in the U.S., may be nearing bankruptcy. Woodside is part of a group of builders developing the Inspirada master-planned community outside Las Vegas. Other developers at the community include Toll Brothers, KB Home (NYSE:KBH), Meritage Homes (NYSE:MTH) and Beazer Homes… Last week, a group of note holders filed an involuntary petition against Woodside Homes in U.S. Bankruptcy Court… Involuntary petitions are often made by creditors to force a company into Chapter 11 bankruptcy… The petitioning creditors listed… are John Hancock Life Insurance, AXA Equitable Life Insurance, Metropolitan Life Insurance, New York Life Insurance and Security Life of Denver Insurance. The total claim amount is $156 million.” (The Street, Aug. 26)

Epstein Sues Toll Brothers. Pennsylvania: “Wrightstown millionaire and philanthropist Gene Epstein has sued Toll Brothers, claiming that construction near his home caused mud and silt to pollute his private lake and kill all his fish. Epstein filed suit Friday in Bucks County court and seeks more than $50,000 in damages.” (Bucks County Courier Times, Aug. 26)

Where Home Prices Are Likely To Rise. Centex, one of Texas' largest homebuilders, has been stung by overextension into Michigan and Colorado, as well as big bets on the vacation-home market in Texas. In July, the builder reported losses of $150 million… However, San Antonio and Austin, Texas, have largely avoided the real estate crash, with price increases of 2.5% and 4.1% in year-over-year terms, respectively [NAR]. This is driven in part by the fact that the two markets are expecting building slowdowns of 24.7% and 28.2%, respectively, through the end of the year, as homebuilders are bearish about the remainder of 2008 and 2009 in the sales market or cannot find financing.” (Forbes, Aug. 25)


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