Some Homebuilders Finding Alternative Financing [Housing Tracker]

Quotes of the Day

"If anybody wants to buy property, I am all ears.” - Phil von Kahle, managing director of Michael Moecker & Associates, an insolvency firm handling the liquidation of Florida homebuilder Oriole Homes. (South Florida Business Journal, Sept. 2) 

“There's no question about it that there is a good portion of our customers who were looking at foreclosure possibilities. We're seeing that every week.” - Marc Burnstein, VP of sales and marketing for KB Homes’ Northern California division. (Record.net, Sept. 2)

Homebuilder Stocks

Hovnanian Reports Eighth Consecutive Loss. “Hovnanian Enterprises (HOV) posted a 37% decline in revenue to $716.5 million for its FQ3… A net loss of $202.5M, or $2.67/share, compared with a year-earlier net loss of $77.9M, or $1.27/share. The latest quarter included $111.7 million in pretax land-related charges… The average price of homes sold fell 12% to $284,427. Second-quarter home deliveries fell 31% to 2,185 homes. Net contracts dropped 38% to 1,584 homes… Hovnanian’s cancellation rate fell to 32% from 35%. Hovnanian reduced its total land position by 5,773 lots compared with April 30… The total land position of 46,682 lots is down 62% from the peak total land position on April 30, 2006.” (WSJ, Sept. 4)

Hovnanian Slump Extends To 2 Years. “Hovnanian CFO Larry Sorsby: Hovnanian reduced its number of unsold houses 46% at the end of April from a year earlier and has not bought any land or started any new communities. In May, Hovnanian sold $133 million in shares and raised $600M by selling five-year notes, its biggest one-day sale ever. The company used the proceeds to reduce a $900M credit facility to $300M. Hovnanian has operations in 19 states.” (Times of Trenton Business News, Sept. 4)

Price Wars In N. Fontana. California: “Price wars are being waged in north Fontana's upper middle-class neighborhoods as homebuilders drop prices… Their products are going up against bank-owned properties, foreclosures and short sales on homes that were built just 2-3 years ago… Centex Corp. (CTX) is building a few dozen homes… in Fontana and calling it Coyote Canyon… Its smallest Coyote Canyon floor plan, (2,470-sf), is going for about $430,000 - a price that other builders would've drastically slashed by now. But homes being built by Riverside-based Van Daele Development Corp. down the street start are comparable in size and are in the high $300,000s.” (San Bernardino Sun, Sept. 3)

Work Under Way On South Side Bioscience Park, Retail Development. Arizona: “Work is finally under way on a mixed-use development… that includes the planned Arizona Bioscience Park, a housing development and commercial and retail centers… The planned first phase of the bioscience park will include the first six buildings in the southern part of the property, including the main anchor building of a planned hotel and conference center, a five-level parking garage and four multi-tenant office buildings including laboratory space. The mixed-use project is a collaboration of the UA, Eastbourne Investments Ltd. and its partner, Idaho-based Retail West Properties; and KB Homes (KBH).” (Arizona Daily Star, Sept. 3)

 Firm Buys Land For The Grove Development. “Private equity firm Brookwood Value Partners LLC purchased 130 sites for single-family homes and 84 sites for twin villas...  The selling price was $3,380,500. About a dozen homes exist or are under construction in The Grove... a D.R. Horton (DHI) development [in Southwest Florida… Randy Thibaut, president of Land Solutions: Horton will remain the exclusive builder in the project. The company will buy the land back when it has a new home customer… The transaction makes it easier for Horton to stay with the development by removing the risk of carrying the land when the real estate market is down.” (News Press, Sept. 3)

Developers Hope State Place At South End Follows Downtown Sales Trend. “Southland Development Partners has 18 condos left in a 48-unit building at 665 Tennessee. Site work is expected to start within 30 days for 44 townhouses next door… The developers also have reassured buyers that the condo market isn't overbuilt and vulnerable to losses in resale value. Southland bought 36 condos and two townhouses in May from Beazer Homes (BZH) after Beazer decided to exit the Memphis market… Developers have increased prices 5% since they began selling units, which has helped maintain buyer confidence that the units will appreciate in value… Southland bought out Beazer for $3.8 million.” (Memphis Commercial Appeal, Sept. 3)

Comstock Swaps Assets for Debt. “Comstock Homebuilding Cos. (CHCI) [has a large] amount of debt coming due this year… Yesterday, the struggling company struck a deal with one of its lenders to eliminate $32.7 million in secured debt, a move that gave the company a little breathing room by improving its total leverage from 80.8% at the end of June to 76.9% today. The agreement with BB&T was termed a "friendly foreclosure," or a deed in lieu of foreclosure, in that the company effectively handed assets--265 lots in Atlanta and 101 lots and 65 condo units in Northern Virginia--back to the bank as collateral for loans in default.” (Big Builder Online, Sept. 3)

Pulte Homes Acquires New Community in Cary. North Carolina: “Pulte Homes (PHM), one of the Triangle’s largest homebuilders, has added another community to its portfolio. Creekside at Tryon Village in Cary will feature 101 townhomes with six floor plans and will be open for sales in early 2009. The homes, ranging from 1,800–2,200-sf., feature six spacious floor plans complete with garages, luxurious Signature Standards and the convenience and beauty of living in Cary.” (Carolina Newswire, Sept. 3)

Homes in Pulte Community Almost Sold Out. Raleigh, N.C.: “Pulte Homes, one of the Triangle’s largest homebuilders, is nearing the end of home sales for Glenwood Crossing.  The community, which opened in January 2007, has only 13 homes remaining of the total 195 homes. Chris Martin, VP marketing:  “Glenwood Crossing has been a great model for us in offering luxury townhomes to the Triangle market.” (dBusiness News, Sept. 2)

Lennar Megaproject Survives. “Lennar Corp. (LEN) [has formed] a new venture with Ross Perot Jr.'s Hillwood Development Co. and the investment firm Scala Real Estate Partners LP. The venture is taking equity stakes in massive projects at former military properties across San Francisco… The venture replaces the 50% stake held by LNR Property Corp., a unit of Cerberus Capital Management, in the Hunter's Point project… half of Lennar's 50% stake in a… Treasure Island [project]… [and] half of Lennar's 100% stake in Candlestick Point… [It also took] a stake in land on the New Jersey waterfront… The Lennar-Hillwood-Scala venture paid $145 million in cash to LNR, Lennar and the partner in the New Jersey project. Hillwood and Scala have committed to providing long-term financing to the projects.” (WSJ, Sept. 2) 

Investors Snap Up Shares of SPF. “Investors bought 27 million of 50 million new stock shares in a transferable rights offering by Standard Pacific (SPF) as part of its cash infusion deal with MatlinPatterson Global Advisers. The remaining 23M shares are slated to be bought by the private equity firm by Friday, Sept. 5. The stock offering, which will generate $152.5M of cash before transaction expenses, was the third and final phase of MatlinPatterson's $530M investment in the company. The company's investment in SPF also netted it three seats on the builder's board… The effect of all the stock issuances is dilution of the company's shares.” (Big Builder Online, Sept. 2)

Minyan Mailbag: Has Housing Hit Bottom? “There’s certainly some positive sentiment brewing in the housing charts. Notice the 30% gain in the PHLX housing sector index since the middle of July… But this could be similar to the bounce we encountered in H2’06. We had a meteoric 25% rise in the index, only to falter and swoon to new lows… I would await further guidance from the evolving chart patterns in these stocks. I am looking for higher lows (and higher highs), a strong basing action or a successful retest of the old lows that we hit in July 2008.” (Minyanville, Sept. 2)

Meritage Homes.  “Meritage Homes (MTH) is now poised to close the month atop its 20-month trendline for the first time since early 2006... Furthermore, MTH has been a star compared to the broad market recently, outperforming the S&P 500 Index (SPX) by more than 56% during the past 40 trading sessions… MTH followers should keep an eye on the stock's 20-month trendline, as a monthly close atop this moving average would be a feat not accomplished in more than 2 years… Investors should pay attention to the pessimism surrounding the outperformer. A continuation of MTH's voyage into the black could motivate the bears to reevaluate their positions.” (Schaeffer’s Research via Zacks.com, Sept. 2)

Aaron Brooks Sees New Project As Stepping Stone. Virginia: Workers under the Newport News native's direction recently began clearing a 17-acre parcel of land in James City County that will become the upscale Burlington Woods subdivision… Former NFL quarterback-[turned]-land-developer Aaron Brooks said he will oversee the project through its completion, but Ryan Homes (NVR) will take over the construction phase once the individual lots are prepped… Jeff Ambrose, Ryan Homes' Williamsburg division manager: Burlington Woods will consist of 26 lots that will be of one-quarter to one-third of an acre. The 4-5BR homes are expected to be from 2,000-4,500-sf in size. Starting prices will be in the low $300,000 range.” (Daily Press, Sept. 2)

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

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