Seeking Alpha

Housing Market Tracker - Homebuilder Consolidation Continues

by: Judy Weil

Quotes of the Day

"December was terrible; things don't get worse than that. During that period, we were wondering what we would have to do to make a sale." - Jeffrey P. Orleans, chairman and CEO of Orleans Homebuilders. (Builder Online, Feb. 4th)

"As we look ahead to 2008, we are not expecting market conditions to improve, and perhaps might continue to decline in the near term. Nevertheless, the strength of our balance sheet, bolstered by the cash generated through our fourth quarter strategic moves, will keep us well positioned to weather these turbulent times." - Stuart Miller, President and CEO of Lennar Corporation. (Jeff Bishop in Seeking Alpha, Feb. 4th)

Homebuilder Stocks

Lennar Attracts Major Backer For S.F. Projects. "Lennar Corp. (NYSE:LEN)... landed a significant investor for its proposed mega-projects at Hunters Point shipyard, Candlestick Point and Treasure Island. Scala Real Estate Partners has signed letters of intent... to secure an at least 30% equity interest in the developments... The Irvine investment and development company... will initially invest tens of millions of dollars in the projects, co-managing partner Frank Zaccanelli said. Kofi Bonner, regional VP for Lennar: The majority of a $200 million fund announced by Scala in October 2007 would eventually land in the San Francisco projects and that the two companies would have equal ownership interests." (San Francisco Chronicle, Feb. 5th)

Builders Climb Amid Gloom. "Shares of several homebuilders rose [Tuesday] after Banc of America (NYSE:BAC) said it has "positive bias' toward the sector, and upgraded KB Home (NYSE:KBH), MDC Holdings (NYSE:MDC) and Pulte Homes (NYSE:PHM) to buy from neutral; and Toll Brothers (NYSE:TOL) to neutral from sell. BofA said in a note that improved affordability, reduced construction and less adjusted-rate mortgage reset risk drive its more positive stance, adding it sees upside potential of 20%, on average: "Despite the significant fears that homebuilders would struggle even more should a recession occur, the evidence suggests that home builders start to rally at the beginning of recessions." (Wall St. Journal, Feb. 5th)

Beazer Cleans House. "Beazer's (NYSE:BZH) stock has risen over the past month, as has that of many builders, including Hovnanian (NYSE:HOV), which is up more than 60% so far this year. But we've been through these "dead cat bounces" before, and Beazer's position is still precarious. It will take a substantial charge for abandoning the various housing markets, plus its financials remain a shambles. Add in that new home orders declined 29% year over year, closings dropped 24%, and nearly half of its orders were canceled last quarter, and Beazer is not so much a stock on sale as one ready to be condemned." (Motley Fool, Feb. 4th)

Lennar Homes Becomes Southern California’s Top Builder in 2007. "The Southern California market is comprised of 7 regions, San Diego County, Inland Empire (East Riverside, West Riverside and San Bernardino Counties), Orange County, and Los Angeles (includes Los Angeles and Ventura Counties). According to MarketPointe Realty Advisor’s ResidentialTrends, Lennar had 2,555 sales, while KB Homes came in second posting 2,339 sales. Lennar captured 7.89% of the market. KB Home captured 7.22% of the new home buying market. Centex Homes (CTX-OLD) ranked third, followed in fourth place by Standard Pacific Homes (SPF). Builder sales ranking changed quite a bit in H2'07, leading to the final 2007 results." (Press Release, Feb. 4th)

Del Mar: Serenity for Sale From Brookfield Homes. San Diego, California: "Brookfield Homes Corp. reports a strong start to sales at Serenity at The Estates at StoneBridge during a grand opening event held Jan. 19 and 20. Pricing for... single-family homes starts in the high $800,000s... The locally based homebuilder released just eight homes in its first phase and sold two during the first two days of sales.Lora Heramb, VP of sales and marketing for Brookfield Homes’ San Diego and Riverside office, says sales were encouraging. “For us, this is validation that things are not so bad as has been suggested." (San Diego Business Journal, Feb. 4th)

Brookfield Homes Corp. Swings to 4Q Loss. "Brookfield Homes Corp. (BHS) reported a loss of $24.2 million, or$0.91/share, compared with income of $58.8M, or $2.19/share, in the year-ago period. Revenue fell 40% to $197.7M from $329.4M in Q4'06. In Q4, Brookfield closed 272 homes and 1,265 lots. This compares with 481 home and 216 lot closings in Q4'06. Homebuilding revenue dropped 46% in Q4 to $165.4M. Additionally, the company recorded land write-offs... of $61M before taxes, compared with $10M in Q4'06. For 2007, income tumbled 90% to $15.6M, or $0.58/share, from $148.4M, or $5.45/share, in 2006. Total sales fell 33% to $583.4M from $872.3M in the previous year." (Forbes, Feb. 1st)

Creditors Object to TOUSA Bankruptcy. "Homebuilder TOUSA's (TOA) restructuring plan included a debt-for-equity swap for senior note holders and an agreement for $135 million in debtor-in-possession financing from Citigroup Global Markets... [TOUSA plan noted] more than 50% of its senior note holders were amenable to exchanging the bond debt for equity in the reorganized company, providing senior note holders with substantially all of the new company's stock, as well as an interest in and potential proceeds from a litigation trust... The tentative approval granted Citigroup senior secured super-priority status, [and therefore] at the top of the list of creditors to be repaid. Subsequently, 10 creditors... collectively filed an objection to the plan's terms." (Big Builder Online, Feb. 1st)

Orleans Loses $38.6 Million in Fiscal '08 Second Quarter. "Jeffrey P. Orleans, chairman/CEO of Orleans Homebuilders (OHB): New orders for FQ2'08 ending Dec. 31, 2007 decreased 25% to $114.7 million on 284 homes, compared to $152.4M on 367 homes for FQ2'07. Loss from continuing operations for FQ2'08 was $38.6M, compared to $7.0M for FQ2'07. The loss was due primarily to inventory impairments... During FQ2'08, Orleans closed nine land sales with nine different buyers, unloading about 1,400 lots within five states. About 94% of the lots disposed of were in Arizona, Florida, and Illinois. The sales... in Arizona represented just about all of the company's assets in that region." (Builder Online, Feb. 1st)

Investment Group Buys Trend Homes. "Trend Homes became the second Phoenix-area builder to file for Chapter 11 this week when it signed an unusual deal with another Phoenix company, private investment firm Najafi Cos... Najafi plans to buy Trend Homes for $65 million, but the deal is subject to a U.S. bankruptcy court approving a Chapter 11 reorganization plan submitted by Trend Homes. The bankruptcy papers, which were filed yesterday, listed that Trend Homes has 50-99 creditors; $100,000M-$500,000M in assets; and $100,000M-$500,000M in liabilities." (Builder Online, Feb. 1st)

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