Orleans Homebuilders Files Voluntary Chapter 11

This came over PR Newswire yesterday evening.

Orleans Homebuilders, Inc. Files Voluntary Chapter 11 Petitions; Obtains Up to $40 Million in Anticipated New DIP Financing; All Homebuilding and Management Services to Continue Operations

BENSALEM, Pa., March 1 /PRNewswire-FirstCall/ — Orleans Homebuilders, Inc. (the “Company”, or “Orleans”) (Amex: OHB), which develops, builds and markets high-quality single-family homes and townhouses and whose operations in Pennsylvania and New Jersey date back more than 90 years, announced today that it filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code for itself and most of its operating subsidiaries in the U.S. Bankruptcy Court for the District of Delaware in Wilmington (the “Filing”). Certain of the Company’s subsidiaries are excluded from these voluntary petitions, including its mortgage services subsidiary, Alambry Funding, Inc., which provides mortgage brokerage services for customers and financial institutions but which does not underwrite any customer mortgages.

The voluntary petitions result from the final maturity of the Company’s $350 million senior secured Second Amended Restated Revolving Credit Loan Agreement (as amended, the “Credit Facility”) on February 12, 2010, and the inability to reach agreement on an extension of the Credit Facility with 100% of the approximately 17-member bank group, or obtain a replacement of the Credit Facility. There is currently approximately $311 million of cash borrowings outstanding under the Credit Facility, excluding any letters of credit.

It’s no small irony that Big Builder listed Orleans among five publicly traded home building companies on the brink of disaster in its August 2007 cover story “A Year of Living Dangerously.”  Four out of five of those companies succumbed to bankruptcy. Comstock seems to survive as home building’s medical miracle, and WCI has reemerged from BK, primarily as a land seller.

Here’s a snippet from that analysis about Orleans:

THE SITUATION: Compared with larger peers, the financial risk profile of Orleans Homebuilders is scary on paper. It’s hardly time to bear a 70-plus percent debt-to-total capital ratio, on almost $600 million in long-term debt, amid gut-wrenching challenges to convert its shrinking backlog to cash. What’s more, as its fiscal year 2007 drew to a close on June 30, Orleans worked feverishly to renegotiate terms on a $75 million trust preferred security issue whose covenants call for an interest coverage ratio of 1.75 to 1.00. Unlikely to meet the demand of that indenture, Orleans hopes to reset terms to avoid triggering an interest rate increase from 8.61 percent to 11-plus percent on the security. Obviously, continued stresses on its cash position and balance sheet machinations take much-needed focus away from operating flawlessly.

HOW IT HAPPENED: A growth plan–both financial and operational–was set in motion in 2003 through 2005 that based itself on a trajectory to reach the mythic $1 billion threshold in sales volume and assumptions that included an unfortunate and unintentional dollop of investor buyers in Orleans’ Florida, Northeast, and Phoenix markets. In its 2004 acquisition of Realen Homes in Pennsylvania and [per clarification comment below, the Charlotte, N.C. division of] Peachtree Residential Properties in Georgia, and its acquisition of land position in Phoenix in 2006, Orleans paid top of the market prices. In 3Q2007, Orleans impaired 20 percent of its 11,800 lots, as it took $47 million in charges against land and model home inventory and another $27 million related to abandoned projects and goodwill charges. The hit to book value amid these asset impairments combines with slower, less profitable conversion of sales to deliveries, to exert intense pressure on covenants keyed to interest coverage.

Orleans’ press release details its plan to continue operations as it restructures under Chapter 11.

The Company also announced that it has reached agreement with certain of its lenders for up to $40 million of debtor-in-possession (DIP) financing, pending Court approval and syndication.  The new financing consists of up to $25 million in cash revolving borrowing availability and up to $15 million of availability for replacement letters of credit under the Credit Facility (the “DIP Revolving Facility”).

All of the Company’s 11 operating divisions in eight states will continue business in the ordinary course and without interruption. The Company has filed motions requesting immediate Court approval for the continuation of all home warranty and mortgage incentive programs and to preserve all pre-petition escrowed customer deposits on contracted homes.  The Company believes all existing customer deposits are protected in segregated escrow accounts and are not affected by today’s filing.  Building will now continue on homes under construction in all communities, as well as the closing of certain home deliveries temporarily postponed in the past two weeks.

According to Jeffrey P. Orleans, chairman, president and chief executive officer, “We have done everything we could to generate cash flow and to reduce operating expenses in light of falling home prices and reduced housing demand, yet still provide a high level of service to our many customers.  We reduced our bank debt by approximately 40%, from $513 million at January 1, 2007 to approximately $311 million today.  

“During this protracted downturn, most of our lenders, junior creditors and vendors had been supportive of the Company. In early December 2009, we approved a non-binding term sheet for a maturity extension of the Credit Facility; in mid-December 2009, the Company and 100% of the bank group extended the maturity of the Credit Facility to February 12, 2010. During this period of time, we executed a non-binding letter of intent relating to the sale of the Company.  However, the lenders could not achieve 100% lender approval of the documentation for a maturity extension or any other modification beyond February 12, 2010. The Credit Facility then matured, and we could not complete the sale. We intend to continue to pursue a sale of the Company through a negotiated sale, a plan of reorganization or other auction under Chapter 11.  We want to reassure our many current and future homebuyers that we will seek to continue to service their needs during this period.  We appreciate the support of our many loyal vendors, customers and employees.”

The Company has filed first-day motions asking the Court to approve, among other things, payment of employee wage and benefit charges that were incurred before the petitions were filed, future employee wages and benefits, incurred commissions, the continuation of certain customer sales incentive programs, and the continued use of cash collateral and existing cash management systems.

Although Chapter 11 law prohibits payments for any invoices that were outstanding at the time of the filing without prior Court approval, it does provide greater protection to those providers of goods and services who conduct business with the Company from this point forward. The Company has also filed a motion to honor prepetition claims for certain critical vendors whose goods and services are deemed essential to operations.

“We regret the hardship that this filing will have on many of our trade suppliers.  We are arranging new financing that should be available almost immediately, pending Court approval and syndication,” stated Mr. Orleans. “We expect these new funds will be sufficient to support our operations while we are under Court jurisdiction.”

The Company is providing information about the reorganization at http://www.orleanshomesreorg.com. For the next few days, a call center will be open from 8:00 am to 6:00 pm, Eastern Standard Time, at (888) 215-9315. Messages may also be left on that number during other times.

Mr. Orleans went on to describe the challenges of the past three years: “Since the latter part of fiscal 2006, we and the entire housing and financial services industries have faced unprecedented challenges.  The U.S. economy is in the worst recession since the Great Depression, consumer confidence remains weak, and national housing starts are at or near all-time lows.  From the fiscal year 2006 to fiscal year 2009, our residential revenue decreased by two-thirds, from just under $1 billion to approximately $322 million.  Now, the housing market appears to have either stabilized or slightly improved, albeit at historically low levels.  Our net new orders have increased by more than 40% in each of the last two quarters on a year-over-year basis, and our backlog has now been relatively stable between June 30, 2009 and December 31, 2009.”  

Mr. Orleans added: “We achieved good progress on our key objectives for liquidity/cash flow, capital structure, balance sheet/portfolio review and cost structure.  Since January 1, 2007, we reduced our total net debt by approximately 30%, and since June 30, 2006 we reduced our spec homes by approximately 75%; total lots by 66% and staff headcount by approximately 70%.  We have creatively refocused our land portfolio in December 2007, and also exited certain markets.  Despite the Company’s high debt leverage, we were cash flow positive in eight of the past 12 fiscal quarters, and cash flow neutral in two others.  Since January 1, 2007, we also repaid more than $200 million under the bank facility, or approximately 40% of the total outstanding loan balance, including cash bank repayment of over $21 million in approximately the last six months.”

In light of the negotiations with the banks during the fall of 2009 on the Credit Facility maturity extension, the Company did not pay approximately $1.5 million of subordinated note interest for the  quarterly coupons scheduled between September 30, 2009 and January 30, 2010 on its two subordinated notes indentures, which amounts were intended to be paid by the Company upon the completion of the non-binding maturity extension term sheet the Company agreed to with certain lenders on December 3, 2009.  Prior to the final maturity of the credit facility, the Company did not miss any interest payment on its bank debt.

According to Garry P. Herdler, executive vice president and chief financial officer, “We believe our banks and trust preferred holders had shown support to the Company in the past, as evidenced by the completion of two syndicated bank maturity extensions in September 2007 and September 2008, plus numerous other bank amendments, including the temporary maturity extension from December 18, 2009 through February 12, 2010.  Two and a half years ago, we completed a trust preferred security amendment, and in August 2009, we completed a debt exchange agreement for 100% of the $75 million of subordinated notes which included a reduced 1% interest coupon for five years ( $39 million of future interest savings), and a unique significantly below par redemption option at approximately 30% of par.”

The Company has also significantly reduced its lot count, spec homes, overhead and headcount during this extended downturn.  As of June 30, 2009, the Company owned or controlled approximately 5,673 building lots, which included approximately 1,003 building lots controlled through option contracts, which represents a 66% decrease in total owned and controlled lots and a 43% decrease in owned lots since fiscal 2006.  Approximately 90% of the Company’s lot inventory is in the Company’s Northern and Southern regions.  From September 30, 2006 to December 31, 2009, the Company decreased its speculative home inventory by over three quarters.  From June 30, 2006 to June 30, 2009, the Company reduced its general and administrative expenses by more than 50%.  From June 30, 2006 to today, the Company has decreased its total employee headcount by 69%, from approximately 990 employees to approximately 300 employees.

As previously indicated, in early December 2009, the Company approved a non-binding term sheet for a maturity extension of the Credit Facility; in mid-December 2009, the Company and 100% of the bank group extended the maturity of the Credit Facility to February 12, 2010. However, the lenders could not achieve 100% lender approval of the documentation for a maturity extension or any other modification beyond that date, and the Credit Facility then matured.

On February 1, 2010, Orleans also announced that in addition to its efforts to extend the Credit Facility or obtain alternative financing, it was continuing to pursue other strategic alternatives including the sale or recapitalization of the Company, and that it had presented potential transaction alternatives to its lending group. Recently, the Company executed a non-binding letter of intent relating to the sale of the Company; however, the Company was unable to complete the sale prior to the Chapter 11 filing. The Company intends to continue to pursue a sale of the Company through a negotiated sale, plan of reorganization or other auction under the Chapter 11 code.

Orleans Homebuilders is being advised by its restructuring financial advisor on the Credit Facility and now on the bankruptcy, FTI Consulting, Inc., and by its legal counsel, Cahill Gordon & Reindel LLP.  For its ongoing strategic alternatives, including the sale or recapitalization of the Company, Orleans has previously engaged its mergers and acquisitions investment banker, BMO Capital Markets Corp. and its homebuilding mergers and acquisitions consultant, Lieutenant Island Partners LLC, who are each anticipated to continue with the ongoing sale of the Company and other strategic alternatives during the Chapter 11 period.

As of December 31, 2009, the Company had total assets of approximately $440.0 million and total liabilities of approximately $498.8 million. Orleans had total debt of approximately $419.1 million (table attached), net debt of approximately $407.4 million, accounts payables (consisting mostly of trade debt) of approximately $40.2 million, and other accrued liabilities of $19.3 million.  Accounts payables (consisting mostly of trade debt) at the time of the filing were approximately $40.1 million.  As the attention of the Company’s senior management has been focused on matters relating to its Credit Facility and other strategic alternatives, the Company has not yet been able to adequately review the inventory impairment charges to be recorded for either the fiscal quarter ending on September 30, 2009 or on December 31, 2009.  

About Orleans Homebuilders, Inc.

Orleans Homebuilders, Inc. develops, builds and markets high-quality single-family homes, townhouses and condominiums.  From its headquarters in suburban Philadelphia, the Company serves a broad customer base including first-time, move-up, luxury, empty-nester and active adult homebuyers.  The Company currently operates in the following 11 distinct markets: Southeastern Pennsylvania; Central and Southern New Jersey; Orange County, New York; Charlotte, Raleigh and Greensboro, North Carolina; Richmond and Tidewater, Virginia; Chicago, Illinois; and Orlando, Florida.  The Company’s Charlotte, North Carolina operations also include adjacent counties in South Carolina.  Orleans Homebuilders employs approximately 300 people.

Orleans’ fate is that of scores of other home builders and developers who followed the Pied Piper of false demand into the middle part of the decade past. The company’s best hope now is that the weeks and months ahead push the needle of value on its land holdings from south of nothing to north of something.

But hope is not a strategy. And for the 300 people whose livelihoods draw from Orleans’ payroll, we can hope there is a strategy.

March 2, 2010 | Filed Under Uncategorized | 2 Comments 

Lennar F.D.I.C. and Pulte Centex Game-Changer Plays: Opposite Routes to the Same Goal?

Recently, Housing Crisis got wind that there were as many as four large “entity acquisition deals” in the home building landscape in various stages on a path to lift-off. Whether we get news of them soon that any of them makes it to fruition is not guaranteed.

However, M&A or no, we  feel that consolidation of home building capacity — Simply it is this: greater share of a smaller market for fewer players — is one of the lightning rod issues of 2010. It will underscore who gets to be in or near the black and who must malinger in the red, or worse, fail to make it beyond the doorway of this new decade.

Whether Lennar’s deal for an FDIC $3.05 billion real estate portfolio was one of the ones we’d been hearing about has not been confirmed. We did hear that at least two other public home building companies were in the running for the FDIC portfolio, but that Lennar-Rialto’s legacy strength in land work-outs clearly won the day.

Carl Reichardt, Wells Fargo managing director and senior research analyst for the home building sector, provides perspective on the magnitude and significance of the deal by saying it’s a “skeleton key,” a template for more transactions that look and act like this one. This particular plunge, he says, is less important in itself than the “philosophical notics that an historically successful and well-known distressed ‘player’ is back in the market.”

Lennar’s dead of winter coup highlights a fact sometimes forgotten or at least under-appreciated among observers of the housing market on a macro basis–not all public home builders are created equal in skill sets, profit models, even core businesses.

Fact is, we see a “fearful symmetry” when you look from a high-level at what Pulte Homes did last year in acquiring Centex Homes vs. what Lennar is doing with its distressed real estate portfolio play this year.

Both deals are “talk of the town” transactions, costing in the billions, ranking as “game-changers.” 

They’re so different on the surface from one another, but we see the two as almost diametrically opposite routes to the identical place, the most important place for any new-home builder that expects to have its doors remain open into and beyond 2011: business unit profitability. For Pulte, adding Centex could provide faster and more scaled entree into the price-value sensitive entry-level and first-time buyer market.

For Lennar, it has decided that making more money amid the limbo of wide-scale deleveraging and marking assets down in price is the way to keep both its senior management talent and its construction operations infrastructure preoccupied as more of the dust settles on what anything of value is worth in dollars or cents right now.

One company’s master plan affirms a strategic combination with an operator whose geographical footprint and construction system add up to huge cost-out opportunities, the elimination of a key competitor in many of the same sub-markets, and a turn-key entry-level new-home brand platform. 

The other company embraces a balance-sheet management play that suggests by its nature and scope that Lennar’s bandwidth and strategic ballast had best focus less on opportunistic home building operations and more on the margins of land asset re-pricing expected to flow through the financial system over the next two to three years.

That’s not entirely the case, of course. Lennar, like every builder, public, private, national, regional, or local, is working on managing it’s assets, shooting for first-time and value buyer opportunities, re-negotiating trade deals and materials contracts, and trying to remove non-value added steps from both SG&A and construction operations at every turn.

The making-money-by-losing-money days are done.

As one trusted divisional president from a top-10 public home building company told us, the fire-sale, sell at any cost period of the downturn cycle largely has run its course. “I told a customer who was in one of our new communities that I’d practically had to give away houses for three years, but I’m not doing that any more. There are real buyers at our price levels, so we’re going to keep at them. So he paid our full price.”

This division president went on to say that sales absorption rate projections for his communities come from the most conservative, reality based demand analyses imaginable, and that pro formas factor in zero price appreciation for the whole life-span of each community, whether it’s one year or four. “They’re penciled in as profitable no matter what comes next. If recovery is interrupted for any reason, we take a hit on margins, but our unit profitability is solid. We just have to get all our operating and business units there.”

Another insight from this division president flashes back to the question of similarities and differences in the Pulte-Centex merger vs. the Lennar echo-RTC asset work-out deal.

He says that today’s buyers are gravitating to communities they know have surfaced out of broken and repriced deals, now offering an altogether new package of values in this wary, toe-in consumer environment.

“You have to feel for those communities that got started toward a goal of 350 homes in 2005, and got 100 homes or more in before hitting a wall in late 2006,” he says.  “Those communities are hanging out there with very little appeal because nothing’s been happening at them for more than two years. Whereas if you open a new community now at a newly reset land cost-base, then you can have the fresh appeal to buyers and the product and pricing they’re looking for now.”

What this means is that, for all the underwater homeowners there are out there, there’s at least proportionately as many underwater new-home communities that are going to need to re-price their way toward eventual sell-out.

So maybe Lennar’s FDIC portfolio acquisition is the company’s sequal to Net Operating Loss claw-backs of 2007,  ‘08, and ‘09. The strategy may say: we can’t count on getting to business unit profitability on home building operations alone, because it’s still too full of uncertainties and possible set backs. But we can get to balance sheet improvement and a greater cash position if we jump into the Big Two-Thousand Teens Work-Out game and figure out how to play the margins well there.

Pulte, meanwhile, means to get to its corporate next step by continuing to flash its operational plan forward–driving down costs, rationalizing every land holding for its three- to four-tier brand platforms, and pulling home buyers–we know they’re there if we can get them “financeable” new home opportunities–from off the fences.

Questions for you:

February 18, 2010 | Filed Under Financial Crisis, Home Builders, Uncategorized | Leave a Comment 

Six Secrets from Behind the Headlines at the International Builders Show in Las Vegas

Everybody talks these days about “take-aways” when there’s an industry event of  significance. Last week, we hunkered down in the trenches, mostly behind the scenes of the NAHB International Builders Show in Las Vegas with our industry friends–home builders–and tried to learn which way their fates and fortunes are headed: up, down, or sideways.

You have heard and seen in other reports that the sentiment among attendees was positive although attendance at last week’s International Home Builders Show was middling at best. File them under wishful thinking–if optimism turns out to have been well-placed, it will be less the result of what challenges are likely to play out, and more to do with what lucky turns of events are unlikely to play out.

As for take-aways, here are a  half-dozen IBS show nuggets you can’t make up if you try:

“So, do you think this ‘green stuff’ is here to stay?

You’d think that might be a rarity to hear among home builders, but it’s surprising how widespread an attitude it is among those who believe that if home buyers won’t pay for energy performance, then it’s not a consideration. Period.

“My name is Carl Mulac, and I’m starting a home building company.” A heckler, whose name will go unpublished, responded: “You’re crazy!”

Still, in an environment where bank funds to go vertical are as rare as rocking horse dung, Mulac and company got $2 million to build on from National Bank of Arizona, so expect the sound of saws and hammers out at CantaMia to echo through the foothills of the Sierra Estrella Mountains.

“[The Selene Residential Mortgage Opportunity Fund] It’s his attempt at atonement. But $2 billion is $2 billion, and there are hundreds of billions of home mortgages in distress right now, so it’s not going to put a dent in foreclosures.”

“There’s talk he withdrew cash from the credit facility set up for the old company and is using it for the new company. How he’s going to wind up getting away with that is anybody’s guess.”

“You talk about privates, but why would public companies continue to counter-bid one another and drive their own land acquisition prices up? Who’s going to be profitable this year? NVR, yes. Maybe, Meritage. Who else? How insane is it for them to be overpaying for lots just like they did three years ago just because they all want the same parcels?

“We’re in the process of developing a strategy to operate the company and generate value as an operator going forward. We’re not for sale.”

That’s not to say that scores of lenders and creditors who retain significant influence on what Woodside’s asset portfolio should ultimately do to generate them value won’t ultimately push for sale of the company.

Still, they worked through a long, painful process to come to new terms as a top-five private builder operator, so it seems likely they should at least give Shine a strong crack at his strategy:

“A private builder culture that looks like a public builder.”

Sounds like he might be aiming to navigate the balance of the market downturn and position Woodside to go public when the right moment comes along in the months ahead. Still, that doesn’t stop Woodside from being–like the North American home building operations of Taylor Wimpey, including Taylor Morrison–assets that may find high regard among public builders.

Other than these take-aways, about all we know is that exactly no one is sleeping easy about what happens to the market come the sunset of the the extended and expanded home buyer tax credit on April 30 for sales, and June 30 for closings.

After the Colts-Saints bash-fest on Feb. 7, 2010, in Miami, Saturdays and Sunday afternoons reopen as that traditional time for couples of many ages to renew their nesting instincts. Spring selling season this year, should it actually occur, may reset the bar of expectations for whether the housing recession can end this year or drag on into 2011, where the IBS venue will return to Orlando.

The IBS this year was populated by a group of intrepid believers in the industry, ones who tend to drop into a disaster scene as soon as possible after a calamity ends. They’re the ones who say, “we’re going in,” and they start the mission of stabilizing the place for a more concerted recovery operation. We didn’t hear optimism at the show. We heard determination. We heard urgency. We heard in the voices of many we trust, this message:

“The time to hesitate is through.”

Face it, practicing with the short stick might make the puts go straighter, but not too many folks we spent time with wouldn’t give up some birdies for a string of quarters operating in the black.

January 25, 2010 | Filed Under Uncategorized | 2 Comments 

Top Lines on Jobs, Job Satisfaction, and Housing’s Crisis

Jobs and satisfaction just don’t fit together in the same thought container these days.

Earlier this week, all the talk was about job satisfaction – or the historical lack thereof — among the 90% or so of the population the Bureau of Labor Statistics counts among the employed.

Now it’s the end of the week, and we’re all talking about our dissatisfaction with the latest data on non farm payrolls from the BLS, which reports that in December 2009, the economy lost another 85,000 jobs.  That figure will undergo revision, but it’s neither what “consensus” forecasters–i.e. people who make a living being wrong most of the time–expected nor wanted.

Now, the Conference Board has been tracking job satisfaction for a long time — since 1987 or so — which we think would make them one of the experts on the topic. They say job satisfaction is at its lowest level in two decades, and that younger workers are way more dissatisfied with their employ than older ones.

Here’s a look — demographically — at our workplace malaise.

Dissatisfaction is not exclusively the province of the young. Right up and down the age ladder, you’ve got around two more folks in every 10 who are less pleased with their lot in work life than they’d been.

(Sidenote: Glad we’ve plowed all those resources into political correctness and career development planning in our companies since the late 1980s. All that management sensitivity training has done wonders on office morale.)

Still, we can’t help but think it’s cynical to focus on employee satisfaction when so many of our comrades are just plain out of work all together.

We have some collective nerve to think that our satisfaction should rank among our entitlements.

We had a boss once who used to say, “Turnover is good. If you lose a good staffer, hire a better one.”

Beneath the politically correct rhetoric layered into workplace human resources self-validation, turnover is good. If someone doesn’t want to be working alongside you as a warrior, you don’t want them there, whether it’s a good or a bad job market.

The issue is this. If you regard your talent as critical to the company’s ability to generate new value in 2010, then chances are some other company might do the same. In some finite number of cases, it will be the smart thing to do to go into certain of your staffs’ compensation programs and ensure that they reflect your enthusiasm and expectations.

Now, let’s get to a basic law of management. Employees’ criteria for satisfaction and employers’ sense of what those criteria may be are widely apart.

This came out in one of the most recent Harvard Business Review analyses on “Breakthrough Ideas for 2010,” where, of course, managers guessed wrong about what motivates their staffers.

In a recent survey we invited more than 600 managers from dozens of companies to rank the impact on employee motivation and emotions of five workplace factors commonly considered significant: recognition, incentives, interpersonal support, support for making progress, and clear goals. “Recognition for good work (either public or private)” came out number one.Unfortunately, those managers are wrong.

Having just completed a multiyear study tracking the day-to-day activities, emotions, and motivation levels of hundreds of knowledge workers in a wide variety of settings, we now know what the top motivator of performance is—and, amazingly, it’s the factor those survey participants ranked dead last. It’s progress.

Imagine! Actually cutting down on the inertial effect of meetings and the paralyzing impact of hanging in limbo can help morale around the water cooler. What a surprise!

In real estate and construction, where risk, dramatic miscalculations, grave errors, and humbling consequences have ruled and tied decisive decision making up in knots, a company whose focus is on getting it done will be the destination. A company that believes it can keep its top performers by “recognizing their achievement” and keeping tabs on their “engagement” will be a point of departure.

January 8, 2010 | Filed Under Financial Crisis, Uncategorized | Leave a Comment 

Net Operating Loss Deals Lead List of Home Builder Deadlines

Tick, tock, round the clock. Which deadline might you be trying to beat?

If you’re a public home building company division president or accountant, you might be burning the midnight oil on the government’s recently expanded builders’ Cash-for-Acres Net Operating Loss  program, which requires transactions on lots to trigger eligibility for a refund from taxes paid on corporate profits now dating back 60 “accounting year” months.

The early-November thumbs up for extending NOL look-back periods is, no doubt, adding to the all-nighter quotient for finance types and deal makers in real estate and construction land. We’ve heard that no fewer than 10 NOL deals among home builder sellers and strategic and financial buyers need to close by some time New Year’s Eve.

We’re not just seeing NOL deals in home building. The Obama administration, per the New York Times’ Gretchen Morgenson, has estimated that the NOL extension will enable companies large and small to recoup as much as $33 billion. Hanley Wood’s ProSales magazine reports on Building Materials Holding Corp.’s bid for an $82 million refund through the program even as it operates under Chapter 11 protection.

For those, particularly public home building companies, who’ve got land holdings that don’t look as if they’ll show up in any division president’s go-vertical plans in the next two or three years, we’ve gotten the distinct sense that the line between sell and dump is narrowing by the day.

One division president we know got orders from corporate in mid-November to “move lots out at any price,” because even if you get just 10 cents on the dollar, the tax refund that would get triggered would make the seller as whole as one could possibly hope to be in this market.

In some cases, however, even land parcels that don’t have a marker on them to move dirt in the next 36 to 48 months out aren’t necessarily on the block because those holdings may be in local jurisdictions where it could take that long to get entitlements.  Plus, after scrubbing land and lot pipelines repeatedly over the past two to three years, many home building companies aren’t crushed by the weight of lots they see no use for in the nearer term, even if it is a slow market.

Another reason one might not see headline-grabbing mega land transaction deals, is that, last time we looked, all but one public home building company is running at a loss anyway. So the incentive to take a big haircut on a land deal is not there the way it had been a couple of years ago.

Interestingly, some of the same companies who are trying to dump lots they don’t need are the ones who have some urgency to lock up lots and reload new communities right now. M.D.C., Meritage, NVR, Ryland–yes, especially the asset lighter home builders–are leading a host of other builders scrounging to find the right finished lot parcels at the right price right now so they can open up communities at a new relative affordability price point.

So the all nighters are not just for sellers.

Another deadline to beat comes April 30–with a June 30 extender. Right now, here’s the conversation going on between management and their more trusted sales associates on the ground out in the communities.

“If I gave you say, 10 specs, how many do you think you could sell right away?”

“I’d like to say,  five right away, and the other five in the next several weeks.”

So, another big deadline right now is the decision of how aggressive to be with specs as another rollercoaster ride of urgency leads toward the next sunset for home buyer tax credits.

Myriad other deadlines pressure those who are dealing with banks–whether it’s on their acquisition, development, and construction loan accounts (where there’s precious little new business happening and lots of old business in perma-freeze), or on buyer mortgage finance.

Appraisals are a crapshoot, future Federal Housing Administration loans are at risk of taking more would-be buyers out of the buyer pool, and AC&D life is pure hell.

These issues create everyday deadlines, every minute deadlines, keep you up all night deadlines.

Then, there’s all that stuff you do that has no direct bearing on your businesses’ financials, but gets done. You talk a talented young hot-head manager off a career ledge; you help one of your people’s sick family members get the medical care they need; you sign-off on plans for a less extravagant version of a holiday party; you think of the little things that make a difference. There are no deadlines for those items. They just have their own urgency mechanism to them that, when it comes down to it, is the only reason staying up all night to make the other deadlines makes any sense.

December 10, 2009 | Filed Under Financial Crisis, Home Builders, Uncategorized | 2 Comments 

Ever Moody’s Mark Zandi

Zandi’s forecast of 7.5 million foreclosures between 2006 and 2011 stands where it has been. So all he’s saying here is that he shouldn’t be regarded as overly bullish on a housing recovery.

So, is Zandi a reality check or a wet blanket?

December 2, 2009 | Filed Under Uncategorized | 1 Comment 

The Big Builder ‘09 Virtual Program Line Up

Click image for registration site.

Big Builder Week is set to kick off Monday, Nov. 16. All in the home building community are invited to participate in this five-day event, which offers a rich educational program that will help event participants from up and down the management ranks at home building organizations nationwide sharpen their skills. Through live seminar events, online collaboration, and on-demand learning, this multimedia program teaches participants how to detect opportunity in a market, better reach target home buyers, manage more meaningfully and measurably, and get on plan for the 2010 calendar year. 

All you need to do to take advantage of some of the best industry-specific educational programming both on-demand and in real time during Big Builder Week is register at www.bigbuilderconference.com. It’s fast, easy, and best of all-it’s free.

Expand your view of the state of the industry while gaining a deeper understanding of some of home building’s most pressing issues with our National Interest section of the conference Web site. We’ve assembled a notable team of experts to provide perspective on what’s happening in the industry today as well as outlooks for tomorrow.

Looking to sharpen your skills in a specific discipline? It’s a one-stop shop in the Best Practices portion of our site. Choose from a 10-plus program menu, offering educational opportunity across disciplines as varied as design, finance, and sales and marketing.

But the main event during Big Builder Week is a series of live Webinars, which you can access through the Regions section of the Web site. We’ve assembled five cross-disciplinary teams in five markets and assigned each of them a tract of land in their respective markets. The challenge is for each team to craft the best business and development plan for their specific parcel. Every day this week, one team will present their final plan via Webinar, followed by a live Q&A session. Tune in to find out what some of the brightest minds in your favorite markets have come up with.

NATIONAL INTEREST

Belsky Unplugged

Harvard’s Joint Center for Housing Studies director Eric Belsky takes a fresh look at a post-meltdown housing economy and plots the trajectory and timing of regaining the “new normal.” His outlook will focus on national economic drivers, household and employment formation impacts, and local economics supply and demand influences for an exclusive story on what to look for in the year ahead.

Crystal Ball Economics: What’s the outlook for 2010?

Real estate consultant de rigueur John Burns serves up his latest take on what the market will do in the year ahead. From projections on new-home demand to insight into the banking industry’s next gyration, by the end of this video, you’re guaranteed to be seeing 20/20 on what to expect in 2010.

Tax Credit 3.0

Get a behind-the-scenes look at the wheeling and dealing that led to the Nov. 6 extension-and expansion-of the federal $8,000 first-time home buyer tax credit program with this exclusive interview with NAHB president and CEO Jerry Howard and tax economist Rob Dietz, recorded just days before the final vote. The dynamic duo gives the lowdown on what was at stake for the industry as Congress battled over the prospect of extending the credit.

The Future of Foreclosures

Wayne Yamano of John Burns Real Estate Consulting shares his foreclosure forecast. (And here’s a hint: It’s not pretty.) Find out what effect the next wave of foreclosures will have on inventory, home prices, and appraisals in this short video interview with Big Builder editor Sarah Yaussi.

The Doctor’s In: A Look at the Healthiest (and Unhealthiest) Markets in 2010

Hanley Wood Market Intelligence’s Jonathan Smoke takes the pulse of the new-home economy in our five key markets, outlining which metro markets are on the mend-and which ones have taken a turn for the worst. Open up and say, “Ahh … .”

The Next Great Land Rush

Michael Reynolds from land use and real estate development consultants The Concord Group offers a deep-dive into where-and, most important, when-recovery in the land market will take place in five of our most-watched markets. Tune in for the lowdown on where to focus your attention as you look to restock your land pipeline. 

REGIONS

ATLANTA

[Live Webinar airing on Thursday, Nov. 19, at 1:15 p.m. Eastern]

Atlanta: Victory at Vickery?

Designed as a New Urban TND mecca 35 miles north of downtown Atlanta, Vickery hit on hard times in 2007, and in 2008, it went back to its bank-then Wachovia and now Wells Fargo. The Atlanta dream team will adapt, re-envision, and re-pencil the lots for a realistic re-launch in the next couple of years.

Team members: 

[On-demand Webinar]

Atlanta Market Overview

Jonathan Smoke, senior vice president of products and innovation at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Atlanta new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.

[On-demand Webinar]

Atlanta Market Insights

SmartNumbers’ John Hunt gives a drill down on what’s hot-and what’s not-in Hot ‘lanta real estate.

DALLAS

[Live Webinar airing on Wednesday, Nov. 18, at 1:15 p.m. Central]

Dallas: To Profit in Prosper

Good schools, great access to employment centers, and less expensive land made Prosper an attractive alternative to nearby Frisco during housing’s boom times. But housing’s setback has created a disconnect between market demand and municipal vision. This team’s challenge will be to recalibrate expectations for the 270-acre tract known as Legacy Lakes. 

Team members:

[On-demand Webinar]

Dallas Market Overview

Jonathan Smoke, senior vice president of products and innovation at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Dallas new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.

[On-demand Webinar]

Dallas Market Insights

Residential Strategies Inc.’s Ted Wilson answers some of the market’s hot-button questions in this Q&A interview. 

PHOENIX

[Live Webinar airing on Tuesday, Nov. 17, at 1:15 p.m. Mountain]

Phoenix: Will It Play in Peoria?

The Phoenix team will pencil and plan a refreshed community concept for Mt. Pleasant Heights, a 1,000-acre section of land in the thick of Phoenix’s Northwest Valley hive of new-home communities.

Team members:

[On-demand Webinar]

Phoenix Market Overview

Jonathan Dienhart, director of published research at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Phoenix new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.

[On-demand Webinar]

Phoenix Market Insights

Hanley Wood Market Intelligence’s Ken Lewandowski outlines the underlying market forces driving some of the fiercest big builder competition for new land.

SOUTHERN CALIFORNIA

[Live Webinar airing on Monday, Nov. 16, at 1:15 p.m. Pacific]

Southern California: SOL on a TOD?

Sandwiched between a commuter rail line and a busy freeway, this seven-acre site’s biggest asset-proximity to transit-is also its biggest drawback. Figuring out how to accentuate that value while down playing some of the parcel’s industrial surroundings could transform this pioneer site into a desirable home base for commuters.

Team members:

[On-demand Webinar]

Southern California Market Overview

Jonathan Dienhart, director of published research at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Southern California new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010. 

[On-demand Webinar]

Southern California Market Insights

It’s a double play with Hanley Wood Market Intelligence’s Greg Doyle and Michael Ellison talking about what’s humming in the Southern California market.

WASHINGTON, D.C.

[Live Webinar airing on Friday, Nov. 20, at 1:15 p.m. Eastern]

Washington, D.C.: A Balancing Act

A combination of shifting demographics and a new metro line planned for two miles from this rather large tract nestled in a discrete corner of the master-planned community of Brambleton suggest an opportunity to rethink the current land plan. The challenge is to figure out what densities will maximize the value of the lots by the time this parcel is ready for market in 2014-2015.

Team members:

[On-demand Webinar]

Washington, D.C., Market Overview

Jonathan Dienhart, director of published research at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the D.C. metro new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.

[On-demand Webinar]

Washington, D.C., Market Insights

Hanley Wood Market Intelligence’s John Birge explains why it’s no surprise that the D.C. metro market may very well be the nation’s best housing market.

ADDITIONAL REGIONAL PROGRAMMING

[On-demand Video]

The Doctor’s In: A Look at the Healthiest (and Unhealthiest) Markets in 2010

Hanley Wood Market Intelligence’s Jonathan Smoke takes the pulse of the new-home economy in our five key markets, outlining which metro markets are on the mend-and which ones have taken a turn for the worst. Open up and say, “Ahh … .”

[On-demand Webinar]

The Next Great Land Rush

Michael Reynolds from land use and real estate development consultants The Concord Group offers a deep-dive into where-and, most important, when-recovery in the land market will take place in five of our most-watched markets. Tune in for the lowdown on where to focus your attention as you look to restock your land pipeline. 

BEST PRACTICES

[On-demand Webinar]

Judo Product Development: How to use process to gain an edge on competitors

FMI consultant Clark Ellis and architect Jerry Gloss show mixed martial arts strategy belongs as much in your company’s culture as in the UFC octagon. By following a path of discipline and control, your company can create a solutions-oriented organization that can outmaneuver rivals by bringing competitive product to market faster and more profitably.

[On-demand Webinar]

Portfolios & Profits: How to make money from bulk land deals

As banks try to unload real estate assets from their balance sheets, there’s a lot of temptation for builders and developers to try to pick up lots on the cheap. But how do you know if you’re buying dogs? Don Walker, a senior vice president with John Burns Real Estate Consulting, identifies the dos and don’ts of buying portfolio land deals.

[On-demand Webinar]

The Shift from Scale to Efficiency: A Not-so-Modest Strategic Proposal

Consultant Robert Held steps back from the trenches of home building operations for a long view at process strategy, management, capital flow, and manufacturing efficiency… Take out the variability, and home builders will instantly add “P” to their P&L.

[On-demand Webinar]

Commercial’s Gone Soft: So What?

The commercial real estate market cycle has historically lagged the residential cycle. But with talk of a commercial real estate meltdown reaching a fever pitch is the worst really behind us? John Burns Real Estate Consulting’s Lesley Deutch deciphers what fallout the commercial real estate downturn could have on housing.

[On-demand Video]

What’s Selling & Who’s Buying

In this short video, Tim Sullivan and Peter Dennehy of Sullivan Group Real Estate Advisors tag-team to show you a handful of communities that really are outperforming peers. They’ll dissect each community to show you what’s driving buyers to these builders’ doors-from price to product to place. Jim the Realtor and his video blogs have got nothing on these two.

[On-demand Webinar]

Foreclosure Fighters: Not just for the first-time buyer market anymore

Many builders have been successful in nabbing buyers from the resale and foreclosure markets with the rollout of value-oriented product lines, which are more affordable and less expensive to build. But as the first-time buyer pool runs dry, will builders be ready to meet the move-up market? Designers Kerrin West of Studio 81 International and John Thatch of The Dahlin Group weigh in on how to retool to have a foreclosure fighter at every price level.

[On-demand Webinar]

SEO S.O.S.

Search engine optimization-otherwise known as SEO-is the online marketing buzz word du jour. Builders’ ability to stay competitive on the Web hinges on how well they can manage it. But what is it exactly and how can you use it to your advantage? Mitch Levinson of Internet marketing, social media, and public relations firm mRELEVANCE lays out all the answers in this slidecast.

[On-demand Webinar]

Who Wants to Be a Zillionaire?

Chances are your sales force is looking a little deflated after three-plus years of the new-home market heading south. A market recovery is headed our way, so it’s time to revive your offensive lines. Former sales execs Karen Murray and Lynn Palmer, now co-founders of RenewalZone.com, share four exercises from their training system plus loads of tips on how to pump up your sales staffs by making them smarter, more competitive, and ultimately more successful.

[On-demand Webinar]

On the Road to Recovery

Bob Hafer and Jon Fogg of The Berke Group offer a four-segment sales training and management program that will focus on the basics as well as the advanced skill sets you need to counter the tsunami of challenges that continues to sweep over the new home landscape.

[On-demand Webinar]

The Message & the Medium

Face it. Your customers have changed. The challenge in 2010 is to find new ways to target your buyers, create a compelling message that synchs with their changing values, and deliver your message in the right format. And increasingly that means getting it right online. Marketing expert Jon Bailey of BG Creative will show you how.

 

[On-demand Webinar]

The New-Home Community Meets the New Economy

Between today’s economic uncertainties and major structural demographic shifts, the next generation of would-be home buyers has a new definition of value that is governing what they buy, how they buy, and what they expect out of the buying experience. Newland Communities’ vice president of research Malee Tobias explains what matters most when it comes to a new home and a new-home community.

The only way to see all these programs is to register. Register Now. Log In Monday.

November 12, 2009 | Filed Under Uncategorized | 4 Comments 

Get Ready for BB09 Virtual, Get Ready for 2010

The news, you all know by now is that Bob Toll is starting to feel better about things in the home building business. Still, sales trends won’t feel comfortable as they knife up and down and everybody overreacts to immediate, short-term data, volatility reigns, banks continue to fail, consumers continue to owe more than they can spend, and people keep on getting pink-slipped.

The headlines will report glowing recovery tidings one week, and two weeks later will be blasting out word of sputtering gains and imminent relapses into the worst of times. It won’t be true, but it will be what happens.

Meanwhile, the 80% of Americans who manage to remain well clear of the job loss wand will hopefully start to flex their collective consumption muscle, evict their grown children from their nests, and go about the business of producing goods and services for a global economy still bent on creating middle class lifestyles in a few of the most populous nations.

Fact is, over the past eight months, we’ve learned that with stimulus, price declines, and favorable interest rates, there are buyers. We’re going to have those conditions for at least another six months. If a sense of scarcity–particularly in new home supply–trumps the sense of oversupply and risk to demand, then post-April 30, 2010, when the extended and expanded tax credit for home buyers winds down, we’ll have a new home market capable of standing on its own two legs.

Most likely, the direction will trend more positive than negative, and the big theme is of the moment is what operators can do themselves to get by and gain some traction when many fundamentals are fragile and money is tough and very expensive to get.

That’s why we’ve created a Big Builder ‘09 Virtual Event that addresses both high-level strategic issues, and mid-managment executional opportunities for the big builder community. 

Between now and Monday, Nov. 16, all you see when you go to the link is a registration console.   

The first thing we’re hearing what home building operators–public and private–need to do has to do with discipline. Demand for homes at the entry level will likely continue, and with expansion of the tax credit rules to include move-up buyers, operators will need to move quickly to meet the newly stimulated demand, seizing on lots to open communities that can be sold, built, and delivered for closing before the end of the extended deadline.

So, the sharpened need for discipline comes around what products and communities you can produce to meet the market and just how aggressive you can become in taking down the lots. We’re hearing that banks and developers alike are increasingly amenable to creatively structured, soft take down schedules, but not if the operator lacks discipline on vertical costs and the ability to meet the market with products that sell.

Your margins need to be sustainable. That means speed, getting things mapped for maximum value (often greater density), and getting things done right the first time.

You’re in the final stages of budget planning for 2010. Uncertainty is a given, continued volatility is probable, and a leg or two downward while the market claws its way back to gains is highly likely.

So Big Builder has put all the focus in its 2009 Virtual Event on collaboration, market insight, demand analysis, what’s working, and financial discipline. We’re passionate about the big builder community, so we’ve produced more than 18 hours of programming that you can log into at your leisure.

The part not to miss though, are the “Live Web Cast” Dream Team presentations that we’re doing one at a time, starting Monday, November 16, at 4:15 pm ET, 1:15 Pacific.

Our program, as you may have noticed, features your peers in action. Each of the following teams has taken on a challenge that we put to them in the form of a parcel of land that’s currently on the market in Southern California, Phoenix, Dallas, Atlanta, and the D.C. metro region.

Here are the folks and the challenges:

Click image for Sarah Yaussis latest blog on the Southern California Dream Team Challenge.

Monday, November 16 Southern California: SOL on a TOD?

Sandwiched between a commuter rail line and a busy freeway, this 7-acre site’s biggest asset-proximity to transit-is also its biggest drawback. Figuring out how to accentuate that value while down playing some of the parcel’s industrial surroundings could transform this pioneer site into a desirable home base for commuters.

Tuesday, November 17 Phoenix: Will It Play in Peoria?

The Phoenix team will pencil and plan a refreshed community concept for Mt. Pleasant Heights, a 1,000-acre section of land in the thick of Phoenix’s Northwest Valley hive of new home communities.

Wednesday, November 18 Dallas: To Profit in Prosper

Good schools, great access to employment centers, and less expensive land made Prosper an attractive alternative to nearby Frisco during housing’s boom times. But housing’s setback has created a disconnect between market demand and municipal vision. This team’s challenge will be to recalibrate expectations for the 270-acre tract known as Legacy Lakes.

Thursday, November 19 Atlanta: Victory at Vickery?

Designed as a New Urban TND mecca 35 miles north of downtown Atlanta, Vickery hit on hard times in 2007, and in 2008, it went back to its bank-then Wachovia and now Wells Fargo. The Atlanta Dream team will adapt, re-envision, and re-pencil the lots for a realistic re-launch in the next couple of years.

Friday, November 20 Washington, D.C.: A Balancing Act

A combination of shifting demographics and a new metro line planned for two miles from this rather large tract nestled in a discrete corner of the master planned community of Brambleton suggest an opportunity to rethink the current land plan. The challenge is to figure out what densities will maximize the value of the lots by the time this parcel is ready for market in 2014-2015.

What’s more, we have partnered with our colleagues at Hanley Wood Market Intelligence, as well as with Dallas-based Residential Strategies, Inc., Atlanta-based SmartNumbers, and The Concord Group, to offer a an exclusive package of on-demand Web programs on regional and local market data and analysis drill-downs on trends, outlooks, and market drivers that you need to bring to bear as you look at opportunities and challenges in the year ahead.

And for that macro insight that can guide strategy and prepare you for opportunity around the corner, we have a line-up of national economic and housing analysts, who’ve prepared an exclusive, timely take on what’s happening and what’s coming as the recovery finds its timing and trajectory.

Starting Monday, November 16, when you log in as a registrant in our Big Builder ‘09 Virtual Event, you’ll have a one of a kind opportunity to view these presentations at your convenience.

It should be mentioned that we could not have produced more than 18 hours of exclusively available programming without heroics. Late nights and weekends for more weeks than we’d like to count have been devoted to bringing you this programming (providing your register now).

Marketing director Kim Grover has been tirelessly creating the messaging and the distribution and community engagement strategy that will make Big Builder’s event different this year. Once Big Builder Week ends on Friday, Nov. 20, the conversation, the challenges, and the forums will live on in user groups, and easily accessed networks that we’ll host for your continued conversation.

Virtual program manager Lauren Lewis has been working ’round the clock to align the stars of both people and technology in hopes of bringing our audience a quality experience online when you log into Big Builder’s virtual event starting next week.

Last but not least, Big Builder editor Sarah Yaussi, who must take great pride in having created and engineered so many of the individual parts of our educational and informational program, has been clocking untold hours in planning, producing, coordinating, and strategizing the event. As we step back and take a look at the curriculum and its events as a whole, it’s mind-boggling.

We thank Kim, Lauren, and Sarah for going beyond the call to prepare what we hope will be an unforgettable experience for the home building business community that we are honored to serve.

So join us. Register now, and log in Monday. It’s home building insight and engagement history in the making.

November 12, 2009 | Filed Under Uncategorized | 1 Comment 

Follow-the-Money Bright Lights Set for Las Vegas Panel

Suddenly, this month the M&A movers and shakers blinked. Capital markets opened for business. Deals are back. Risk’s rewards–as opposed to only its lashing penalties–are emerging afresh as an enticement to cash patiently sitting on the sidelines. Assets both real and in commercial paper have gone from free-fall to suspended animation toward the first flicker of the new valuations they’ve sorely lacked these many months while the world of assets was stuck in limbo.

Now, as equities regain traction and investors steadily gain confidence and fear missing an opportunity, it’s high time to find out what real liquidity there is out there. The moment has come to understand real money’s peculiar appetite for real estate, and just what it will take to move it from being bundles of horded cash into working capital.

If 2008’s eerie radio silence on the residential land deal front was only occasionally interrupted by a net operating loss-motivated divestiture here and there, the first nine months of this year have offered quite a different picture of transaction activity.

Truth be told, many of real estate’s ”Done Deals” have been one-offs, each one triggered by its own urgencies on the parts of seller or buyer groups. We’re not seeing a national trend here, mind you, and we’re nowhere near normal deal-flow yet, but that’s mostly because bank repossessors haven’t had reason to move land assets out of their claim. Too much public sector money around, or at least the suggestion of it, gummed up the works of a normally functioning price reset.

In residential land, this past spring and summer saw a flurry of finished lot deals. Foreclosure sales, short sales, distressed sales, and highly motivated sales brought home buyers–especially at the entry-level, non-contingency level–swarming back into the market to look at their options. Home builders who’d retooled their entry-level product lines to win the comparison battle with existing foreclosures found that demand was picking up, and an $8,000 first-time home buyer tax credit that kicked into effect in February and effective on all purchases from January 1, 2009 on, sealed the deal.

Home builders pounced on finished lots because they were selling out communities and needed to reload. They could pencil take-downs at a higher price than private equity or hedge fund money because they could grab some margin on direct construction costs, book the cash, and keep their operational pulses pumping.

Greg Vogel, founder and CEO, Land Advisors Organization

Greg Vogel, CEO, Land Advisors Organization

Greg Vogel, chief executive officer for Phoenix-based Land Advisors Organization, has been in the trenches, particularly in Southern California and Arizona, and saw “the lights go on” on finished land deals with multiple bidders beginning in April.

Still, 2009 has begun to witness its fair share of activity in more than the Phoenix and SoCal markets, and among more than home builders.

“We’re seeing more deal-flow now than I have seen ever,” said Charles Schwartz, a principal at Winter Park, Fla.-based Avanti Properties Group, a land and real estate investment group operating in 25 metro areas. “I’d characterize deal-flow as serious inquiries, negotiations, and transactions, and we’ve got more of that going on than we’ve seen in years.”

Vogel and Schwartz are part of a super-group of private equity, investor, and financial advisory powers we have slated to go over the “Deals Done” landscape as part of the Developer conference taking place at 3:30 pm, Tuesday, Oct. 13, at the Bellagio in Las Vegas.

Vogel–who’s so stoked about the imminent prospects of land transactions that he’s expanded his Land Advisors Capital talent pool by adding veteran home building and real estate expert Irene Carroll as senior director of business development, and has tapped designated broker Anthony H. Lang and market expert Rick Hildreth to open up a Las Vegas office–will moderate a “follow the money” panel that will look at where the land asset transaction market is and where it’s going.

In addition to Vogel and Schwartz, here’s who’s on the panel:

The five panelists and Vogel will explore the drivers behind 2009’s deals, diagram out the metrics, the multiples, the rates of return hurdles, and what’s in play as risk returns as a deal catalyst among investors in all asset classes. Whether it’s single- or multi-family, for sale or for rent, these fellows have their finger on the pulse of every real dollar already working or ready to go to work in real estate.

What’s more, they’ll plot the timing and trajectory of continued demand for finished lot inventory, and begin to plot the time-line for the resumption of demand for raw properties, assigning return hurdles and horizon dates based on path of growth expectations as they’ve been reset.

To sign up for the Developer Conference, follow this link.

October 1, 2009 | Filed Under Uncategorized | 2 Comments 

A Twist on REO Assets — Real Estate in Bidding to Buy Bank

Not so willingly, banks everywhere are finding themselves total owners of real estate assets, both through home foreclosures and via derailed commercial acquisition and development loans to builders and developers. REOs of one incarnation or another will be part of opportunities and challenges in the market for years to come.

Now, here’s a twist.

The Wall Street Journal reports:

Barry Sternlicht’s Starwood Capital Group, a private-equity firm specializing in real-estate investments, is bidding on assets of Corus Bankshares Inc., according to people familiar with the matter.

“We’re bidding on a bank,” Mr. Sternlicht said during a conference call with investors in Starwood funds on Monday. Without naming the bank, he said it is heavily concentrated in real-estate lending and has more than 110 construction loans. People with knowledge of the matter identified the bank as Corus.

Technically, of course, Sternlicht’s company is private equity, not a pure real estate company. Still, it’s strange to see a firm that makes a mission of being long on land in the position to buy a failing bank.

Adds to that upside down and inside out feeling to things these days.

July 14, 2009 | Filed Under Uncategorized | 6 Comments 

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