We have to be so careful of headlines..How many times have you found a story did not reflect the headline??
Lately, My Reading Material has changed. I don't mean i went from Dear Abby to Hints to Heloise. In my new position with Developers Capital Realty, I have made a change from one house at a time to whole subdivisions. From one lot at a time to large tracts of raw land. I am basically doing the same thing as before, it's just on a bigger scale. Much bigger.
Funny how reading the local Realtor mags and perusing normal Realtor websites have left out a huge segment of the news. I have been reading archived back issues from National Builders & Developers type magazines. As far back as 2005 while the normal Real Estate world was going giddy with its glory and excess, these types of publications were openly discussing the upcoming slowdown.
Larger national companies were rushing to get projects in the works, and others were getting closer to the sidelines.Even locally, I noticed some of the National big boys swooping in and acquiring good sized builders. The common thread, each of these deals showed that the acquisitions had a large amount of lots, or raw land to develop later. Some did well, some will lose.Apparently, emotion replaced factual logic in some of these deals. I have seen some of the details, in my 20-20 hindsight, it appears that some of the deals were made with a belief that the boom would run on indefinitely.
Note to self: Every Merry-Go-Round will eventually stop.
Even yesterday,I was looking at Builder Mag,a nd there was an article about Hovnanian Enterprises announcing a First Quarter loss of 169 million. However, if you look into the story past the headlines, then you see that its only a restructuring, and much of the write down is attributed to acquiring even larger land development deals for the future.
I see very big players looking at targeted markets in the Southeastern part of the country. Our job at Developers Capital Realty is to know who wants to buy big deals, and who wants to sell. We are actively seeking deals to look at, and so far, we have been very busy. Many here at Active Rain have sent me info, and we are in careful contemplation of some of these deals right now.
So be careful of Headlines, they may not carry the value of the entire story. Even if it takes a few years to recover, most of the major money developers feel the market is coming up to the bottom, and want to be positioned there, or slightly below, in a big way. I would encourage many of us to read and study more outside of our normal comfort zone, and see what may be coming down the road.
For those of us that survive, its going to be great. Here is the shortened version of the story...For a great look at national versus just local news, try some different reading materials..
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From Builder 2008
Hovnanian Enterprises Has First-Quarter Loss of $169 Million
by Steve Zurier
- From:
- BUILDER
- 2008
- Related topics:
- business
- accounting
Hovnanian Enterprises reported a pre-tax loss of $169 million on revenues of $1.09 billion for its first quarter of fiscal 2008 ending on Jan. 31, 2008.
In speaking to analysts this morning, president and CEO Ara Hovnanian said while there's really no evidence that the housing market is improving, the company is taking the right steps to reduce its inventories, maximize cash flow, and reduce overhead.
"The long-term housing demographics are not going away," said Hovnanian. "During the downturn much of our competition will go away and we'll be positioned to take advantage of pent-up demand and decreased competition," he concluded.
During fiscal 2008's first quarter, the company incurred a total of $94 million of pre-tax land-related charges. This includes land impairments of $74 million and write-offs of predevelopment costs and land deposits of $16 million, as well as another $4 million for the equity portion of write-offs and impairment charges in unconsolidated joint ventures. Similar charges in the first quarter of 2007 totaled $93 million.
On the inventory front, Hovnanian said the company now has 27,372 owned lots and 31,729 optioned lots, a decrease of 51 percent since the company's peak in 2006. The company also projects it will generate a positive cash flow of $100 million for fiscal 2008 and has taken steps to cut costs, most notably a 47 percent reduction in staffing since 2006.
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See how the story that starts off looking like a bad thing really is not that bad, look to me like they are gearing up for a strong surge in the future!!!! With over 31,000 optioned lots, its looking good to me!
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