Housing Giants - April 24, 2008 - (Page 10)

MOVES 9 QUESTIONS FOR: DAVID GOLDBERG To gauge how differently the current housing downturn is affecting public home builders in comparison to private giants, we asked one of the top housing stock analysts on Wall Street, David Goldberg, a few questions. Goldberg is a director who covers the building and building products sector of UBS Investment Research. 1. Are the public builders in more trouble than the large private builders? They’re in less trouble than the privates because they’re less leveraged. They have longer-duration debt, whereas the private builders have more two- and three-year bank debt, with balloon payments at the end. Capital is not a big advantage. Everybody can get capital, especially if you know someone in Dubai. But in the short term, if you can’t access the capital markets, liquidity becomes a problem. 2. Are you concerned that the public builders’ primary product — suburban single-family homes built four to the acre — may be obsolete? I think that product is in trouble not just because of buyer choice, but because of land costs. The cost basis on much of the land held by the public builders is too high for that traditional product. It can’t be sold at a profit. They need to develop it to higher densities, but obviously they have to build something people will buy. If your land is all in far-out suburban locations, it’s a problem. Location is now more important than ever. 3. Can public builders find a way to mass-produce housing if their products have to be more diverse, perhaps even site-specific? Even in a worst-case scenario, where everything the public builders produce has to be site-specific, why would they be at a disadvantage, compared to the private guys? The public builders were trying to build their top lines to create economies of scale. But if that goes away, they’re still on equal footing with private builders. 4. Will we see more public builders protection? TOUSA (Technical Olympic USA) is alr and we hear that WCI is close, but w companies. Beyond those two, I don’t 2008. It really depends on what happ fall, somebody else might be in troub be an ’09 event. 5. Will the current market contract builders? I don’t think we’re there yet. We’d hav market is going to settle out before yo nobody knows what the assets are wo dealing in super-cheap stock—gettin building up their cash. Toll has $1 bi credit on their line. Pulte has more th billion in cash), but they’re about to g is also generating cash. That trend is 6. Will more public builders follow G company private? Why do that? They went public for a r share-holders? That’s a lot of risk. Wh get bank financing anymore? The larg can access private equity money if th smaller private builder, right now I’m financing. I certainly want to make su Many private builders who relied financing have seen it cut off. The cr got an A&D (acquisition and developm collateral assigned against that loan at 120 percent or more in loan to valu paying that loan back? There are a bu because of bad loans to builders. Most private builders have to be 10 HOUSING GIANTS.4.24.08 WWW.HOUSINGGIANTS.COM http://www.tousa.com/ http://www.wcicommunities.com/default.asp?pageID=home&siteID=1000&vid=1000&url=www.wcicommunities.com&col=0 http://www.pulte.com http://WWW.HOUSINGGIANTS.COM

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Housing Giants - April 24, 2008 Contents Viewpoint News and Moves Sell Workforce Housing The New Housing Demographics

Housing Giants - April 24, 2008

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