Housing Giants - April 24, 2008 - (Page 11)

MOVES file for Chapter 11 bankruptcy eady in court-supervised restructuring, e don’t cover either of those think we’ll see any more filings in ens to house prices. If they continue to le — but if it happens, I think it will issues. Nervous is the word that comes to mind. 7. Why are you more bullish on Toll Brothers than most other public builders, even though that firm holds a 14-year supply of land? Toll is a high-end builder. Most of their land is in more desirable areas— closer in and in the best school districts, close to transportation corridors. And they bought it better. It’s holding its value better than most. They also do their own entitlement work, which adds value. Toll has a lot of liquidity, and it doesn’t compete with Pulte, Horton or Lennar. It competes with small custom builders, who have no liquidity. 8. Will Lennar’s tax-advantaged land deal with Morgan Stanley be a trendsetter? I’m surprised it isn’t already, but the builders are being offered 20 or 25 cents on the dollar for their land, and they just don’t want to sell that cheap — even if the tax benefits bring the bottom line on the deal up to 50 cents on the dollar. But we do hear now that most of the large public builders are biting the bullet and trying to sell land. Still, we don’t yet see land at real fire-sale pricing. We need for those capital constraints to kick in on the small private guys, developers, land bankers and all the others still holding land. They have to feel the pain before they’ll get the prices down to where they should be. But Lennar got that land off its books. They generated cash and tax benefits. And they still have the option to get the land back, in the future, if they want it. With the number of public builders in similar circumstances, you’d think more would have followed Lennar’s lead. But it hasn’t happened yet. 9. When will the public builders recover? I think mid-’09 is about right for the trough. We’re undersupplying the market right now. It will take a while for that to show up in the data, but the starts pace is about one million units a year right now. Demand is t: about 1.7 million units, when you include now a well k s.com all types of housing, including rental. That Po ines nnifer Let Jews@reedbus HG undersupply will show up eventually. hgne ion in lead to more mergers of public e to get some visibility on how the u could pencil a deal. Right now, rth. And the public builders are all g cheaper every day. But they keep llion in cash and $1.2 billion in unused an $1 billion. Lennar has less (than $1 et $500 million in tax refunds. Centex not going to stop anytime soon. en. William Lyon’s move to take his eason. Why lever up and buy out the at happens if private builders can’t est private builders are fine; they ey need it. But if I’m a mid-sized or worried about where I’m going to get re I’m generating positive cash-flow. on traditional two- to three-year bank edit lines are being pulled in. If you ent) loan in the last two years, the is under water. Those loans are now e ratio. What chance do you have of nch of banks out there in deep trouble nervous right now about liquidity GOT ? NEWS WWW.HOUSINGGIANTS.COM 4.24.08.HOUSING GIANTS 11 http://www.centex.com/ http://www.lennar.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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