Housing Giants - May 23, 2008 - (Page 25)

Land impairments, measuring into billions of dollars each for the Top 5 builders, have destroyed their profitability. “Let’s face it, margins suck for these companies,” says San Francisco-based housing stock analyst Carl Reichardt of Wachovia Securities. “For an industry that’s basically very similar, from one company to another, the income statement reporting of these public companies is a mess,” he says. “Toll Brothers has more land than anybody, but that land is viewed more positively than most because much of it is held free and clear. How much trouble (a builder) is in now is a function of debt. Pulte has a ton of land, but the firm is also lowly leveraged. Standard Pacific doesn’t have an excess of land, but it does have an excess of debt — and it’s due.” Pulte Homes and D.R. Horton have taken a lower percentage of impairment hits in relation to book value on their land, even though both were more aggressive than others in acquiring lots and new parcels to fuel future growth. When a turnaround comes, both may be in a weaker position relative to competitors because their land basis may be higher. And 40 percent of Pulte’s business is in Del Webb active adult communities, which require heavy investments in huge land parcels, many of them well beyond the normal commuter-shed of major metro markets. “The companies that are in the best shape are those that slashed prices early and often and found ways to monetize assets besides just selling houses to a shrinking customer base,” Reichardt says. “Still, the relative strength of these companies — to each other — hasn’t changed much because of the downturn. Those that entered it with weaker balance sheets are still struggling. Those with stronger balance sheets are now more WWW.HOUSINGGIANTS.COM 5.23.08.HOUSING GIANTS 25 http://www.standardpacifichomes.com/ http://www.pulte.com/ http://www.delwebb.com/ http://www.wachoviasec.com/ http://www.tollbrothers.com/homesearch/servlet/HomeSearch http://WWW.HOUSINGGIANTS.COM

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Housing Giants - May 23, 2008 Contents Viewpoint & Letters News & Moves Process The Top 25

Housing Giants - May 23, 2008

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