Housing Giants - August 11, 2008 - (Page 25) Big Change in Development FinanCing? David Drees runs a tight ship in financial management of his family’s privately-held firm. “We’re managing our balance sheet very conservatively,” he says, “trying to convert assets to cash wherever possible and paying down debt. The public builders had much more robust land acquisition operations than we ever had. They bought more land and so, when the what will the industry look like 10 years from now? David Drees opines. market crashed, they’ve had bigger land holdings to dismantle. In most cases, all we’ve done is shift the mission of our land guys from acquisition to disposition.” Drees now has $400 million tied up in land ownership and lot option contracts, down from a peak of $450 million in June 2007. By the end of this year, Drees expects to have that land investment down to $350 million. The firm owns 8,500 lots, in various stages of development, and controls 13,300 when lot options are added in. “Right now, we have a six-year supply,” he says, “based on 2,200 closings a year, which is the pace we’re operating at this year.” Still, Drees believes big changes are coming in the way his firm and other large builders will finance land acquisition and development of future communities. Drees now accesses capital through a syndicate of seven banks in its line of credit, but he is not sure he can count on the banks to fund his future growth. “We have a revolving four-year deal that renews every year,” he says, “so we’re sitting pretty. We’re not violating any covenants. We’re still making money because we still have some commercial and investment properties on our books. We’ve had some of those assets since the 1980s, but we are worried about the www.housinggiants.Com 8.11.08.housing giants 25 http://www.housinggiants.com
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