Homebuilder News: WCI On The Brink [Housing Tracker]

Homebuilder News

$1B Fraudulent Transfer Claim Delays TOUSA Reorganization. “TOUSA's (TOA) post-Chapter 11 bankruptcy reorganization has encountered yet another delay as the court seeks to sort out a $1 billion fraudulent and preferential transfer claim against the company's secured lenders. Yesterday, the official committee of unsecured creditors filed an adversary complaint against a group of secured lenders that alleges the lenders forced certain TOUSA subsidiaries to unfairly guarantee roughly $800 million in debt related to the company's Transeastern Homes joint venture, a move that unnecessarily drove some of the subsidiaries to insolvency.”  (Big Builder Online, July 16^th)

CTX Mortgage To Sell Jacksonville Offices.  Florida: “CTX Mortgage Co. will put all of its retail offices up for sale, including two in Jacksonville. CTX Mortgage is the financing arm of Centex Corp. (CTX) and has two divisions, one that provides mortgage financing to Centex Homes only and the retail division, which originates mortgages for non-Centex homebuyers. [Additionally,] there is a third CTX Mortgage branch that supports only Centex homebuyers. The company announced earlier this year that it would close this branch once it completes its home sales in two neighborhoods. All three offices total about 30 employees, said Centex spokesman Eric Bruner.”  (Jacksonville Business Journal, July 16^th)

Hoku Scientific, Inc. Reports First Quarter Fiscal Year 2009 Results. “Hoku Scientific, (HOKU) a materials science company focused on clean energy technologies: Hoku Scientific's wholly owned subsidiary, Hoku Solar, Inc., markets, sells and installs turnkey photovoltaic, or PV, power systems in Hawaii. Hoku: In June, we completed an over 250 kilowatt PV system installation for Paradise Beverages. We… expect to begin in August [to] sell the power generated by that system over a 20-year period to Hawaiian Electric Company. [Expected completion:] The quarter ended September 30, 2008, along with residential installations related to our program with D.R. Horton-Schuler Division, a wholly-owned subsidiary of D.R. Horton, (DHI) at the Kahiwelo at Makakilo Development in Kapolei, Hawaii.”  (MarketWatch, July 16^th)

City, Builder Settle Assessment Dispute. Minnesota: Ending a four-year legal challenge of assessments levied against it during 2004 road construction. Cottage Grove Council members gave the OK to an agreement to reimburse builder Lennar Corp. (LEN), $65,000 for court costs and assessments already paid, and agreed to a number of other provisions, among them: Cottage Grove will install yard trees and park plantings in the Pinecliff neighborhood’s Second Addition at a cost of roughly $71,700; the city will suspend its requirement for two-phase roadway construction within the development; and will pay costs associated with reconstruction of portions of Ideal Avenue that abut a planned public park.”  (South Washington County Bulletin, July 16^th)

Palm Harbor Homes Dips After Missing Q1 Sales Expectation.  “Palm Harbor Homes, Inc. (PHHM), maker of factory-built homes reported late Tuesday that its first-quarter sales dipped to $130 million, which fell shy of Wall Street’s expectation of $131.6M. During the year-earlier period, the Addison, Tex.-based firm’s sales totaled $143.3M. Palm Harbor’s quarterly profit fell to $1.6M, or $0.07/share, compared with a loss of $4.3M, or $0.19/share, a year ago. Wall Street analysts, on average, anticipated a loss of $0.08/share.” (SmallCap Investor, July 16^th)

Lennar Blamed For Money Woes.  Florida: “Knowing the Heritage Isles community [can’t] make its next bond payment, community development district Supervisor William Martello says he would rather sue Lennar Corp. than let the district go into default… despite its lawyer's warning that the district likely has no claim against its original developer. Martello argued that the business model for the New Tampa community was flawed from the outset because the developer relied too heavily on municipal bonds to pay for the golf course and clubhouse… Even after Lennar paid down half of the debt, residents have subsidized the golf and restaurant operation by more than $700,000.”  (Tampa Tribune, July 16^th)

Up Next for WCI: Buyout or Bankruptcy. “A buyout or bankruptcy appear to be the only remaining options for WCI Communities Inc. (WCI) now that the luxury home and condominium developer has apparently canceled its restructuring plans with outside parties, including billionaire investor Carl Icahn. Observers say the move may adversely affect sales of units in unfinished condo towers throughout Florida. WCI, has plans to build 15,000 homes along the East Coast at prices up to $10 million… Carl Icahn, WCI’s chairman, [has been trying] to expand his stake in the company beyond 14.5% currently. Icahn could still pursue a buyout of the entire company, unless it first files Chapter 11 reorganization.”  (Globe St., July 15^th)

 Lennar (LEN) NewsBite - Upgrade Boosts Lennar. “Lennar Corp. hit its 52 week high of $37.09 in August and set its 52 week low of $9.33 Tuesday. LEN has been generally down for the past year. Lennar shares have been soaring as a UBS analyst upgraded the stock to "Neutral" from "Sell." Technical indicators for the stock are bearish and steady while S&P gives LEN a neutral 3 STARS (out of 5) hold rating. If you’re looking for a hedged play on this stock, consider a November bull-put credit spread below the $7.50 range. LEN stock could fall up to 30% before expiration and this position would still be profitable.”  (Market Intelligence Center, July 15^th)

MDC Holdings Inc. Names Successor To Finance Chief. “Homebuilder MDC Holdings Inc. (MDC) on Tuesday named Christopher M. Anderson its senior vice president of finance, and said he will become chief financial officer after the current CFO, Paris Reece III, retires. Anderson must also be appointed by the board.” (Forbes, July 15^th)

Cramer: Expect More Banks, Builders To Fail. “Pundit Jim Cramer says the future of mortgage giants Fannie Mae and Freddie Mac may hinge on who wins the November elections, and that financial markets won't bottom out "until all the banks that have to fail do so and GM files bankruptcy along with Ford." Fannie and Freddie might be able to recoup heavy losses if they survive two more years, but only if the government allows them to "limp through" the downturn… Cramer doubts that home builders Hovnanian (HOV), Lennar, Pulte (PHM) and Horton "will all make it" through the downturn.”  (Inman News, July 15^th)

Centex Moves on Environmental Concerns. Centex Corp. had its cake and ate it, too, last week. The Dallas-based builder successfully persuaded shareholders that a proposal to establish goals for reducing greenhouse gas emissions from its homes would be a bad move for the company and its customers. In practically the same breath, Centex disclosed that it would install a mix of energy-saving features to all of homes it starts after January 1, 2009. The new program is called Energy Advantage, and perhaps its most prominent feature is an energy monitor that allows homeowners to track their homes' energy consumption and carbon footprint.” (Builder Online, July 14^th)

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