Homebuilders Stocks Tumble further - KB, WCI, Centex, Pulte Report Losses

Homebuilder stocks tumbled Tuesday after KB Home reported a $773 million quarterly loss and new data showed pending home sales fell more than expected in November.

KB Home's fourth-quarter loss resulted from ongoing weak demand and plummeting margins, as land impairment charges and tax expenses came in higher than analysts projected.
KB Home shares were down 8.6% to $16.89 in midday trading, hitting a 52-week low Other builders tumbled on the reports as well, with Meritage Homesdropping 11.9% to $10.11 -- also a 52-week low -- and WCI Communities falling 8.8% to $3.34.

KB Home's quarterly loss amounted to $9.99 a share, compared with a loss of $49.6 million, or 64 cents a share, a year earlier. Analysts expected a loss of $1.08 a share.
The Los Angeles-based builder said revenue fell 31% to $2 billion, reflecting the ongoing difficulties of getting buyers to close on their new home purchases. KB Home also said 2008 will be "another tough year" for the homebuilding industry.

Also on Tuesday, the National Association of Realtors said its pending home sales index fell 2.6% in November from October -- worse than the 0.5% decline that economists expected, according to Reuters estimates. The index measures contracts of existing home sales.
"The disappointing data show that record levels of home inventories will take a while to burn off, which means that homebuilders may have to cut prices even further to sell homes.

We expect further modest declines in pending sales in the coming months as buyers continue to wait for home prices to bottom, although further price cuts should begin to lure some buyers off the sidelines," Bank of America analyst Daniel Oppenheim said in a research note.
KB Home's bottom line was slammed by $403 million of land impairment charges. The company also recorded a $373.7 million income tax expense, even though the company lost money on a generally accepted accounting principles basis.

This charge mostly relates to a reserve allowance against KB Home's deferred tax assets -- meaning the company must create an accounting entry to allow for the chance that it cannot carry unused tax deductions into the future.

"The inventory impairment charges we incurred during the housing downturn have produced substantial deferred tax assets," KB Home CEO Jeffrey Mezger said. "To the extent that we generate sufficient taxable income in the future to utilize the tax benefits of the related deferred tax assets, we expect to see a reduction in our effective tax rate as the valuation allowance is reversed."

The company's new orders in the quarter fell 32% to 2,574 units. The cancellation rate on previous orders measured 58% -- the same level as a year ago, but up from 50% in the third quarter.

Homebuilders DownFall Hurts Commercial Real Estate Too - WCI, Divosta Empty Offices

Woes touch commercial real estate (From Palm Beach Post Staff Writer By Jeff Ostrowski)


The commercial real estate market largely has shrugged off the housing market's woes, but that happy trend might not last forever.
With builders and mortgage companies downsizing and in some cases going broke, there's suddenly a lot of empty office and industrial space coming on the market.

For instance, DiVosta Building Corp.'s former industrial complex in Palm Beach Gardens now is available for lease. The downsizing company last week sold five buildings totaling nearly 100,000 square feet, and Asset Specialists Inc. of West Palm Beach is marketing the space.

DiVosta isn't the only builder adding space to the market. Bonita Springs-based WCI Communities has announced layoffs, and Grubb & Ellis is subleasing about 26,000 square feet of offices in Broward and Palm Beach Counties that WCI no longer needs. That includes 3,800 square feet in Palm Beach County, said Owen Sagar, senior vice president at Grubb & Ellis in Boca Raton.

And Mercedes Homes is selling a 5-acre truss-manufacturing plant in Delray Beach. Sagar sees such sales as evidence that the residential downturn is hurting the commercial market.

"We're definitely starting to see the slowdown," Sagar says.
It's not just the builders that are adding space to the market. HomeBanc Mortgage Corp. went broke this year, and First NLC Financial Services announced layoffs soon after moving from Deerfield Beach to Boca Raton - and before it found a taker for its Deerfield offices.
With the dollar marked down to fire-sale prices, foreign investors should be swooping in to buy Palm Beach County's commercial properties on the cheap, right? Not exactly.
Foreign investors have been selling more than they've been buying, even as the greenback has plummeted in value against the pound, the euro and the Canadian loonie.

True, GLL Real Estate Partners of Munich, Germany, in September paid $180.2 million for the Legacy Place shopping center in Palm Beach Gardens, and a German group in August paid $37.25 million for Wellington Green Square on Forest Hill Boulevard.
But GLL in May sold the office building at 3601 PGA Blvd. for $21 million to an American investor.

Other foreign sellers: Hans Vogler, a German who in June sold 537 acres at Florida Research Park for $162 million; Siemens AG, the German telecom giant that in July sold land and offices in Boca Raton for $37 million; and Canadian investor Murray Dalfen, who got $37.7 million for the Boynton Commerce Center last month.

All three sales were to American investors. But Manuel de Zárraga, executive managing director at Holliday Fenoglio Fowler in Coral Gables, reads nothing more into those sales than simple profit-taking.

"They're harvesting some pretty big gains," he said.
While foreign investors have been flocking to Florida to buy vacation homes and iPods, buyers of commercial real estate tend to focus on a property's income stream, not on the discount provided by a weak yield, said Bob Sullivan of RJS Realty in West Palm Beach.

"Real estate is a very different commodity," Sullivan said. "You're buying a yield."

Lotsa Layoffs - WCI Layoffs - Mostly Due to Issues in Florida

Wow, Southwest Florida seems to be getting hit particularly hard with the layoffs. WCI, Centex, Lennar Bonita Bay Group all announce major layoffs and restructuring...Stories of more homebuilder layoffs follow:

Bonita Springs-based builder WCI Communities Inc. has eliminated 575 jobs as part of a restructuring plan announced last week amid the continued housing slump. About 80 percent of the cuts are due to restructuring in Florida — the core of the company's operations — and the rest come from changes to operations in the Mid-Atlantic states and the Northeast, said Jim Dietz, chief financial officer."In Florida, we've combined our tower and traditional homebuilding teams," Dietz said.

Many of the jobs cut were division leaders and managers whose jobs were redundant when the two operations merged, Dietz said.The move will cut the company's work force to about 2,100 jobs — down about 46 percent from a 2006 peak of 3,889 — and generate annual savings of about $46 million in salaries and benefits. One-time costs of the restructuring, including severance, are about $5.4 million.

"This prolonged downturn requires that we continue to assess our overhead and make reductions in order to remain viable through the trough of this cycle," President and Chief Executive Jerry Starkey said in a statement.The cuts are the latest in a wave of job losses that have hit the home-building industry in Southwest Florida since the real-estate boom fizzled:• First Home Builders in Fort Myers, which two years ago was Lee County's biggest residential contractor with almost 1,200 employees, will be down to about 50 following its layoff — announced Oct. 29 — of 200 workers effective Dec. 28.

• The Bonita Bay Group, based in Bonita Springs, has trimmed about 60 jobs since May.

• On Sept. 4, Lennar Homes announced the layoff of 72 people from its Southwest Florida division, from Naples to Manatee County.

• In March, Centex Homes laid off 141 employees from Naples to Sarasota.WCI reported a net loss of $33.2 million in the quarter ended June 30 and is expected to announce quarterly results today. Alex Perez, an advertising director in the marketing department, was among those let go. Perez said he was notified when he got to work."They give you a severance package you can take and they are paying for the week, but they basically tell you to gather your things and leave," Perez said. Perez, 42, had been with the company for about 18 months. He said his severance package offers six weeks pay and some extended medical coverage."I came just after the last cuts and you kind of wonder if that is it," Perez said.WCI cut about 600 jobs in July 2006, citing the slowdown in construction.

The company also announced David Fry will assume the post of chief operating officer and will be responsible for WCI's Florida tower homebuilding in addition to his previous responsibilities for the company's traditional homebuilding, real estate services and amenities lines of business. In the new organizational structure, the Northeast and Mid-Atlantic traditional homebuilding regions will be combined, reporting to Fry. The Northeast and Mid-Atlantic Tower
Homebuilding divisions also will be combined and will report directly to Starkey.

The company's board also announced that seven members will take no compensation for the rest of 2007 and all of 2008 and the remaining two members — Hilliard M. Eure III, chairman of the audit committee, and Jonathan Macey — will accept reduced compensation of $50,000 each.

Board members earned between $140,000 and $180,000 in 2006.The move will save the company about $1 million, Dietz said. Billionaire investor Carl Icahn was elected to the board of directors in August and then was named chairman, ending months of a proxy fight for control of the company. In March, Icahn had offered $22 per share for the company, but the move was blocked by the board at the time.

WCI Layoffs, Centex Layoffs, Lennar Lay offs, Bonita Bay Group Layoffs