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November 09, 2007

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Reggie

From WSJ.com

Levitt Unit Seeks Chapter 11 Haven
By ANDREW EDWARDS and KATHY SHWIFF
November 10, 2007; Page A2

The downturn in the housing market has claimed the home builder behind one of the nation's first suburbs.

Levitt Corp.'s home-building unit, Levitt & Sons LLC, filed for Chapter 11 bankruptcy protection on Friday citing "unprecedented conditions in the home-building industry" that has been "particularly sudden and steep" in Florida and Southeast.

Levitt & Sons gained fame as the company behind Levittown, N.Y., one of the nation's first suburbs, built on Long Island after World War II. It says it has built about 200,000 homes in the past 78 years.

The unit, which evolved into a developer of southern retirement communities for baby boomers, had suspended home construction, laid off 200 workers and defaulted on a number of loans in recent months. Much of its business is in Florida, one of the nation's most troubled housing markets.

Chief Executive Alan B. Levan said the company will explore the sale of all or part of unit's assets as during bankruptcy proceedings.

Also on Friday, the parent company, Levitt Corp., said it swung to a third-quarter net loss as it took charges on the sagging value of its real estate portfolio.

The real-estate holding company reported a net loss of $169.2 million, or $8.37 a share, compared with a year-earlier net income of $2.97 million, or 14 cents a share.

The latest quarter's loss included $163.6 million in charges related to the impairment of its home-building inventory. Excluding these charges, the company would have recorded a pretax loss of $12.6 million.

Last month, Levitt said it expected to take third-quarter pretax impairment charges of $160 million to $170 million on home-building inventory at Levitt & Sons and the write-off of investment and loans made to it.

Revenue dropped 6.4% to $124.3 million from $132.7 million.

Analysts' mean estimates were for a loss of 52 cents on revenue of $126 million, according to a poll by Thomson Financial.

"The home-building industry, particularly in Florida, has experienced unprecedented declines with an over supply of inventory and waning demand exacerbated by the recent disruptions in the credit markets. Levitt Corp.'s results for the quarter are a reflection of the deeply challenging environment in the housing sector and the primary cause of recent actions taken at Levitt and Sons," Mr. Levan said.

The home-building unit's troubles dragged on the parent company's stock, which has plunged 84% this year.

Without Levitt & Sons weighing it down, investors say the Fort Lauderdale, Fla., parent company could focus on its other ventures, such as its land-development unit, Core Communities LLC, and Bluegreen Corp., a developer of vacation resorts in which it has a 31% stake. Core Communities has attractive commercial projects, and Bluegreen is profitable.

Levitt's shares were halted after closing at $1.84.

Reggie

The dumping of real assets on the market at distressed prices will devalue all of the other competing homebuilder's assets. This may be a significant event.

Reggie

And so the game commences (this announcement came out just a few hours later): California residential builder Dunmore Homes files for bankruptcy

http://www.startribune.com/535/story/1539751.html

Real asset devaluation will start in earnest as private equity money comes in to scoop up and dumpt assets on the cheap, causing a domino effect that will truly hurt the banks and the homebuilders.

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