In a Securities and Exchange Commission filing, Newport Beach-based William Lyon Homes says …
On December 26, 2007 and January 7, 2008, William Lyon Homes, Inc., a California corporation (“Lyon California”) and subsidiary of William Lyon Homes, a Delaware corporation (“WLH”), entered into ten separate purchase and sale agreements with various affiliates of Resmark Equity Partners, LLC (the “Resmark Agreements”). Pursuant to the Resmark Agreements, Lyon California agreed to sell to the Resmark affiliates 604 residential lots and 5 model homes in 10 communities in Orange County, San Diego County, and Ventura County, California for an aggregate purchase price of $90.6 million in cash. The purchase and sale of 404 of the residential lots and the 5 model homes closed on December 27, 2007 (for an aggregate consideration of approximately $65.9 million) and the remainder of the residential lots closed on January 9, 2008. Prior to the sale, the collective net book value of these lots (as reflected in WLH’s financial statements) was approximately $210.7 million. Lyon may consider entering into future agreements with the various affiliates of Resmark Equity Partners, LLC to build and market homes in 5 of the 10 communities on behalf of the affiliates. For such services, Lyon California would receive fees and may, under certain circumstances, receive additional compensation if certain financial thresholds are achieved. Certain of the Resmark affiliates have an option to acquire an additional 23 model homes in 6 of the 10 communities.
By our math, that’s 43 cents on the dollar. That’s not so wild. Builder Lennar recently sold land (not in O.C.) for 40 cents on the dollar. (Read more HERE!) Also, Lyon reports to the SEC …
Lyon California has seven revolving credit facilities which previously had an aggregate maximum loan commitment of $560.0 million. Each of the revolving credit facilities requires Lyon California and WLH (“the Company”) to comply with a number of covenants. Upon consummation of the land sales transactions described above, the Company would not have been in compliance with the tangible net worth covenants in certain of the revolving credit facilities. The Company has reached agreement with each of the lenders to modify the terms of the respective revolving credit facilities so that upon consummation of the land sales transactions described above, the Company would be in compliance with the modified terms.
So Lyon likely gets a huge tax write off, and Resmark holds for a few years for a tidy profit. It’s a win-win, and takes inventory off the table for up to three years.
Target markets:
California
Arizona
Nevada
Mid-Atlantic region
Florida
Other high-growth metropolitan markets throughout the U.S.
Typical project profile:
Size of the development: 50 to 300 single-family residential units
Capital requirements: $3 million to $20 million of committed equity
Investment term: approximately 36 months
This also represents a floor on the price of the homes that will go there in the future. If a lot that was worth $400,000 got scooped up for $172,000 in anticipation of a nice profit in three years time, that doesn’t translate into a very big discount on a finished home. If this isn’t a sign the bottom is here, nothing is. Investors aren’t charities.
Just keep trying to convince yourself there’s the bottom. We wont know when the bottom is until its been passed.
Most of these lots are in the hinterlands…..of course they go for cheap, that’s where most of the problem housing is….duh…..
When lots in Newport Beach go for 40 cents on the dollar, give me a call……
When will we (the buyers) see big discounts on these builders homes?
Also I own a house. Us homeowners are not all delusional.
This is actually a great example of how much this market has imploded. Just like Remark, I fully intend to pay 40 cents on the dollar for a southland OC home, in fact, that home will most likely be brand new so as not to have the smelly after stench of “liar loan” or “flipper”.
Remember good people: Bid 20-30% of asking this spring. It’s time buyers took full control with a little “water-boarding” type negiotations.
Wow.
Nearly 60% drop in value on home lots. Who would have thought investors were more bearish than even we bears when it comes to SoCal housing prices? Clearly, they don’t expect to be making any money on these lots for quite some time.
Now, I don’t think prices are going to drop that much in OC: last time we only lost 37% of value and apparently these lots aren’t in OC, but it does give one food for thought….
“Eat it” I guess you never know what is going to happen. A guy down the block just took $80,000 off his asking price to sell and it did! Oh well, what do I care? I just sit back and watch.
Questionable that a tax write-off was the motive here.
Profits=taxes
Losses=write-offs
But then you know that…. why do you prattle on? You really THAT Bored?
Uh, there is a huge difference between lots (in bulk) and finished homes. Please wait and pay 40 cents on the dollar. Come back and let us know how that works out for ya! The uber-smart money has made its bet. Whom to believe?
SOB,
you really need to get out of your Newport bubble and drive around. You cany put the direction of the entire market based on one City or from what I am guessing a few blocks within one zip code of one City.
If you think that way, of course the stats are going to go more in your favor. Orange County in comparison to one zip in Newport is a very big place.
As for these lots being sold off.This will allow for the to construct homes and sell them at a great discount in comparison to previous sale prices. The permits are probably already issued and ready to go. In a matter of months they could have completed homes ready to be sold.
Lyone homes takes 40 Cents on the dollar
Yes these are lots however,
What happens when builders are stuck….
The finished homes will be discounted as well.
I believe many builders will follow suit in 2008
Bottom?! HA HAHAHAHAHAHHA
I guess you would have to believe that Resmark is a charity to believe that they will dump these lots/homes. Somehow, I doubt that.
Yes bored this is clearly the bottom, time to get the plastic flags out and the signs with your smiling mug…the RE market is back! I swear it is a done deal go get a new car and a plasma there is no reason why you shouldn’t!
I realize that many of you Bears either can’t or won’t buy a home in OC now. That’s fine, it is your decision.
All I am trying to say is that there are transactions out there, people ARE buying homes. And the one’s that are being sold now have aggressive pricing and are in good neighborhoods. By the time you guys wait for your 40% declines I can tell you what you will be left with - beater homes in bad areas.
I saw this in the mid-to late 90’s. By the time buyers got around to realizing that prices weren’t going down any further, that’s all that was left. Do you really think the trashed homes are the one’s selling now? No, the smart money is buying now and leaving the scraps for the fence sitters.
You’ll eventually find some homes at the discounts you seek but they will be in less-than-desirable areas with significant deferred maintenance issues. When you add it all up, you will kick yourselves for waiting but justify it cuz you got a “good deal”.
I guess it’s all how you define what a “good deal” is……
Sick of Bears says;
“The smart money is buying now,
and leaving the scaps for the fence sitters”
Hmmmm.
The smart money a ??
Sounds like a sales pitch from a RE agent…..
Sounds like…. “Buy now or be priced out!!! ”
How many homes do you own on 30 year fixed paper with 20% equity?
I only listen to the players that have a stake so….
For now your advise is worth a cup of warm p!ss.
“……..the smart money is buying now and leaving the scraps for the fence sitters.”
With so few sales there mustn’t be much “smart money”……..either that or what you write is tripe.
Oh, golly gee, I’m scared…Look, I’m not and many are not, paying for your imaginary bubble equity based on fraudulent loans and illegal lending practices. Oh, unless you think that that no fraud was involved in the run up in prices and the normal laws of supply and demand are at work. Sure a few people will buy, and yes there are homes in desirable areas that have come down in price.
We’re still in equity burn mode, those who found a bag holder for their previous home are buying the (now) discounted move up home. Great for them. I’ll buy when I feel that the bubble equity is burned off sufficiently enough and if I miss my opportunity, then too bad for me. Right now I see massive denial and all signs point down, down, down.
Bears, that’s great if you make $200,000 a year and can afford Newport Beach. Reality is that this blog is not populated by mostly multi-millionaires. Most people here I’m assuming are not rich and cannot afford a 2-million dollar home in Newport. So most here do not care if values in the highest price OC zip codes are maintaining their value a little bit better than the rest of the county. Since an entry-level home in this county is $500,000, that is THE problem. The average Joe in OC cannot afford that, so prices will continue to fall until they reach a level of affordability for the average first-time home buyer in the county. I’m really sorry that the rich, middle-aged home owners in South OC are losing 15-30% of their equity in the process, but this is long overdue and completely predictable for anyone who’s in the industry like I am. If anyone claims themselves to be an expert in real estate and did not see this coming, I can only laugh at them. Neg ams are continuing to default at higher levels every month and we’re not out of the woods on ARMs either. Those facts, along with ever-tightening lending guidelines are bringing values in OC down 10-30% and we’re not close to being done. I get tired of saying this over and over again to people who ignore reality and tell people it’s a good time to buy because they clearly have an agenda and make their income/commision from home sales. Any person on this blog or any realtor that advises a client to purchase now is unethical, or just plain ignorant.
The “smart money” ehh? (I have tried posting this previously…one more time)
5114 Riverview Ct., Fallbrook, CA 92028
–4 beds, 3 baths, 2,610 sqft
–05/1999: purchased from builder for $265,308 ($102/sqft).
–02/2005: sold for $590,000 ($226/sqft).
–08/2007: foreclosed to bank at $502,417.
–10/2007: purchased by current owner for $537,000 ($206/sqft).
So how much has the knife catcher lost since his purchase in October of ‘07? Well, here’s a neighbor down the street, turns out to be an original owner looking to move out of the country:
3338 Avocado Vista Ln., Fallbrook, CA 92028
–4 beds, 3 baths, 2,670 sqft
–08/1999: purchased from builder for $263,000.
–10/2007: listed for $450,000.
–Price Reduced: 01/05/08 — $450,000 to $399,999
–Price Increased: 01/09/08 — $399,999 to $430,000
–Price Reduced: 01/10/08 — $430,000 to $399,999 ($150/sqft).
–Price Increased: 01/10/08 — $399,999 to $430,000 ($161/sqft).
And at $400k, that would be a jaw dropping 25% drop in 3 short months.
Full post at bubble tracking inventory blog. (scared to put a link to be blocked for a 3rd time, glitch in the new software Jon)
Gosh, it feels like 1995 again.
Standard Pacific (SPF) is the next publicly traded builder to go kaput. Isn’t it ironic that their corporate office is located in Irvine, CA, aka Housing Bubble, USA.
Sick of bears:
You still did not answer my question??
Want people to take your advise?
Show them/me by what you do..
Not what you say….
My wifes parents live in Laguna Niguel since 1989.
I will be buying our 5th property either in LN or Aliso in 2 years.
God willing.
Garden Grove?
Only if you are Asian/Veitnamise and want to be around the coulture.
Patricio:
Please post your data on the San Diego county blog, this is the OC blog.
One stupid guy bought a house in the sticks, and that refutes my position…..?
Yeah….complete different San Diego is so ghetto compared to the OC…give me a break the only time I think you will EVER get a grasp is if you are surrounded by four houses and all four go into BK then you might look around and scratch your chin and think “hmm….something might be amiss here…” Having your head that deep in the sand has once again made you myopic to the point that you think OC is insulated from any outside pressures.
Lee:
Is that true about Standard Pacific homes?
Can you forward that info to me?
Got to look up what projects they are stuck in and were?
Patricio;
Well put young lady!!
Notice he wont answer my question?
All these Agents need to show with action, not words.
Someone is paid 1099 and needs the commission check! LOL
I tell you what I think is happening and will happen…house prices will fall to 02-03 levels all over the county, lending will tighten up like anus in prison, and I will find a home I feel meets my needs at a price I can afford (that’s not an over inflated sense of entitlement).
Do you deny that homes are over priced? If they are, then how much do they need to come down? If not, then why and what are the new market fundamentals (100yr mtgs? multi-family?).
The market fundamentals are that a couple people on here need commision checks and will say anything to try and talk the market up, as if their comments on this site will affect the marketplace. I see no other explanation to the sheer level of ignorance and stupidity of most of their comments.
A couple thoughts:
This isn’t the bottom. This was pure desperation by a builder that needed cash. If all was well and right, they would have sold these at their book value.
Also, in regards to the pricing, and the amount of the discount: there is mention of a provision that would allow Lyon to build and market on those lots in the future in return for a “fee”. Normally, the builder expects to have approx. 10-15% profit in the selling price. It looks like Lyon is willing to forgo this in exchange for a flat fee, which allows Resmark higher margins,or to sell at a lower price.
Finally, given that many of the projects already have model homes, I doubt that this is land banking. These are finished lots, which means the holder is (in the case of developments like Talega) already paying property tax, assessments, and homeowners dues. They won’t want to be making to many of these payments, and certainly not for three years.
Now is a great time to BUY BUY BUY!!!!!!
Sick of Bears and Bored:
I am a serious buyer. I almost bought a condo last year and asked for $10K below the asking price. The buyer rejected it and said it was ridiculous… now it sells for $50K less. I can actually now buy a SFR instead for about the same price with the interest rates the same. Those SFRs were going for $140K+ more than what they are now ($540K). Do you like apples?
Sick of bears said:
“By the time you guys wait for your 40% declines I can tell you what you will be left with - beater homes in bad areas”
How is this going to take place? You are acting like we are picking over the last remaining inventory of books in the bargain bin at a bookstore. You assume that once they are all gone, all new production (new homes plus homes new on the market) will just resume the “old” prices.
What makes you think that will be the case?
Thomas:
Sick of bears has no answers.
I have asked him many questions regarding his posts.
DONT FEED THE BEARS
OR TROLLS
Jimmy:
You know whats up.
As a serious buyer,
I am glad I waited too.
Get me one step closer to the dream machine;
1957 Porsche Spyder
Only 10 more years!
Just took a quick tour of redfin and found that 05 prices are the norm and that 04 prices are the sell-soon prices and the 03 prices are the sell-now. So I think we’re looking at moving down at step this summer: 04 = asking, 03 = interest, and 02 = move.
Richard Head:
Are you advising the 1st time buyer to BUY , BUY , BUY ???
Sounds like some one needs the commission check.
What is the other name for RICHARD ???
DICK HEAD
Real Estate consulting
Orange County California
555-tak-mony
No one has refuted the facts underlying this sale. These investors have established a floor. Period. End of story.
No one has refuted the facts….get real and go get a job Roc and quit blathering about you wanting it to go back to 2004. It is over this is not coming back it is not going to happen again, after the bottom you will have average to below average growth the jig is up the lie is shown…go get another job girl and get out of the house and help your husband out if he hasn’t already left.
Nice factual argument.
$2,000 an acre plus construction costs, baby!! Heck, Detroit even went below construction cost, and they actually make stuff there. Here we just loan other people’s money to liars without a prayer of paying it back and take our fee. Sustainability!!
Fifty percent decline? Hell, that’s way too optimistic. Remember, from 1929 to 1933 the Dow Jones Industrials lost 75% of their value. They started overvalued and then the economy went to *&^$. That is very possible with OC real estate here. The implosion of Wall Street could very likely send us to a economic crisis that puts OC homes at construction cost, which quite frankly, is all they are REALLY worth. I mean, it is a bunch of lumber and granite, $100 a square foot. Tops. For the bubble OC median house, that would be a drop from 600K to what 200K, 150K? 100K? Most of this old construction is garbage from the 60’s, what is it insured for? My beach rentals were insured for 100K each, that’s it.
Things could get a lot uglier than people imagine. This is directed at those bears among us that are timing the re-entry. Be patient. Bulls, please, take some prosac and chill, you aint seen nothing yet.
Dear Readers,
Please accept this disclosure regarding many of the comments you will read on this blog.
Despite the best intentions of Mr. Lansner, this forum has been taken over by greedy speculators. In the past, there have been many balanced opinions expressed here. Over time, that has ceased to be the case. There are many regular posters here who have berated, insulted or otherwise harassed posters holding opposing views into leaving. As a result, the opinions expressed here have become completely one-sided.
Please also be advised that these same posters are overwhelming participants in many other “bubble blogs” (several even operate them). This group has one goal in mind – to drive the market down so that they may profit from it personally.
Sick_Of_Bears Says,
Lyon California agreed to sell to the Resmark affiliates 604 residential lots and 5 model homes in 10 communities in Orange County, San Diego County, and Ventura County, California for an aggregate purchase price of $90.6 million in cash.
Orange County, San Deigo County and Ventura County are all in the hinderlands?
Dear Readers: this blog is burdened by greedy homeowners who hope 2005 will come back. Please forgive their howls, their screeches, and their moans: they have some resets looming.
Now that bored has called this a bottom, this must be a bottom.
Also bored, would you mind issuing signed certificates that the bottom has been reached. Then we can get out, open the bubbly (no pun intended) and party.
BTW bored, who is clueless? You or your buddies are NAR? They declared bottom in October of 2006. Why are you so late to bottom declaration party?
Money talks……. Please re-read the article.
Bored,
This investor could be using a tried and true tactic from the stock market: Buying on the way down.
They are obviously players in this market, and I would not be surprised to see them buy more lots from other builders (SPF needs cash, as does Lennar and Pulte).
As they buy down, they are able average their cost basis.
If they are going to be a large player in this market, they won’t be able to accumulate all the lots they want in one transaction, at one cost, from different sellers. Some will be higher, some lower. I can easily see this being the first in a series of transactions that traces down to $.20 on the dollar, with an averaged cost basis of $.25 to $.32 on the dollar.
I do not think that you should call the bottom until the vultures stop buying.
Throwing up sticks is for schmucks. Land development is where the real leverage and real money is. That is what the smart guys do. And they are smart…and in most cases, they found bagholders (ie the housing developers). A 30% increase in home prices can translate into a 100% or more gain in land holding values. The house devleopers bought at the top, and the land developers are counting their stacks of chips.
We are at the bottom now. I have multiple couples coming to me to buy a home eventhough i have told them that prices will continue to go down. They don’t care, prices have come down enough for them to afford. They are getting 30 year fixes and plan on staying in the home for years to come. Perhaps the single first time buyer is priced out, but couples with dual incomes are coming back to the market. I am not saying that real estate is going to take off, i am just telling you that we have reached bottom and will take a few months for these escrows to close and show in the numbers. i expect the media to report September 2008 as the bottom. You heard it here from me first.