Lennar Suspends Sales at Two Major Projects
Submitted by
CalculatedRisk on Wed, 11/07/2007 - 8:09am (37 comments)
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That old saw about throwing good money after bad is finally sinking in, I suppose.
How can they plan a neighborhood like that with zero retail? so weird.
Boy, how does one stop such a project? I mean won't all the work done to date turn to crappola and deteriorate?
I know the area very well. I like to call Irvine, Housing Hubble USA.
Orange County is the poster child of this orgy of debt.
You gotta give Lennar credit for doing the right thing here (something that's been lacking in a lot of corners lately). They're essentially saying, "Uh, well, maybe not."
Housing Hubble USA
Are you saying that it is a super-telescope that allows us to look into the abyss?
KB homes did something similar in petal uma ca.work stopped in august after they graded a huge hillside,laid out streets and installed sewers.work just stopped,no announcement in the local press.now it is sitting there,bare and ugly.
The builders are so geared to build, as its the only way to liquidate their land , that if they're halting projects, things are really getting bad.
Wow, giving earnest money back can't be a good sign that they plan on finishing this project. Also, since when does a builder give money back to customers, especially when so many of them are insolvent? Good on Lennar for not screwing the customers out their cold, hard cash at the very least.
Of course, those dollars are worth about half what they were when they left the customer's wallets, but that's another story...
this is poor form -- pardon me -- but recently there was some discussion/disagreement here about the validity of the prices being seen in the abx quotes.
anyone interested might see this spot from the financial times, which cites a creditsights report out today.
the conclusion is fairly ghastly.
I agree with iceman; things must be baaaad.
Amazing, but with many, many more to come.
Urban blight, coming to a neighborhood near you.
One more point, Orange County is (or was) home to:
New Century Mortgage
First American Title
Ameriquest
Standard Pacific
Lyon Homes
Subprime Mortgage
Word has it down here in The O.C., many former mortgage brokers are scrambling for cash these days ... it might be a good time to purchase a 3 year old Porsche at fire sale prices.
"But company officials concluded that too much of the village was still under construction for early buyers to be able to fully appreciate its amenities and living environment"
ROTFLMAO!!!!!!!!!
Tom -
Where in Petaluma was KB's development? I used to live there and am curious.
Thx.
"Good on Lennar for not screwing the customers out their cold, hard cash at the very least."
Unless they are planning on going BK, they really had no choice but to return the money.
Their ability to make new sales in parts of the country where that is still possible and convince buyers to fork over 'earnest money' would have been irreparably damaged if they screwed over this small number of customers for this soon to be cancelled project.
This tells me that they still have a plan to survive that they believe.
Now if a builder cancels a project and gets real squishy about returning earnest money.... that is a sign that they are preparing to file BK and are currently stripping the copper from all the unfinished homes...
iceman said:
The builders are so geared to build, as its the only way to liquidate their land , that if they're halting projects, things are really getting bad.
Really bad. I at least applaud Lennar's attempt to get the money back to the little guys.
Donny said
it might be a good time to purchase a 3 year old Porsche at fire sale prices.
Not yet. The dealerships are full, but prices have only begun to go down. For some reason, Corvettes have taken a much harder pounding on the used market. I'm not saying Porsches won't fall, but sales always proceed price... and the price needs to drop down to the market clearing price. So don't buy a Porsche yet. In a few months... new story.
Got popcorn?
Neil
Banker, they are still working on the project (I'll do a drive by today if I can find the time). If they halt work, they'll probably try to leave it at the right stage for minimal damage.
This could be a real eye sore for several years.
Atrios, there is a new shopping center just up the Jamboree (North) at the old El Toro helicopter base. It's a weird location - not that far from the Tustin Market Place, but I think they were counting on some of these "urban villages" for customers.
Best to all.
If they halt work, they'll probably try to leave it at the right stage for minimal damage
Just like the North Koreans and their half-finished Pyong Yang concrete hotel tower, [[giggle]]
Lennar just started selling (or trying to sell) houses at a huge masterplanned community in Santee, Ca called SkyRanch. It took years to approve and they essentially had to shave the top off a mountain to prepare the land. It's hundreds of houses planned. My wife and I just went through the models that opened last weekend. The houses are huge with prices around $240sq/ft.
I don't see them finishing this. I predict they may do what they did in Irvine, i.e. stop building and return money to anyone who bought.
The money they put into infrastructure on these homes had to be huge! I doubt they can take a profit just by slashing prices.
I'll update any changes I see there.
If they halt work, they'll probably try to leave it at the right stage for minimal damage.
Just enough to where there's framing, but no copper pipes or windows, so when the homeless mortgage broker starts a little fire to keep his Hoover Hilton warm, he burns the whole joint up.
Probably a better business plan than they currently have.
We had something similar in Austin,TX right after the tech bubble, 2001:
EETimes.com - Intel, Austin at impasse
Intel steel frame was an eyesore for a while until they brought it down this year.
http://www.informationweek.com/blog/main/archives/2007/02/when_the_walls.html
Coming soon to other bubble markets near you!
Lennar refunding earnest money??? Maybe the end(of the world) IS near...when have you heard of a builder having integrity like that without the fear of God?
Seriously, kudos to Lennar. That is a company that I could do business with! (although not for a while
.when have you heard of a builder having integrity like that without the fear of God?
Leads me to think there's more to it. Perhaps they can sell the land or return it to somebody more easily that way. It's possible that they are just doing the right thing, but it doesn't seem probable without some huge disincentive looming in the background.
It kind of makes you wonder if Lennar's financing was pulled. Builders don't usually just stop in mid stride like that.
Lennar had no choice.
In Santee, their association dues are $317 a month. Once you get residents then the builder has to pay to keep the place up until they get enough residents to cover cost.
Also, you would get a much louder reaction from people losing their (probably small) deposits, making it difficult to sell at other locations and making the stock tank on BK fears. They need time to act and sell their own stock.
It's cheaper to give the money back at this point...especially considering I doubt they had much money from deposits to begin with.
Bluzer,the KB homes project was on the large hill above hwy 101 just past the petaluma River bridge (heading south).It was above the quarry with a lovely view toward santa rosa ,and was bathed by the soothing sounds of the river of commerce just below...
Neil-
Porsche's are for the privileged (Wall Steet).
Corvette's are for the common man(contractors).
Once Wall Street collapses, so will three-year old Porsche prices.
Is this the real supply reduction Lennar seems to hope will stem value losses, or will the buyers who are refunded now look outside this market, leading to a net wash?
Are more companies/banks/investors going to pursue this kind of artificial supply reduction? I say artificial because, given the intent to complete the project, the units will still end up being there, just not for a while.
Great, the start of construction pollution.
What a great landscape.
America, the Dumpster!
I live 3 blocks from this development. They already graded the whole area and it looks like one building is already framed and there is a high rise that is 1/2 completed. I don't know if the high rise is part of the complex, but the vacant New Century building is right across the street. Looks like this will be an eye sore for a few years. Wonder how the city will deal with this? Also wonder if the "Greatpark" is dead too. Hope so, this area needs a real airport.
To CR's point, that Tustin "District" must have been designed by 3rd graders. The streets and traffic are so bad I refuse to go there. They need to fire the engineer that approved such a horrible design.
it might be a good time to purchase a 3 year old Porsche at fire sale prices.
Donny
I'm hoping to pickup a 2 year old BMW for a good price soon
As for builders canceling projects, one of the larger local Chicago builder was grading a huge chunk of land for a new project and a few weeks ago stopped all work. They have also frozen the prices from 03/01/06 Still no price cuts but I don't know about free upgrades etc.
thats was my post from Chicago
WaPo had a story this weekend about several moderate income apartment complexes that had been bought out and emptied in prep for upscale townhouse projects. Those projects are now cancelled, but the previous tenants have already been booted and in some cases buildings razed, leaving urban blight with the added bonus of hundreds of moderate cost housing units removed from the market.
I work in a building in the same complex as Lennar in Aliso Viejo (OC) (Chevy Chase Bank has an office in our building, too). Lennar used to do a lot "team building" exercises (e.g., stand around in a circle and toss tennis balls to each other, etc.). They don't do that anymore; guess they're too busy trying to keep the company alive.
Also, if I recall correctly, I believe that Lennar paid around $2 billion for the El Toro "Great Park" property (and I don't believe that they just purchased an option - I think they paid cash for it). If that project doesn't go forward, they are in a world of hurt.
I totally agree with westpark's comment regarding the planning for the "District." Terrible design. And the "District" needs the new homes in order for it to be feasible. The Tustin Marketplace has enough homes surrounding it to make it work, the "District" doesn't (yet - we'll see if it gets them in time for it to survive).
I work just down the road and just drove by. There are two approx 15 story towers that are in early stages of construction: just floors and and girders. There's a very large condo/townhouse? two-story project -- maybe a hundred units -- that has rough framing in. But it's totally exposed to the elements.
According to the website, it's a 42-acre site with about 1,380 units planned in 7 townhome "neighborhoods", 2 luxury towers and and income-restricted mid-rise neighborhood.
Atrios, I think the idea is that the light commercial uses -- restaurants and Gap stores -- will be onsite.
Residential development is exploding along the Jamboree corridor. G*d only knows who lives in the stuff. Aliso Viejo refugees?
Re: the District - yeah but that Whole Paycheck/Foods is a thing of beauty. Love that store....will not go there a lot since its not near my neighborhood....uh oh wonder how many oc locals say the same thing
here is another halted project in Simi Valley in Ventura County:
Simi condo project's halt is just temporary» Ventura County Star
even worse, they bulldozed the hillside, got rid of the lovely oaks (the city next door's name will soon be "we used to have Thousand Oaks")though they did box up a couple of'em as a sop to the locals (and which will soon die). Now they have a barren hillside next to the freeway and the local pols have nothing to show for selling their souls to the devil....Not a lot of happy faces on those hills now......
I drive down Jamboree everyday to work. It's amazing at how all these projects are stalling.
Looking at the cranes from my office window... they don't move as much as they used too.