Realty Check

Centex Land Deal: And I Thought Worst Was Almost Over


Every time I want to say that the bleeding is over, I’m proven wrong. Centexjust announced that they sold about 10 percent of their land holdings to a joint venture for what analysts compute is about 18 cents on the dollar.

The joint venture that is led by Dallas-based RSF partners paid $161 million for 8,500 lots in 11 states. The book value, according to Centex, was $528 million at the time of sale, but analysts say that was already after significant writedowns. They say the land was worth $900 million originally.

Centex will receive the $161million plus $294 million worth of tax refunds, so the total cash receipt is $455 million. “This transaction is consistent with our near-term goals of reducing our land supply and generating cash,” says Centex CEO Timothy Eller. “This land sale accelerates our move to a more asset-light operating model, sharpens our focus on strategic markets and consumer segments, reduces future land development cash obligations and monetizes a meaningful portion of our deferred tax asset.”

The majority of the land is in California and Nevada, obviously the heart of the housing bust. Pali Research analyst Stephen East notes, “Given the well-known weakness in the markets, we are surprised that CTX had not been more realistic in its mark down of land in its impairment process the prior quarter. Did they really think three months ago this land was worth more than 3X what it was sold for?”

Hope springs eternal, I suppose.

Update: See my post on Centex response.

Centex Land Sale

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