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Houston Builder
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Joined: 09 Jan 2009
Posts: 351

Re: Lennar, KB now fee building......
PostPosted: Fri Jan 29, 2010 3:20 pm Reply with quoteBack to top

double post


Last edited by Houston Builder on Sat Jan 30, 2010 3:10 am; edited 1 time in total
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Houston Builder
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Joined: 09 Jan 2009
Posts: 351

Re: Lennar, KB now fee building......
PostPosted: Fri Jan 29, 2010 3:20 pm Reply with quoteBack to top

NewHomeDallas wrote:
This is not an either or situation. It's not like KB and Lenanar are building for a fee and not building contract or spec houses. KB and Lennar aren't giving up the core business, just adding another profit stream.

A builder can do both.


NHD - your points are well made, they can do both - to that end, they can also generate a profit stream by selling lemonade out of their models if they want.

The point is that these two are focusing on an area that has virtually no upside - anyone can build for a fee, and with the industry being a fraction of its peak size, people nowadays will build for a very, very small ...and those building for a small fee don't have the 16%-18% overhead like Lennar and KB

Lennar has the confidence to open up in Atlanta.....

At least in Texas, these two are watching the parade go by as Meritgage, Long Lakes and Horton cherry pick the best land deals at great prices.....
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Nelson
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Joined: 07 Nov 2008
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Re: Lennar, KB now fee building......
PostPosted: Sat Jan 30, 2010 12:57 am Reply with quoteBack to top

I agree with Houston Builder. Fee building is a distraction that pays relatively little, but provides a diversion so management can say they are doing something to address too much overhead with not enough to do.
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Houston Builder
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Re: Lennar, KB now fee building......
PostPosted: Fri Feb 05, 2010 5:57 am Reply with quoteBack to top

Nelson wrote:
I agree with Houston Builder. Fee building is a distraction that pays relatively little, but provides a diversion so management can say they are doing something to address too much overhead with not enough to do.


Builders that fee build only do so for one reason - they can't make any money by taking a risk, buying a lot and building a house for a profit.

Lennar and KB apparently have no confidence in earning a profit, so guess what, they build for a teeny weenie fee........

Now that the downturn has impacted all the builders, its becoming more clear as to who has a strategy to survive.

Lennar's corp office has 0 confidence in their Texas management teams.
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houston
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Joined: 02 Dec 2008
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Location: Houston, Texas

Re: Lennar, KB now fee building......
PostPosted: Wed Feb 10, 2010 6:45 pm Reply with quoteBack to top

I am curious as to the story behind your comment that Lennar has zero confidence in the Texas management teams. I am not with Lennar but I would like to learn more of the details or perhaps some of the evidence.

Can you elaborate?

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Houston Builder
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Joined: 09 Jan 2009
Posts: 351

Re: Lennar, KB now fee building......
PostPosted: Wed Feb 10, 2010 10:34 pm Reply with quoteBack to top

houston wrote:
I am curious as to the story behind your comment that Lennar has zero confidence in the Texas management teams. I am not with Lennar but I would like to learn more of the details or perhaps some of the evidence.

Can you elaborate?


If you have confidence in your team, you would go out and buy new deals and let them run with them to turn those lots into profitable new home sales.

There is nothing specific as to Lennar - its the same story at KB, Ryland and others - since they have no confidence, they are merely cutting costs to survive.
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NewHomeDallas
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Re: Lennar, KB now fee building......
PostPosted: Thu Feb 11, 2010 5:22 pm Reply with quoteBack to top

At least Wall Street thinks Lennar is doing OK since their stock has doubled in the past 8 months and is up 8% today.
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Houston Builder
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Re: Lennar, KB now fee building......
PostPosted: Fri Feb 12, 2010 5:25 pm Reply with quoteBack to top

NewHomeDallas wrote:
At least Wall Street thinks Lennar is doing OK since their stock has doubled in the past 8 months and is up 8% today.


8 months? why not go back to August 2005 when it was at $62, now its at what, $16?

I get your ...and must admit that it was a very bold move by Lennar to buy $3B worth of distressed loans for less than $.10 on the $1 - 7 year, 0% note from the FDIC - sounds like an RTC deal. Just think, 5500 loans to sort through to find some gems.......

I think that is a great way to deploy capital - they are definitely thinking outside the box while their zombie competitors are hawking 900SF houses for $70,000.
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BigDuke6
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Joined: 28 Mar 2009
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Re: Lennar, KB now fee building......
PostPosted: Sat Feb 13, 2010 4:32 pm Reply with quoteBack to top

Houston Builder wrote:
Nelson wrote:
I agree with Houston Builder. Fee building is a distraction that pays relatively little, but provides a diversion so management can say they are doing something to address too much overhead with not enough to do.


Builders that fee build only do so for one reason - they can't make any money by taking a risk, buying a lot and building a house for a profit.

Lennar and KB apparently have no confidence in earning a profit, so guess what, they build for a teeny weenie fee........

Now that the downturn has impacted all the builders, its becoming more clear as to who has a strategy to survive.

Lennar's corp office has 0 confidence in their Texas management teams.


What percentage of Lennar and KB's overall business do you believe or know is fee building?
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Houston Builder
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Re: Lennar, KB now fee building......
PostPosted: Tue Feb 23, 2010 4:09 am Reply with quoteBack to top

Quote:

What percentage of Lennar and KB's overall business do you believe or know is fee building?


Not much in Texas - KB's strategy is to burn through lots to raise cash - since the Martha Stewart debacle her in Houston they don't trust their Texas divisions enough to buy land or even build for a small fee - at this point, their Texas divisions just take orders from their bosses - their job descriptions are very similar to a cashier at McDonald's.

Lennar hasn't dumped prices to the same degree KB has - they obviously aren't as desperate for survival since they picked up the $3B loan portfolio for $300MM.
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