The sales total $82 million, and the company expects to record pre-tax land impairment charges of about $80 million in the fourth quarter of 2007. However, by closing the deals on December 27, M/I expects to benefit from a tax refund of nearly $50 million in the second quarter of 2008.
After committing to a plan to exit the West Palm Beach market on December 26, M/I sold 500 lots to an undisclosed private builder the following day for a price of $45 million. The assets sold include raw ground, developed lots and unsold homes in the company's four area communities.
"The decision to exit the West Palm Beach market was a difficult one in light of the fact that we have been operating there since 1985," said Robert Schottenstein, CEO and president of M/I Homes. "At the same time, our West Palm operation has been our smallest for more than 10 years, and we believe that disposing of our West Palm assets during these challenging times is the right decision for M/I Homes." The company expects to have all operations in the market wrapped up by mid-year.
Extricating itself from West Palm will inflict a fourth-quarter pre-tax impairment charge of $44 million associated with inventory and other market assets. M/I also estimates another $1 million of charges in relation to one-time termination benefits.
Through December 28, the company also completed sales of raw ground and developed lots in other parts of Florida as well as North Carolina and Washington, D.C. to various buyers. As a result, the company is predicting an additional $35 million in pre-tax impairment charges in the fourth quarter of 2007.
In connection with the company's quarterly inventory review, additional impairments are also likely.