Despite abysmal sales thanks to a weak Florida market and high cancellation rates, AVTR made money last year–a rarity among public home builders. The company's low cost basis for its long-owned land as well as its diversification into both commercial and industrial real estate have helped maintain profitability. It also has managed to maintain low levels of debt and almost as much cash on hand as it had at the end of 2006, both factors that should help it weather the downturn. To help bolster the company's cash, management is in the process of targeting commercial and industrial land in its portfolio for sale. A potential drain on the company's future cash is a 9.66-mile four-lane road it has agreed to build in Florida's Osceola and Polk Counties.
BHS made it to the 2007 finish line in the black. But the way the financials are stacked up, 2008 will be much more challenging. While much of its controlled land is pre-2005 vintage, the potential for greater write downs and option abandonments is heightened, particularly if sales don't pick up soon. The company's lengthy land pipeline combined with only $9 million in cash and a dwindling backlog presents a red flag. Sales teams will have to step up to net more orders, but additional revenue generation will be necessary to avoid a liquidity crisis. Whether BHS can ink a deal with a private equity source to unload distressed assets remains to be seen; its assets may prove too concentrated in California and Washington, D.C.
CTX took great pains to systemize its business and focus on markets that would maximize its investment and efficiencies. CTX was one of the first to shed assets and right-size, which allowed the company to lower costs quickly. The builder started its fiscal year strong in an effort to generate cash and move to an asset-light model–even clearing out of secondary markets like Columbus, Ohio. However, the effort stalled by year-end, which put a lot of expectation on strengthening the balance sheet during its fiscal fourth quarter. A deeply-discounted bulk land sale of 8,500 lots to a Dallas-based JV didn't help the calendar year, but spurred aid at the close of FY4Q. Facing a heavy debt maturity schedule and substantial JV debt, generating cash is critical.