Are we worried, yet? With San Francisco having climbed deeper into bed with Lennar thanks to Prop. G's passage, the bad news coming from Wall Street and beyond can't exactly be music to Mayor Gavin Newsom's ears.
As Lennar reported bigger-than-expected quarterly losses today, Lennar's Chief Executive Officer Stuart Miller expressed hope that the federal government would soon belly up and help bail out the beleagured housing industry.
Miller cited increased foreclosures, higher unemployment rates and diminished consumer confidence as reasons why the Florida-based mega developer experienced a 61 percent loss in revenues this quarter.
“With the U.S. housing inventory growing in excess of absorption and limited credit available, the prospect of further deterioration in the homebuilding industry will likely become reality absent Federal government action,” said Miller, who is apparently hedging his political bets by making the maximum campaign contribution to both presidential candidates.
“To that end, we are hopeful that the Federal government will acknowledge the need for further reform and will institute programs designed to stabilize and facilitate the recovery of the housing market.”
But a government plan to address the nationwide foreclosure crisis hit a roadblock in the Senate yesterday in the shape of a Republican from Nevada, Sen. John Ensign.
Sen. John Ensign (Nevada) wants $7 billion for renewable energy tax credits before he'll support foreclosure bill.
This isn’t the first time that Ensign has played the role of lone obstructionist.
In September 2007, the Senate discovered that Ensign was using the “secret hold” to obstruct a bill that requires senators to file fund-raising reports electronically, rather than bury the identity of their benefactors in paper filings.
And for a short period in March 2006, Ensign blocked the nomination of Vice Admiral Thad Allen (who replaced FEMA director Mike Brown in the aftermath of Hurricane Katrina) to become the next Commandant of the U.S. Coast Guard.
But now Ensign, who reportedly has been tasked with assembling a staff to win back the U.S. Senate for Republicans in November 2008, is blocking a foreclosure rescue plan that has broad bipartisan support until he gets a vote on his amendment to provide almost $7 billion in renewable energy tax credits.
As a result, passage of the housing bill to create a multi-billion fund to aid thousands of homeowners refinance costly mortgages into more affordable government-backed loans, will likely be delayed until after July 4.
“In an election year, very few things are actually going to make it into law,'' Ensign told reporters, ``So if you actually want to get something done, you need to be on that train that is basically going to be leaving the station.”
While Lennar spent $5 million to defeat a grassroots coalition that wanted 50 percent affordable housing in the Bayview, the City applied for $25 million in grants to bail out Lennar's Shipyard development.
Here in San Francisco, Lennar Corp. has assured elected officials that there is no relationship between LandSource, a land and development company that filed for Chapter 11 bankruptcy on Sunday, June 8, and Lennar’s Bayview Hunter’s Point project.
In a June 9 letter to San Francisco Mayor Gavin Newsom, Lennar Corporation’s Chief Investment Officer Emile Haddad wrote, “We anticipate that there may be some effort to link LandSource to other Lennar ventures, including Hunters Point Shipyard. Let me be clear: There is no relationship between the two entities. Hunters Point has its own capital structure and financial partners.”
Haddad does not however explicitly mention that LandSource, which owns properties in California, Arizona, Florida, Texas and New Jersey, does have a relationship with Lennar Mare Island, which also filed bankruptcy June 8, leaving city officials in the already bankrupt Vallejo doubly stressed.
And nowhere does Haddad guarantee San Francisco a smooth, obstacle-free redevelopment of Bayview Hunters Point, which apparently is already facing a potentially fatal $25 million funding gap, according to City officials.
“Lennar is committed to continuing to work closely with our community partners and the City and County of San Francisco to overcome any obstacles and to work toward a successful venture,” Haddad writes. “You have my personal reassurance that we will keep you fully informed of any and all significant developments that may impact the project.”
“Likewise, we will continue to utilize the development’s partnership experience and qualifications to leverage all state and federal funding sources to enhance the project and ensure its timely completion.”
As for Lennar’s CEO Stuart Miller, he told investors that “notwithstanding the bleak operating environment, Lennar made significant progress during our second quarter.”
This progress included reducing unsold completed inventory. “We now have on average less than one completed unsold home per community.”
Lennar also reduced selling, general and administrative expenses by 60 percent.
“Given our success with asset reduction, we have shifted our primary focus to the execution of an efficient homebuilding model through the repositioning of our product to meet today’s consumer demand and by aggressively reducing our construction costs.”
‘we are very pleased to end our second quarter with approx $880 million in cash and no outstanding borrowings under our credit facility. We have reduced our maximum joint venture recourse debt by approximately $1 billion from its peak level in 2006, which reflects a decrease of over 50 percent.”
“We recognize that the remainder of 2008 will likely see further deterioration in overall market conditions; however, we are confident that we will remain well positioned with a strong balance sheet and properly scaled operations to navigate the current market downturn as a leaner and more efficient homebuilder.”
Meanwhile, following a posting of a video showing some community members less than positive take on Lennar, someone replied with a video about Lennar's homebuilding operations in Texas.
Seems like some folks in the Bayview aren't the only ones, er, frustrated with Lennar.