San Elijo Hills Development/Home Fed 10-k filing

Click here to read the 10-K filing for Home Fed the parent company of San Elijo Hills Development.

Highlights

Sales of new homes and re-sales of existing homes have not kept pace with the early years of the project’s development; based on information obtained from homebuilders and other public sources, the Company estimates that total home sales (both new and re-sales) at the San Elijo Hills project were approximately 171 in 2008 as compared to 860 in 2004.

The Company has substantially completed development of all of its remaining residential single family lots at the San Elijo Hills project, many of which are “premium” lots which are expected to command premium prices if, and when, the market recovers. The Company is not actively soliciting bids for its remaining inventory of single family lots and is unable to predict when local residential real estate market conditions might improve. The Company believes that by exercising patience and waiting for market conditions to improve it can best maximize shareholder value with its remaining residential lot inventory. However, on an ongoing basis the Company evaluates the local real estate market and economic conditions in general, and updates its expectations of future market conditions as it continues to assess the best time to market its remaining residential lot inventory for sale.

During 2008 at the San Elijo Hills project, the Company sold the church site for cash proceeds of $600,000 and sold the swim and tennis club site for cash proceeds of $700,000. There were no other San Elijo Hills real estate sales during 2008. In September 2008, the San Elijo Hills project repurchased a 131 unit multifamily site for $6,000,000 that had previously been sold to a homebuilder in October 2005 for $36,000,000. The acquisition increases the amount of multi-family units available for sale at the project.

As of December 31, 2008, the aggregate balance of deferred revenue for all real estate sales was $5,800,000, which the Company estimates will be substantially recognized as revenue during 2009. The Company estimates that it will spend approximately $1,500,000 to complete the required improvements, including costs related to common areas. The Company will recognize revenues previously deferred and the related cost of sales in its statements of operations as the improvements are completed under the percentage of completion method of accounting.

As of December 31, 2008, the remaining land at the San Elijo Hills project to be sold or leased includes the following:

Single family lots                                 441
Multi-family units                                 171
Square footage of commercial space              60,000

The Towncenter includes multi-family residential units and commercial space which are being constructed in phases. The Company is currently constructing the first phase of the Towncenter, which includes both residential units and commercial space and which is expected to be completed during 2009. With respect to the Towncenter commercial space, the Company intends to construct and lease approximately 53,000 square feet of the commercial space and sell the remainder of the commercial space to third party builders or owners.

Estimates of future property available for sale, the timing of the sales, selling prices and future development costs are based upon current development plans for the project and will change based on the strength of the real estate market or other factors that are not within the control of the Company.

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