Form 10-Q for HOMEFED CORP
27-Oct-2011
Quarterly Report
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Interim Operations.
Liquidity and Capital Resources
For the nine month periods ended September 30, 2011 and 2010, net cash was used for operating activities, principally for real estate expenditures at the San Elijo Hills and Otay Ranch projects, general and administrative expenses, and estimated federal and state tax payments. The Company’s principal sources of funds are proceeds from the sale of real estate, fee income from the San Elijo Hills project, dividends and tax sharing payments from its subsidiaries, farming income related to grape sales at the Rampage property, borrowings from or repayment of advances by its subsidiaries and cash and cash equivalents and investments. As of September 30, 2011, the Company had aggregate cash, cash equivalents and investments of $66,000,000 to meet its current liquidity needs and for future investment opportunities.
As of September 30, 2011, the remaining land at the San Elijo Hills project to be developed and sold or leased consisted of the following (including real estate under contract for sale):
- Single family lots 325
- Multi-family units 29
- Square footage of commercial space 38,800
As of October 25, 2011, the Company has entered into two agreements to sell an aggregate of 77 single family residential lots to homebuilders for aggregate cash proceeds of $21,100,000, for which it has received non-refundable option deposits totaling $2,000,000 during the nine month period ended September 30, 2011. These option payments are non-refundable if the Company fulfills its obligations under the agreements, and will be applied to reduce the amount due from the purchaser at closing. Although these agreements are binding on the purchasers, should the Company fulfill its obligations under the agreements within the specified timeframes and the purchasers decide not to close, the Company’s recourse will be primarily limited to retaining the option payments.
As more fully discussed in the 2010 10-K, residential property sales volume, prices and new building starts have declined significantly in many U.S. markets, including California and the greater San Diego region, which have negatively affected sales and profits at the San Elijo Hills project. The slowdown in residential sales has been exacerbated by the turmoil in the mortgage lending and credit markets, which has resulted in stricter lending standards and reduced liquidity for prospective home buyers. Sales of new homes and re-sales of existing homes have declined substantially from the early years of the project’s development.
READ MORE via Summary of HOMEFED CORP – Yahoo! Finance.
