The New Home Company Inc.
Q2 2015 Earnings Call Transcript

Published: 10 Aug 2015

[Operator:]

Welcome to The New Home Company Second Quarter 2015 Earnings Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask the questions. [Operator Instructions] At this time, I would now like to turn the conference over to your host, Rodny Nacier, Investor Relations. Please go ahead.

[Rodny Nacier:]

Good morning. We would like to thank you for joining us today for The New Home Company's second quarter 2015 earnings conference call. Today's conference call is hosted by Larry Webb, the Company's Chief Executive Officer, and John Stephens, the Company’s Chief Financial Officer. Additional Wayne Stelmar, the Company's Chief Investment Officer will join us on today's Q&A session. This morning we distributed a press release detailing our second quarter financial results, which can be found in the Investor Relations section of our website at thenewhomecompany.com. We expect to file our Form 10-Q today after the close of the market. During our call today, management's remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements includes statements regarding expected performance, especially expectations with respect to revenue, gross margins, operating income and expenses, cash flow and liquidity as well as non-GAAP financial measures, operational expectations including community count, the number of new community openings and home deliveries and the role of fee building in our overall business plan. These statements which may occur during our prepared remarks or during the question-and-answer session may be identified by word such as expects, should, anticipates, intense, estimates, believes, or similar expressions that are used in connection with any discussion of future financial and operating performance. As a reminder forward-looking statements represent Management's current estimates and Company assumes no obligation to update any forward-looking statement in the future. We encourage you to review the Company's past and future filings with the SEC including, without limitation, the Company's Form 10-K which identifies the specific risk factors that may cause actual results or events to differ materially from those described in these forward looking statements. I will now turn the call over to our CEO, Larry.

[Larry Webb:]

Thank you for joining us today for our second quarter earnings conference call .Before we get into the details with the quarterly results, I wanted to make a few comments about some changes in our Executive Management team. As I mentioned previously John Stephens, a veteran of Oak Standard Pacific in MDC has joined as the CFO. My long time partner Wayne Stelmar has shifted to Chief Investment Officer. This shift allows Wayne to primarily focus on strategic planning and company growth while continuing to be an asset on the financial side of the business. Our previous CIO Joe Davis has retired, but will remain active as a consultant to the company with the focus on large land deals. I am confident that this management changes gives The New Home Company a strong foundation in which to expand their operation within a fiscal responsible platform. Now moving on to the quarter. First, I will provide a summary of operating and financial highlights and then John will discuss additional details on our financial results in balance sheet. If there are prepared remarks we will open the call after questions. Over all we make significant progress through the half way mark of the year to further position our business for success. We continue to achieve the mile stones necessary to reach our full year 2015 financial and operating goals with a combination of wholly-owned joint venture and fee building operations. During net quarter we continue to shift our business to wholly-owned communities. We doubled our wholly-owned community canal with four new openings. Increase orders by 74% and dramatically increased the dollar value of our wholly-owned backlog. These accomplishments have positioned us well for strong finish through the year. In addition our joint venture and fee building businesses continue to play an integral part in our unique operating model and financial results by leveraging our capital base and overhead structure as we continue to add wholly-owned communities. Year-over-year we grew our top line in all the areas of the business with wholly-owned home sell revenues up 100% and $19 million and fee building revenues up 105% to $26 million. We also delivered our third consecutive quarter of earnings. But more importantly we continue to significantly increase the dollar value of our homes and backlog for both our wholly-owned and joint venture communities. Siding the table for a successful finish to the year. In particularly the dollar value over wholly-owned backlog more than tripled to $137 million for the dollar value of our joint venture backlog including lots under contract double to $284 million. These gains represented year-over-year increases of 245% and 100% respectively. While the average selling price of our homes and backlog reached $2.1 million wholly-owned communities and $1.3 million for joint venture communities. These high average selling prices are reflection of our strategy to build in well located land constrained markets with innovative architecture and home designs. We have also made progress during the quarter by bringing new well positioned housing programs to market. We ended the quarter with 18 active selling communities. Eight of which were wholly-owned and 10 were owned by joint ventures. This represented an increase in 5 communities to our total net community counts at end of the 2015 first quarter and seven communities added or an increase of 64% as compare to the end of the prior year quarter. The five wholly-owned communities opened during the quarter consisted of two in our Woodberry Community located in Bay area Chapel Al and El dorado Hills, 20 Oaks and 1000 Oaks and our highly successful Fiano community at Newport Coast. To provide a little color on our Fiano community to-date we have written a total of 14 contracts with an average selling price of $3.7 million per home in many of these cases the buyers have not yet finish making their options and selections, which should further drive our average sells price growth. For these home sales were included in our second quarter backlog and the balance were written in July and August. In addition we plan to open three more wholly-owned communities and one more JV community during the second half of 2015. As we have consistently stated the efforts we have made in opening new communities and building our backlog during the past year will be reflected in the second half of 2015. As we stated last quarter a larger portion of this backlog is anticipated to be converted in the fourth quarter. With respect to our joint venture operations revenues totaled $58 million during the quarter and 88% year-over-year increase, which included $16 million in Ranch sells primarily from our Northern California, Cannery Master Plan located in the city of Davis. Importantly our Cannery Master Plan is the first new housing development in Davis in the past 20 years and we plan on debuting two new wholly-owned communities next week during each grand opening. Joint venture structures similar to the Cannery allow us to participate in the ownership of a larger scale more than each sites in some of the strongest markets in United States. Moving on to our fee business we more than double our fee revenues year-over-year and completed 286 homes during the quarter. As a result of these volume levels we are one of the largest builders in Orange County market, which provides us access to some of the best trade partners and it is attractive land constrained housing market. On the land acquisition plot we recently entered into multiple lot options contracts with the Irvine company. On four wholly-owned communities totaling over $250 in land acquisition. Two of these communities were consist new luxury owns in the premier Crystal Cove Master Plan Community at Newport Coast and another would be a new program in Portola Springs Community located in North Irvine near a very successful Lambert Ranch Master Plan. We expect to open the Crystal Cove and Portola Springs Communities in the spring of 2016. In addition we entered into a contract for the continuation of our highly successful Trevi community located in Orchard Hills Master Plan in Irvine. I am proud of our teams accomplishments in the first half of this year and energized to continue executing our strategic objects as we move into the second half of the year and finish 2015 on a strong note. I’ll now trying to call over to our CFO John Stephens to provide additional detail on our financial results

[John Stephens:]

Thank you Larry and good morning before. I continue with the financial highlights I wanted to thank Larry, Wayne, Tom, Joe and the board for the opportunity to be part of this management team in organization. I couldn’t be more proud to be associated with this group. Now on to the financials. The company generated net income of $449,000 or $0.3 per diluted share compared to a net loss of $1 million in the prior year period. The improvement in our year-over-year results was driven by higher revenues and a $3.1 million increase in joint venture income which was partially offset by higher SG&A expenses associated with cost and current connection with growing our community count and operations as well as a $315,000 increase in abandoned project costs. Our net orders were up 74% to 40 homes for the quarter and importantly the dollar value of our wholly-owned backlog was up significantly to $137 million or 245% over the prior year period. In addition our joint venture of home deliveries revenues and backlog value were also up meaningfully as compared to the prior year. We remain on track to deliver our 2015 financial goals however, we stated in our last quarters conference call our earnings for the full year are still expected to be heavily weighted to the fourth quarter as we open new communities generate new orders and convert our backlog. Our total revenues increased 103% to $46 million as compared to $23 million in the prior year period. Both our home sales revenue and our fee buildings revenues experienced year-over-year gains of a 100% or more. The growth and home sales revenue was driven entirely by a 117% increase in our average selling price to $1.6 million compared to $739;000 in the prior year. The increase in our average home price was largely influenced by shift in product mix primarily from a large percent of closing from our Trevi and a Amelia communities in Irvine were average sales price was $2.6 million. We expect our average selling prices to fluctuate from quarter to quarter due to the wide mix of homes offered by us with the variability of deliveries between quarters as we continue to open new communities. Deliveries for the second quarter with the lowest expected for 2015 in total 12 homes which was one home left in the prior year period. Also as mentioned earlier the dollar value of our wholly-owned home backlog increased by $97 million from the prior year $237 million totaling 65 homes in an average sales price of $2.1 million a 33% year-over-year increase in average price. Our gross margin percentage for home sales for the quarter was 10.4% versus 17.6% in the prior year period. The decline in the gross margin percentage was driven substantially by to close up communities in Sacramento that required higher than anticipated incentives. Also the deliveries from higher price communities that Irvine had expect the gross margins in line and consistent with that we have previously discussed given those land sellers profit participation component. Let me provide more color on two Sacramento communities. We terminate the option contract for one community that was not performing and rode off the balance of our option deposit, which was included in abandoned project cost. The capital will be redeployed into higher yielding projects. The other Sacramento community is expected to close out in Q3. Given the current margins in our back log we expect to see our gross margins improving in third and fourth quarters as compared to the margins we generated this quarter. Having said that our gross margin percentage will continue to influence by a higher proposition of Irvine, Master plan Community Homes that we anticipate delivering in the second half of 2015. However the per unit gross margin dollar contributions from these communities are large and the communities generates strong SG&A leverage due to their higher average selling prices. Further more these lots are acquired under favorable lot options structures and generate strong returns on equity. Our SG&A expenses as a percentage of home sales revenue was 29.5% versus 35.6% in the prior year period. The 610 basis point year over year improvement in SG&A rate was driven by higher homes sales revenue, which more than offset the increase in G&A expenses required by the growth and our business from a year ago. Sequentially our SG&A rate increased substantially from the first quarter due to a decline revenues that resulted from the variability in deliveries from quarter to quarter. We expect our SG&A rate to improve in the third and fourth quarter of this year as we generate more property leverage from higher deliveries and revenues. Our fee building revenues increased by a 105% over the prior year quarter to $26 million and our fee margin, which include management fees from joint ventures was 4.6%. The higher fee revenues were due to an increase number of homes under construction for the period. The management fee revenue for the quarter totaled $2.1 million compared to $1.6 million in the prior year. The fee building business has been attractive segment of our diverse operating platform as it provides incremental profits and returns and at the same contributes to developing stronger relationship with our trade base and strategic land sellers. Moving to our joint ventures we had ownership in 13 JV’s which included 9 home building and 4 land developed JV’s with capital percentages ranging from 5% to 50%. As a reminder results of our unconsolidated JV’s are not included in our consolidated results, but rather are reported below the gross margin line item in our income statement. For the second quarter our equity and net income from unconsolidated joint ventures were $3.3 million compared to $172,000 and a year earlier period. The increase in joint venture income allocable to us was driven largely by increase in home sales revenue resulting from a 35% increase in average JV home sales price an increase from land sales and a $1.6 million gain from a step-up and basis of the company’s capital account in connection with the formation of a new house in JV and the Bay area. With respect to this new JV we made the decision to enter to a JV structure for the Thailand’s Community in San Mateo to maximize our return on capital based on the size of investment. Our home sales revenue from JVs increased 38% to $43 million on the delivery of 45 new homes and $16 million from JV lot sales primarily related to our Cannery land development JV in Davis. Our gross margin percentages from JV home closing and land sales were both very healthy coming in at 20.8% and 24.7% respectively. Our new JV orders were up 23% over the prior year to 103 order due largely to a 15% increase in average new community count and a slight increase in our monthly sales absorption rate. That grew our JV community count by 43% year-over-year to 10 communities as we purchased 7 in the year ago. as a result of this community count and order growth the dollar value of our JV backlog grew by 68% to $238 million, which represented a 187 homes. In addition, dollar value of our JV backlog of lots under contract totaled $46 million for the 2015 second quarter versus no loss under contract in the same period last year. This combined JV backlog positions to recognize higher joint venture income in the second half of the year with a heavy waiting to the fourth quarter. At the end of the second quarter together with our JVs we owned our control over $6000 lots including fee building lots. Of this supply we and our joint ventures owned approximately 3700 lots and controlled an additional 2300 lots. This land of pipeline remain strong and is in well located land constrained market that positions us well to support our growing operation. With respect to our financial position we ended the quarter with $53 million in liquidity including $37 million in unrestricted cash and $60 million in availability under loan commitments. We had a $175 million of indebtedness outstanding at the end of the quarter, which represented net debt to Cap ratio of 47.3%. I now would like to discuss our outlook for 2015. We are pleased with the progress we have made to the first half of the year especially with the growth in our community count in backlog. As a result we are reconfirming our guidance for the full year EPS consists of what we discussed on our last call. We continued to expect EPS of $1.30 to $1.45 per diluted share for 2015, which again will be heavily weighted towards the fourth quarter. This EPS outlook is based on the following assumption. 16 actively selling communities at yearend consisting of 9 wholly-owned in seven JV communities. Revenue from owned communities of $250 million to $270 million. Fee building revenue of $125 million to $135 million and income from unconsolidated joint ventures of $20 million to $22 million from a combination of homebuilding and lot activities. Again we want to be clear that a significant portion of this income and revenue for the back half of the year are heavily weighted to the fourth quarter. I'll now turn the call back to Larry for his concluding remarks.

[Larry Webb:]

Thank you John. As we stated for the last two quarters 2015 for the new home company is all about operational excellence in growth. A strong sales results during the first half of the year is setting the table for very solid operating results for the remainder of 2015 and beyond. Our unique business model and well located grand positions allow us to take advantage of the improving California housing market. Since going public 18 months ago, we have concentrated our investments in field sites with strong jaw growth. The first six months of 2015 have been all about opening new communities with a shift towards more wholly-owned endeavors. These efforts are just beginning to reach fruition quite simply I’m very proud to regenerate our future’s bright. John, Wayne, and I welcome your questions at this time.

[Operator:]

Thank you we’ll now begin the question and answer session. [Operator Instructions] Our first question today comes from Allan Ratner of Zelman and Associates.

[Allan Ratner:]

Hey good morning thanks for taking my question and congratulations John and Wayne on new roles. First question I guess probably for Larry on I think when you discuss last quarter the community count ramp. You had indicated that you’d expect to see a little bit of bumped here absorption rate as new communities open up because you have interest less than you tend to see kind of flurry of activity when the community opens and if you look at your absorption right this quarter it was pretty flat with the first quarter even though you did have a lot of community openings. So we’re just curious how we should think about that going forward you’re selling around two per month right now. As the communities begin to stabilize here and the growth slows a bit in the back half of the year. Is there room for improvement in absorptions or is two per month the right metric to think about?

[Larry Webb:]

Actually Allen thanks for reading with that and I’d say that as I kind of reiterated over and over in the beginning we are all about growing the company in the right way and when I look at it with our new communities we are at or above where our absorptions need to be. But if I will get it really between our JV and our owned we’re averaging 2.8 sales a month. Our new wholly-owns are around 2, but it somewhat misleading and part of it is that we are selling in our communities kind of what we can do in terms of building per month and we are really in a pretty good spot right now. I feel comfortable that our absorptions are where they need to be.

[Allan Ratner:]

Got it that’s helpful and then second question on Sacramento incentives obviously we can understand you want to close out of community that might be underperforming, but I guess some of the concern would you still have a lot of assets that are coming soon and opening in Sacramento. So what are you seeing more broadly in that market to you feel the need to incentivizes or are there are any issues with demand there or was this really unique to one or two communities where you had to incentivize any color you can give would be helpful?

[Larry Webb:]

Sure well Sacramento is the slowest of our three markets no doubt about it. We felt like this was a proper thing to do to make some manager of decisions and move on so we could redeploy the capital. But the fact is there are opportunities in Sacramento. We are one week away from grand opening Cannery in Davis and we are really confident and excited about what we think the results are going to be. We have an interest with it, Davis is over 5000 people and so there is a market, but big picture it’s still the slowest of our three that’s true.

[Allan Ratner:]

Okay thanks a lot good luck.

[Larry Webb:]

Thanks Allan.

[Operator:]

Next question is from Michael Rehaut from JPMorgan. Please go ahead.

[Michael Rehaut:]

Thanks. Good morning everyone. And welcome John to the team.

[John Stephens:]

Thank you very much.

[Larry Webb:]

Hi Mike why does not anyone welcome me to still be with the team.

[Michael Rehaut:]

We should never take you for granted Larry. And we don’t.

[Larry Webb:]

Thanks.

[Michael Rehaut:]

I am looking forward to see you guys soon on the West Coast. First question just on the Canadians of how the rest of the year should play out and particular I guess also the second quarter from a wholly-owned perspective and just more broadly. You kind of commented a couple of times about the 4Q waiting of the results overall. So number one just trying to get a sense when you think about 3Q versus 4Q are we talking about 80% of the balance in 4Q versus 20 in 3Q is it even – is that type of the right rough range to think about it and with 2Q itself where those results kind of consistent with your internal expectations because we were looking for a little bit more this quarter obviously still waited to 4Q, but we are looking for a little bit more to flow through in this past period?

[John Stephens:]

Hi Mike its John. Thanks and with respect to the balance of the year we do expect it to sequentially increase and I see its heavily away we note it to be more than 50%. I would say it’s probably may be closer to Q1, but maybe not quite there sort of between Q2 and Q1 were without giving you a specific guidance we are not ready to guide and give quarterly guidance at this point. So I think again we want to reiterate the fact for the full year we are confident that we will hit that range of EPS we described and again much, much heavier waited to fourth quarter. Hopefully that helps a little bit.

[Michael Rehaut:]

So if I understand right you are saying 3Q perhaps a little more similar to 1Q?

[John Stephens:]

I think it’s more in that range without getting specific as to exactly what it is.

[Michael Rehaut:]

Okay.

[John Stephens:]

And I think the other thing that you asked earlier to is Q2, we set along I know Wayne talked about it last quarter we expected Q2 to be kind of lowest quarter in the year and I think it’s exactly what we expected in that regard.

[Michael Rehaut:]

Okay perfect. And then just second question on the guidance I guess you reiterated the EPS, but it appears like some of the revenues home building revenue, fee revenue, a little bit less one a little, well the tweaks on there and fee building revenue a little bit less, home building revenue may be slightly higher. Just wanted to get a sense in terms of perhaps what’s going on there and I guess what the fee revenue and the fee building is that more of a shift into 2016 our presume and if that has anything to do with perhaps delays or just the way the business is progressing?

[John Stephens:]

Yes, Mike let me start and I’ll let Larry kind of fill in some color on the fee building, but you’re in terms of the components of our guidance we did bump up our consolidated revenues from our own communities. I think a lot of that with the strength we have seen some of our communities in Irvine here the million Trevi projects so we expect that increase in revenues to more than offset the decline in our fee building business and maybe I’ll let Larry kind of comment a little bit more on the fee building business.

[Larry Webb:]

First of all as we probably only builder large public builder animation that has such a big fee operation, but it has been very important to us. And we remain the Irvine company’s go to fee builder and as I mentioned we crossed 286 homes in second quarter, which was gigantic, but in long term even short term it continues to be an important part of our business. We started a 105 homes in July alone. And in addition we just received contracts to do six new projects for the Irvine Company in the new master planned called Eastwood totaling roughly 600 more homes. But in the long run that starts and stops are all related to how the Irvine company views our business. So while it’s going to be a solid part of our business we don’t really control how they start everything. So it’s going to shift back and forth, but overall its really solid.

[Michael Rehaut:]

Great thanks so much guys.

[Larry Webb:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from Mike Dahl of Credit Suisse. Please go ahead.

[Mike Dahl:]

Hi, thanks for taking my questions. Larry I wanted to go back to the topic of absorptions and I guess slightly differently if you think about all of the new communities that have come on and may be some of them towards the end of the quarter and then you articulated some new onset of coming on through year end and spring of next year. And so if we look at the new blend or the go forward blend of your communities what is the targeted pace that you would expect and I am speaking to wholly-owned specifically?

[Larry Webb:]

Sure, it really does vary project-to-project, but we try to be conservative in our business planning and normally we want to be somewhere in the area of two net sales a month. Sometimes that’s misleading for example our Fiano project that we opened in Newport Coast every release we’ve had we sold out, but because initially we had a few BRE issues to resolve those net sales don’t show up in the annual absorption. So we opened a month and a half ago roughly we have 14 net sales, but on the business – around our absorptions it shows we are four. So we are 2 and 2.5 is what we do, we’re really in a good position Mike and without these various projects the project but overall we are solid.

[Mike Dahl:]

Okay, thanks and then similarly but from the margins side thinking about this the community you’re nearing the end of some of the Sacramento issues. You have got some new wholly-owned non-Irvine projects opening up but also some continued work with the Irvine Company obviously as you think ahead to what we should or what you expect to see from your margin performances this is still realistic to think that we’re going to migrate back up towards the high teens over the next four, five quarters or so?

[John Stephens:]

Hi Mike, this is John Stephens hello. Let me take a crack at that, as you indicated we did see the impact on Sacramento margins on those couple of close out communities and looking forward for the balance of 2015 and as we move into 2016 we still have a pretty heavy presence on the wholly-owned basis on the Irvine Ranch so we really like those communities for number of reasons. But we expect those have performed what we expect kind of in a low to mid teens having said that they generate really, really large per unit dollar contributions, which is great from an operating leverage and a proper perspective. We also like them because the lower execution risk they are very well located, finish lots, excellent schools, and amenities they generate very attractive returns on equity as a result of their takedown structures. So having said that they will continue to be a pretty large percentage of our business as we move through the balance of this year and in the next year so getting to the high teens in the near term it’s probably not what we will see from wholly-owned perspective. But from a JV perspective we are not kind of in those participation deals like we generate this quarter in the 20% range. We think that’s more kind of in the range from that standpoint of our business.

[Mike Dahl:]

Okay, thanks for that John and one final question I think you talked about some of these new Irvine contracts finally getting done the crystal curve for total of Trevi and then I think we all saw the announcement in terms of Fremont and Santa Clara can you help us in just the total revenue opportunity from this combination because it seems very meaningful and just trying to think about the total and how that will lay around or how quickly lay around in terms of both orders and revenues?

[Wayne Stelmar:]

This is Wayne Mike. The four contracts that we executed with the Irvine company for about $250 million should generate well and access the $500 million with the revenue over the base of several years and couple of year actually given the size of the projects. The community that reference in the Bay area particularly Santa Clara and Fremont. Those are relatively small communities in size. I think in total they are roughly 100 units but they will begin models and those communities will begin sometime in fourth quarter and in the first quarter of next year so we should see the impact in those communities both in the buildup of backlog and in some cases some revenue in 2016.

[Larry Webb:]

This is Larry guy. The Irvine deals are pretty incredible in that they represent some of the finest property in the whole United States and we are very excited about what this means and what it means really it will probably be coming in fourth quarter 2016 and beyond, but this is big opportunity for a company and indicates the Crystal Cove Projects they are the last two production sets of homes in Crystal Cove in the first new communities there since 2007. The Irvine Company picked us over every builder in California and we are very optimistic about those projects.

[Mike Dahl:]

That’s great. Thank you for all the color.

[Larry Webb:]

Thank you.

[Operator:]

The next question comes from Alex Barron from Housing Research Center.

[Alex Barron:]

Thanks and good morning guys. I wanted to ask I guess if you guys experienced well obviously the closings were a little lower I think than most people were expecting. So wondering if there was some type of labor related delays or what influenced. I’m guessing especially like in a million Trevi relative to the backlog, it seems like the units must have been a little bit low. So what were some of the factors that maybe played there?

[Larry Webb:]

Really, well labor is going to be an issue for every builder in the country. I don’t think that we should blame any slow closing on anything like that. We have very strong relationships with trades right now really we didn’t what you saw is roughly what we thought were going to get. We were hand fully of homes off but overall we are on track, we always thought this was kind of going to be the case. One moving consistently forward the way we want Alex.

[Alex Barron:]

Okay then hoping you can help me also with some timing of other projects and hoping you will be help yourself here. On some of the bigger ones in JVs the McKinley Village and Russel Ranch when are those roughly started to slated to start previously start taking orders and are each of those going to be consistent of multiple product types in a multiple communities?

[Larry Webb:]

Sure, lets go through those. Both are land JVs. McKinley Village, which is roughly 340 lots in downtown Sacramento. We are grading the site today and we anticipate starting models sometime end of fourth quarter early first quarter of 2015. Plus a Ranch we are still in our tied them in our process we are making good progress we expect to be in that Russel Ranch roughly 850 lots it falls in a very strong location. We think we’ll begin moving dirt towards the end of this third and fourth quarter. And we will be putting lots on the market sometime may be 12 to 18 months from now. But both projects are proceeding in a solid fashion and we think both of the locations are really strong.

[Alex Barron:]

How about in the wholly-owned if you can give us a sense of timing for when you’re likely to start selling homes at Lafayette and Fiano and 20 Oaks?

[Larry Webb:]

At all of those projects we have just began and Fiano, 20 Oaks, and we call our Lafayette we call we have two there we call Woodberry we are open operating right now. We will be delivering houses at all of those sites in fourth quarter.

[Alex Barron:]

Okay, and Canyon Oaks as well.

[Larry Webb:]

Canyon Oaks is still in the entitlement process and we anticipate getting political approval of that site. Somewhere first quarter next year. But for those who don’t know it’s an infield site Calabashes that we’ll have detached homes somewhere in the 55 to 60 detached homes we have been on that and working with it on an option for three years and think we are getting close, but it’s a slow process in Calabashes.

[Alex Barron:]

Okay thanks guys.

[Larry Webb:]

Thank you.

[Operator:]

There are no further questions at this time. I’ll handle the call back over to Larry Webb for closing comments.

[Larry Webb:]

I want to thank all of you for your questions, we welcome for the scrutiny I know we will have one-on-one to many of you later, but let me just be very clear. We started this public journey a year and a half ago. we went public. We took the proceeds and we focused on primarily taking our 5000 to 6000 lots and spending last year transitioning to be a public company. getting product on line, planning the right kind of homes, being a special type of builder. This year has all been about opening lease projects to the market place and second half will be delivering and starting opportunity moving forward. It clear is a bumpy start because we are so small. But we are right on track, we have a great team of people and we are very confident that we’re heading in the right direction and are going to have great 2015 and beyond and thanks a lot.

[Operator:]

This concludes today conference call you may now disconnect your lines. Thank you for participating and have a pleasant day.