Developer to lower land values

The Baltimore Sun

In a sign that the housing downturn is squeezing even the more resilient areas of the Baltimore region, Columbia's master developer said it plans to lower the estimated market value of its remaining, unsold residential lots in the Howard County community.

The developer, General Growth Properties Inc., said in a financial filing yesterday that it expects to take a noncash charge of $77 million, not including tax benefits, during the current quarter to write down the market value of residential land for sale in Columbia, two planned communities in Laurel, also in Howard County, and the Fairwood planned community in Prince George's County.

The charge will reduce the value of residential land in the Columbia and Laurel communities to $141 million and the Fairwood value to $60 million, the Chicago-based real estate investment trust said. The company last reported the value of the Columbia residential lots at $225 million, as of Dec. 31.

The company blamed the continued decline in the housing market, which it said has weakened demand for land in the nearly complete communities as homebuilders have canceled sales.

The company sold just over 12 residential acres in Columbia in 2006 and two residential acres in all its Maryland planned communities from January through September, according to company filings.

General Growth had 80 acres of residential lots left for sale in Columbia and 148 acres of residential land left in Fairwood as of Dec. 31, when it last reported the information by community. In October, General Growth reported it had 226 residential acres available in all four of its master-planned communities in the state.

The company owns residential land in Columbia alone that could support an additional 246 units of new housing, including a mix of single-family and multifamily, according to Marsha S. McLaughlin, director of planning and zoning for Howard County.

Nationwide decline

New-home sales are expected to slide to 788,000 this year from 1.05 million last year, and no sustained improvement is expected until 2009, according to a National Association of Realtors forecast released Monday.

The trade group anticipates that housing starts will be down by nearly 25 percent this year and by nearly 15 percent in 2008.

"There is a substantial amount of buildup of inventory, and builders have cut back in starting new development, so they're working off substantial inventory," said Paul Bishop, a managing director of research for the NAR.

As home sales have slowed and cancellation rates on new homes have soared, residential builders have struggled with decreasing revenues and operating losses. Many have offered buyer incentives such as help with closing costs, upgrades or cut prices.

Some have simply sold off completed, but unsold, projects in bulk. Lennar Corp. sold about 11,000 home sites valued at $1.3 billion in Maryland and seven other states to a land investment venture it formed with Morgan Stanley Real Estate, and last month sold 22 unsold homes in the 26-unit Federal Place development off Key Highway in Federal Hill to local developer Terra Nova Ventures, which has cut prices.

Major homebuilders, including Lennar, D.R. Horton Inc., Pulte, K Hovnanian Homes and Beazer Homes, have cut their land holdings, canceled land contracts and written down land values.

Throughout Maryland, "builders have thinned down the pipeline and have been aggressive on moving the inventory they have," said John E. Kortecamp, executive director of the Home Builders Association of Maryland.

A General Growth spokesman said yesterday that he could not provide details about the number of acres affected in each community, but he said the lots were mostly sites for single-family homes.

"It runs the range from raw land to land where you have roads and utilities to the individual platted lot," said Timothy Goebel, the spokesman.

He said he could not disclose whether any of the lots are under contract to builders. He added that the mix of land planned for residential development or commercial development was in flux and could change depending on market demand

'Best land use'

"We're still going to seek to maximize the value of these communities, and there's more development that could take place there," Goebel said. "So we're working with the local municipalities and county governments to provide the best product, the best entitlements and the best land use, which is what a master-planned community is about - intelligent design that maximizes the value of the property."

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