Faced with financial losses and a sinking stock price, Hovnanian Enterprises, longtime home builder and one of the Tampa Bay area's top 10 builders in recent years, is exiting this regional market.
"Rather than focusing on additional revenue growth beyond 2016, we now plan to focus on deleveraging our balance sheet and maximizing our profitability," CEO Ara K. Hovnanian said Wednesday. The executive outlined company plans to wind down its operations in Tampa, as well as in the San Francisco Bay area, by delivering the remaining homes in existing Hovnanian communities. The home builder also is exiting the Minneapolis and Raleigh, N.C., markets.
"We are confident these decisions will lead to continued efficiencies and ultimately improved financial performance," the CEO said.
From a market point of view, the timing of Hovnanian's departure feels odd. The recession is over. Unemployment is well under 5 percent in the Tampa Bay market. Mortgage rates remain historically low. Millennials are starting to feel more confident and rich enough to consider buying rather than renting. And the housing supply in this area is extremely tight.
It all suggests great opportunity for home builders in a state that is growing in population again.
Assuming the home builder is healthy.
The New Jersey home builder, one of the nation's largest, closed on more than 200 homes in Tampa Bay as recently as 2014. On Wednesday, the company reported a $16.2 million loss, compared with a $14.4 million loss a year ago. Revenues climbed 29 percent to $575.6 million.
But Hovnanian shares have long been in trouble. Topping $70 in the summer of 2005, shares have trickled south ever since. The stock fell sharply Wednesday after the weak quarterly performance, closing at $1.48, down 15.9 percent.
Hovnanian homes dot the bay area. They can be found at the Grand Cypress on Lake Tarpon development in Palm Harbor, the Reserve at Lake Leclare in Tampa, Terra Bella homes in Land O'Lakes, Riverside Bluffs in Riverview and Union Park in Wesley Chapel. Prices range as high as the $700,000s and as low as the $200,000s. The builder's average price in Florida is in the low $400,000s.
In an SEC filing Wednesday, Hovnanian Enterprises cited debts coming due that, while payable, were motivating the company to improve its liquidity position. Higher costs and thinner profit margins also influenced the company's decision to exit certain geographic markets.
"Looking forward, because we may not be able to refinance our near-term debt maturities, we are shifting our focus from growing our community count and revenues to increasing operating efficiency and profitability while generating positive cash flow from operations to pay debt maturities as they come due," says the company SEC filing.
Translation? It seems the company is overextended and needs to retrench.
Contact Robert Trigaux at [email protected] Follow @ venturetampabay.