SPF Inflating Asset Values?
SPF reports the value of homebuilding assets on its books at approximately $2 billion dollars. Most of that value is owned land much of which is located the very challenged markets of CA and FL. We know that owned land has recently been selling for around $0.30 on the dollar. Land values have generally continued to decline since those reported sales.
On slide 11 of SPF's recent Wachovia presentation, SPF indicates that it reduced its owned lots over the past year by 40%. But on the CC, the CEO Steven Scarborough goes out of his way to say that over the past 18 months, SPF has been "we think dilligent in taking impairments on our inventory" impairing about 70% of owned lots.
Why would Mr. Scarborough use an 18 month time frame when on the slide it uses a 12 month bracket. Further, over the past 18 months, hasn't SPF sold 70% of its owned lots. Is it possible that little if any of SPF's current land positions have been impaired?
A similar analysis can be applied to SPF's well over $1 Billion dollars of JV assets on the same slide and Mr. Scarborough comments.
Is potentially failing to impair current owned lots "diligent in taking impairments?" If Mr. Scarborough didn't go out of his way to point out how diligent he was, this wouldn't be an issue. Why is Mr. Scarborogh and the CFO being sued in a class action suit alleging providing false and misleading guidance?
Just to be fair, don't forget a bunch of Wall Street analysts upgraded SPF following its recent quarterly report. Many are using a price to book metrix. Are these guys in a class by themselves, maybe the class action will give us an answer?