All homebuilders are similar only in the fact that they must follow GAAP accounting.
Take a typical Pardee project. You buy the land for $8 million, pay Cal-Trans to add the freeway exchange, build the roads, trunk-line sewer and utilities, terra-form the valley, landscape, and by the time you build the first 20 homes for sale, you are up to $160 million.
The first 20 homes bring in say $7 million with $2.5 million of that being profit.
So GAAP says you earned $7 million, while on a cash basis you are in the hole by $153 million. Now if you were smart, like Pardee, you bought lots of land during the previous down-turn. As you build, you build up a big pile of cash to use during the next down-turn.
But if you're a typical builder, you buy lots of additional land during the upswing - which now costs twenty five-fold as much as it does during a down-turn. So while Pardee is building a large pile of cash, the typical builder is increasing their debt-level precipitously. They build until they file for bankruptcy.
General Lyon has always tried to find ways to enrich himself at the expense of his shareholders. During the last cycle he went from a retired man on a military pension to the richest man in California - and then to a bankrupt few assets apart from his military pension. He's back as the CEO of Presley Development, re-named WLS, and he wants your money.
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