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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (57575)	7/12/2006 1:34:11 PM
From: Ramsey Su	Read Replies (2) \| Respond to of 306849

It is very strange indeed. Here are thoughts: Mechanics liens cloud the title immediately, making it virtually impossible to transfer ownership. Why would LEN allow that to happen, knowing full well that is the subs will do if they are not paid? This is a framing contractor. Framing is one of the earliest stages of construction. I suspect the other subs got to know that dispute between their client and the other subs. If I am one of them, there is no way I am going to work on the projects. Why would I want to put myself in the same position as the framing contractor? If these homes are not going to be deliverable, would the buyers be totally off the hook and get their deposits back? Wouldn't that guarantee a spike in canc rate for these projects? Strange. This is painting the picture of a builder that is ready to go down. As bearish as I am, I did not think that LEN is in that position.

To: mishedlo who wrote (57575)	7/12/2006 2:01:13 PM
From: Think4Yourself	Read Replies (1) \| Respond to of 306849

That IS very strange. I agree with Ramsey Su. The framers are one of the first groups in after the concrete/foundation guys. Word about not paying them would get around and the other subs would quickly get suspicious of Lennar management's motives. Lennar obviously doesn't care. OTOH Elroy has a good point. We have only heard one side of the story. Why would Lennar be willing to pay the contractors directly? That suggests, as Elroy pointed out, that they think Veemac is severely overcharging them. They would probably want to keep this quiet, as most companies try to do, but the word is out now. Lennar should be coming out with a statement in the next few days (weeks at most), telling their side of the story if they have a legitimate reason for doing what they did. I am also wondering why other subs continue to work for them if Veemac is telling the whole story. Everyone probably knows something has happened, even if it's just that the contractors haven't been paid. Whatever is going on, Lennar has just risen several notches to become my number one stock of interest. They are doing a lot of things that suggests the company has a serious problem with their senior management.

To: mishedlo who wrote (57575)	7/12/2006 2:56:18 PM
From: jpk1	Read Replies (2) \| Respond to of 306849

Usually one of the bigger progress payments you receive from the lender is when framing is complete. These amounts are typically in excess of what you owe your framing subs and can give you cash flow to keep operating. Often the lender will review your financials and if they see a large drop in orders they may have cut back on future financing. In other words get the money will you still can and hope the market improves. That would be my guess as to whats happening. At the same time by paying the workers directly they are saving the markup by the framing sub. Pay them directly by 1099 in hopes of avoiding insurance and unemployment taxes. If the above scenario is right, the builder must be in big trouble.