Mizel: MDC prepared for growth

Highlights:

  • MDC reports 1st quarter earnings.
  • MDC reported net income of $8.4 million.
  • The average sales price of a home sold by MDC rose $49,000.

 

By John Rebchook

Richmond is building 5 new "eco-friendly" models at Sky View at Candelas at 9412 Noble way in Arvada. Shown is the Darla model, with 3,337-square, feet, 4-berooms, 4-bathrooms, and a 3-car garage. Its base price is $542,950.

Richmond is building 5 new “eco-friendly” models at Sky View at Candelas at 9412 Noble way in Arvada. Shown is the Darla model, with 3,337-square, feet, 4-berooms, 4-bathrooms, and a 3-car garage. Its base price is $542,950.

MDC Holdings Inc, the Denver-based homebuilding company, on Tuesday reported net income of $8.4 million, or 17 cents per share in the first quarter, compared with $11.5 million or 23 percent per share in the first quarter of 2014.

Although that is a 27 percent drop in dollars and a 26 percent drop per share, MDC beat earning estimates by a penny, according to reports.

The homebuilding giant, parent of Richmond American Homes, also said that in the first quarter,compared to first quarter of 2014:

  • Average sales price of a home rose $49,900 per home, or 14 percent, to $414,800;
  • It delivered 909 homes, up from 873;
  • Gross margin from home sales of 15.4 percent, compared with 18.5 percent. The decrease was due partly to higher incentives.
  • Homebuilding interest and other income decreased to $1.9 million compared $13.5 million;
  • The dollar value of net new orders of $666.5 million, an increase of 43 percent;Net new orders of 1,593, up 29 percent;Average monthly absorption rate increased 18 percent;
  • Ending active community count of 166, up 6 percent;
  • Backlog of dollar value of $952.9 million, up 46 percent.
  • And ending backlog units of 2,203, up 36 percent.

“During the first quarter, to start the spring selling season, season, we were pleased to see an overall improvement in homebuilding industry conditions across most of our markets,” said Larry Mizel, CEO and chairman of MDC.

“Our net new orders increased 29 percent year-over-year, driven by increases in both our absorption rate and active community count,” Mizel continued.

“Furthermore, we were able to increase prices in many of our active communities across the country, helping to offset cost increases experienced over the past few quarters,” Mizel continued.

Larry Mizel, the CEO of MDC, was pleased by 1st quarter results and is bullish about the company's prospects.

Larry Mizel, the CEO of MDC, was pleased by 1st quarter results and is bullish about the company’s prospects.

He pointed to progress made by MDC.

“We succeeded in reducing our supply of spec inventory during the quarter, consistent with the objective we outlined in prior periods,” Mizel said.

“By offering increased incentives on aged spec homes, we decreased our spec homes per active community by more than 40 percent year-over-year,” he said.

The incentives, however, came at a cost.

“The additional incentives adversely impacted our gross margin for the first quarter, but the reduction in aged spec inventory was an important step toward improving our gross margin in the future,” Mizel said.

“The dollar value of our quarter-end backlog increased by 46 percent year-over-year, giving us a foundation for solid performance in the coming quarters,” Mizel continued.

The future looks bright for MDC, according to Mizel.

“Looking forward to our prospects further out, we believe we are well prepared for growth, with a strong balance sheet, overall liquidity of $825 million and no senior note maturities until 2020,” Mizel said.

“Although our land acquisition activity has been relatively light over the past couple quarters, we have recently seen an uptick in our pipeline of new proposed land acquisitions, which provides the potential for additional home closings in 2016 and beyond.”

Richmond is by far the largest homebuilder in the Denver area.

Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.

 

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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