##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 0-7616
 AVATAR HOLDINGS INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    
    
    23-1739078(State or other Jurisdiction of Incorporation or Organization)
    
    
    
    (I.R.S. Employer Identification No.)
 201 Alhambra Circle, Coral Gables, Florida
    
    33134(Address of Principal Executive Offices)
    
    (Zip Code)
 (305) 442-7000
(Registrants telephone number, including area code)
 
 þ o
 o o
  Large accelerated filer: o
    
    Accelerated filer: þ
    
    Non-accelerated filer:
    
    Smaller reporting company: o
 o þ




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##### 



AVATAR HOLDINGS INC. AND SUBSIDIARIES
 INDEX
 PAGEPART I.
    
    Financial Information
    
    
    3Item 1.
    
    Financial Statements (Unaudited):
    
    
    3Consolidated Balance Sheets September 30, 2010 and December 31, 2009
    
    
    3Consolidated Statements of Operations Nine and three months ended September 30, 2010 and 2009
    
    
    4Consolidated Statements of Cash Flows Nine months ended September 30, 2010 and 2009
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    41Item 4.
    
    Controls and Procedures
    
    
    41PART II.
    
    Other InformationItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 6.
    
    Exhibits
    
    
    43EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I   FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 AVATAR HOLDINGS INC. AND SUBSIDIARIES
 September 30,
    
    
    December 31,2010
    
    
    2009AssetsCash and cash equivalents
    
    $
    148,149
    
    
    $
    217,132Restricted cash
    
    
    23,272
    
    
    
    699Receivables, net
    
    
    6,286
    
    
    
    6,656Income tax receivable
    
    
    1,766
    
    
    
    35,018Land and other inventories
    
    
    271,312
    
    
    
    264,236Property and equipment, net
    
    
    45,680
    
    
    
    48,010Poinciana Parkway
    
    
    8,452
    
    
    
    8,482Investment in and notes receivable from unconsolidated entities
    
    
    5,104
    
    
    
    5,321Prepaid expenses and other assets
    
    
    7,915
    
    
    
    9,165Total Assets
    
    $
    517,936
    
    
    $
    594,719Liabilities and Stockholders EquityLiabilitiesAccounts payable
    
    $
    1,167
    
    
    $
    2,014Accrued and other liabilities
    
    
    9,093
    
    
    
    5,293Customer deposits and deferred revenues
    
    
    3,044
    
    
    
    2,874Estimated development liability for sold land
    
    
    20,368
    
    
    
    20,417Notes, mortgage notes and other debt:Corporate
    
    
    64,087
    
    
    
    63,010Real estate
    
    
    111
    
    
    
    55,992Total Liabilities
    
    
    97,870
    
    
    
    149,600Commitments and ContingenciesStockholders EquityCommon Stock, par value $1 per shareAuthorized: 50,000,000 sharesIssued: 14,019,792 shares at September 30, 2010
14,013,912 shares at December 31, 2009
    
    
    14,020
    
    
    
    14,014Additional paid-in capital
    
    
    286,852
    
    
    
    286,096Retained earnings
    
    
    197,530
    
    
    
    222,928498,402
    
    
    
    523,038Treasury stock: at cost, 2,658,461 shares at September 30, 2010
and December 31, 2009
    
    
    (78,937
    )
    
    
    (78,937
    )Total Avatar stockholders equity
    
    
    419,465
    
    
    
    444,101Non-controlling interest
    
    
    601
    
    
    
    1,018Total Equity
    
    
    420,066
    
    
    
    445,119Total Liabilities and Stockholders Equity
    
    $
    517,936
    
    
    $
    594,719
  3




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##### Table of Contents



AVATAR HOLDINGS INC. AND SUBSIDIARIES
 Nine Months
    
    
    Three Months2010
    
    
    2009
    
    
    2010
    
    
    2009RevenuesReal estate revenues
    
    $
    35,326
    
    
    $
    48,749
    
    
    $
    9,388
    
    
    $
    16,737Interest income
    
    
    401
    
    
    
    522
    
    
    
    147
    
    
    
    144Other
    
    
    771
    
    
    
    3,683
    
    
    
    38
    
    
    
    1,371Total revenues
    
    
    36,498
    
    
    
    52,954
    
    
    
    9,573
    
    
    
    18,252ExpensesReal estate expenses
    
    
    45,224
    
    
    
    61,254
    
    
    
    13,530
    
    
    
    21,736Impairment charges
    
    
    204
    
    
    
    2,008
    
    
    
    36
    
    
    
    332General and administrative expenses
    
    
    12,641
    
    
    
    12,924
    
    
    
    4,796
    
    
    
    3,913Interest expense
    
    
    4,288
    
    
    
    5,182
    
    
    
    1,126
    
    
    
    1,632Total expenses
    
    
    62,357
    
    
    
    81,368
    
    
    
    19,488
    
    
    
    27,613Equity losses from unconsolidated entities
    
    
    (331
    )
    
    
    (215
    )
    
    
    (124
    )
    
    
    (67
    )Loss before income taxes
    
    
    (26,190
    )
    
    
    (28,629
    )
    
    
    (10,039
    )
    
    
    (9,428
    )Income tax benefit
    
    
    375
    
    
    
    1,447
    
    
    
    375
    
    
    
    617Net loss (including net loss attributable to
non-controlling interests)
    
    
    (25,815
    )
    
    
    (27,182
    )
    
    
    (9,664
    )
    
    
    (8,811
    )Less: Net loss attributable to non-controlling interests
    
    
    (417
    )
    
    
    
    
    
    
    (145
    )
    
    
    Net loss attributable to Avatar
    
    
    ($25,398
    )
    
    
    ($27,182
    )
    
    
    ($9,519
    )
    
    
    ($8,811
    )Basic and Diluted Loss Per Share
    
    
    ($2.26
    )
    
    
    ($3.13
    )
    
    
    ($0.84
    )
    
    
    ($1.01
    )
  4




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AVATAR HOLDINGS INC. AND SUBSIDIARIES
 2010
    
    
    2009OPERATING ACTIVITIESNet loss (including net loss attributable to non-controlling interests)
    
    
    ($25,815
    )
    
    
    ($27,182
    )Adjustments to reconcile net loss to
net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    3,562
    
    
    
    4,066Amortization of stock-based compensation
    
    
    763
    
    
    
    1,455Impairment of land and other inventories
    
    
    204
    
    
    
    1,560Impairment of the Poinciana Parkway
    
    
    
    
    
    
    448Gain from repurchase of 4.50% Notes
    
    
    
    
    
    
    (1,783
    )Return of earnings from an unconsolidated entity
    
    
    (32
    )
    
    
    (148
    )Equity losses from unconsolidated entities
    
    
    331
    
    
    
    215Deferred income taxes
    
    
    
    
    
    
    2,005Changes in operating assets and liabilities:Restricted cash
    
    
    (22,573
    )
    
    
    176Receivables, net
    
    
    370
    
    
    
    (1,097
    )Income tax receivable
    
    
    33,252
    
    
    
    17,899Land and other inventories
    
    
    (7,483
    )
    
    
    15,735Prepaid expenses and other assets
    
    
    1,250
    
    
    
    2,375Accounts payable and accrued and other liabilities
    
    
    3,030
    
    
    
    2,418Customer deposits and deferred revenues
    
    
    170
    
    
    
    (1,136
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    (12,971
    )
    
    
    17,006INVESTING ACTIVITIESInvestment in property and equipment
    
    
    (79
    )
    
    
    (46
    )Return from (investment in) Poinciana Parkway
    
    
    30
    
    
    
    (342
    )Investment in unconsolidated entities
    
    
    (82
    )
    
    
    (7
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (131
    )
    
    
    (395
    )FINANCING ACTIVITIESRepurchase of 4.50% Notes
    
    
    
    
    
    
    (11,627
    )Principal payments of real estate borrowings
    
    
    (55,881
    )
    
    
    (109
    )Net proceeds from issuance of common stock
    
    
    
    
    
    
    38,276NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (55,881
    )
    
    
    26,540INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (68,983
    )
    
    
    43,151Cash and cash equivalents at beginning of period
    
    
    217,132
    
    
    
    175,396CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    148,149
    
    
    $
    218,547
  5




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AVATAR HOLDINGS INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements (Unaudited)  September 30, 2010
(Dollars in thousands except share and per share data)
 Basis of Financial Statement Presentation and Summary of Significant Accounting Policies
     Reclassifications
  Subsequent Events
 JEN Transaction
  6




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Subsequent Events
  Arizona Assets
 
    
    CantaMia- a 1,781-unit active adult community located in the Estrella Mountain Ranch
Master Plan Community in Goodyear, Arizona. CantaMia is composed of three phases. On October
25, 2010, we acquired phase 1 consisting of 593 partially or fully developed lots, 29 houses
under construction, a partially completed recreation center and a fully finished sales
center; and an option for phases 2 and 3 consisting of 1,138 undeveloped lots. The option
price for phases 2 and 3 approximates $9,600, of which $1,000 is due
by December 15, 2010.
    
    Various Arizona Properties- includes 99 developed or fully developed lots, 15 houses
completed or under construction and 16 developed lots which we have an option to acquire.
    
    Joseph Carl Homes, LLC- a Phoenix-based private home builder and the developer of
CantaMia.
 Florida Assets:
 
    
    Sharpe properties- 445 acres located in Orange County, Florida, comprised of 839 partially
developed single-family and townhome lots, a multi-family tract, and a two acre commercial
site.
   Changes in Management and the Board of Directors
     7




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Cash and Cash Equivalents and Restricted Cash
   Income Tax Receivable
  Land and Other Inventories
  Property, Plant and Equipment
   8




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Land and Other Inventories  continued
    Primary Residential Communities
  Active Adult Communities
  9




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Land and Other Inventories  continued
  Housing communities:
   Land developed and/or held for future development or sale:
  10




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Land and Other Inventories  continued
  September 30,
    
    
    December 31,2010
    
    
    2009Land developed and in process of development
    
    $
    143,363
    
    
    $
    136,578Land held for future development or sale
    
    
    104,331
    
    
    
    98,818Homes completed or under construction
    
    
    22,614
    
    
    
    27,971Other
    
    
    1,004
    
    
    
    869$
    271,312
    
    
    $
    264,236
  Property and Equipment
   11




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Poinciana Parkway
      12




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Poinciana Parkway  continued
  Notes, Mortgage Notes and Other Debt
    13




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Notes, Mortgage Notes and Other Debt  continued
 Debt with Conversion
Options  Cash Conversion
  September 30,
    
    
    December 31,2010
    
    
    20094.50% NotesPrincipal amount
    
    $
    64,804
    
    
    $
    64,804Unamortized discount
    
    
    (717
    )
    
    
    (1,794
    )Net carrying amount
    
    $
    64,087
    
    
    $
    63,010Equity Component, net of income tax benefit
    
    $
    13,737
    
    
    $
    13,737
      14




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Notes, Mortgage Notes and Other Debt  continued
 Nine Months
    
    
    Three Months2010
    
    
    2009
    
    
    2010
    
    
    2009Interest incurred
    
    $
    4,386
    
    
    $
    5,502
    
    
    $
    1,167
    
    
    $
    1,693Interest capitalized
    
    
    (98
    )
    
    
    (320
    )
    
    
    (41
    )
    
    
    (61
    )Interest expense
    
    $
    4,288
    
    
    $
    5,182
    
    
    $
    1,126
    
    
    $
    1,632
  Warranty Costs
   Nine Months
    
    
    Three Months2010
    
    
    2009
    
    
    2010
    
    
    2009Accrued warranty reserve, beginning of period
    
    $
    458
    
    
    $
    468
    
    
    $
    484
    
    
    $
    513Estimated warranty expense
    
    
    319
    
    
    
    541
    
    
    
    62
    
    
    
    204Amounts charged against warranty reserve
    
    
    (345
    )
    
    
    (524
    )
    
    
    (114
    )
    
    
    (232
    )Accrued warranty reserve, end of period
    
    $
    432
    
    
    $
    485
    
    
    $
    432
    
    
    $
    485
 Loss Per Share
 Earnings Per Share.
  15




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Loss Per Share  continued
  Nine Months
    
    
    Three Months2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Basic and diluted loss per share  net loss
    
    
    ($25,398
    )
    
    
    ($27,182
    )
    
    
    ($9,519
    )
    
    
    ($8,811
    )Denominator:Basic and diluted weighted average shares
outstanding
    
    
    11,254,591
    
    
    
    8,680,873
    
    
    
    11,272,437
    
    
    
    8,733,183
 Repurchase of Common Stock
  Non-controlling Interest
  Comprehensive Loss
  16




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Share-Based Payments and Other Executive Compensation
     Income Taxes
  Income Taxes
   17




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Income Taxes  continued
   Fair Value Disclosures
 Fair Value Measurements and Disclosures
 Fair Value Measurements and Disclosures  Overall  Transition and Open
Effective Date Information Fair Value Measurements and Disclosures  Overall
  Level 1:
    
    Fair value determined based on quoted market prices in active markets for
identical assets and liabilities.Level 2:
    
    Fair value determined using significant observable inputs, such as quoted
prices for similar assets or liabilities or quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices
that are observable for the asset or liability, or inputs that are derived principally
from or corroborated by observable market data, by correlation or other means.Level 3:
    
    Fair value determined using significant unobservable inputs, such as
discounted cash flows, or similar techniques.
   18




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Fair Value Disclosures  continued
  Fair Value
    
    Fair Value atNon-financial Assets
    
    Hierarchy
    
    September 30, 2010
    
    LossesHomes completed or under construction
    
    Level 2
    
    $
    1,629
    
    
    $
    36
  September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueCash and cash equivalents
    
    $
    148,149
    
    
    $
    148,149
    
    
    $
    217,132
    
    
    $
    217,132Restricted cash
    
    $
    23,272
    
    
    $
    23,272
    
    
    $
    699
    
    
    $
    699Receivables, net
    
    $
    6,286
    
    
    $
    6,286
    
    
    $
    6,656
    
    
    $
    6,656Income tax receivable
    
    $
    1,766
    
    
    $
    1,766
    
    
    $
    35,018
    
    
    $
    35,018Notes, mortgage notes and other debt:Corporate:4.50% Notes
    
    $
    64,087
    
    
    $
    64,966
    
    
    $
    63,010
    
    
    $
    61,969Real estate:5.50% Term Bonds payable
    
    $
    111
    
    
    $
    110
    
    
    $
    111
    
    
    $
    105Amended Unsecured Credit Facility
    
    $
    
    
    
    $
    
    
    
    $
    55,881
    
    
    $
    54,750
  Cash and cash equivalents and Restricted cash:
 Receivables, net and Income tax receivable:
 4.50% Notes:
 Real Estate Notes Payable:
 19




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Variable Interest Entities
 Consolidation
  Consolidation of Variable Interest Entities
     Unconsolidated Variable Interest Entities
   20




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Variable Interest Entities  continued
    September 30,
    
    
    December 31,2010
    
    
    2009Assets:Cash
    
    $
    255
    
    
    $
    243Land and other inventory
    
    
    11,574
    
    
    
    11,573Other assets
    
    
    
    
    
    
    25Total assets
    
    $
    11,829
    
    
    $
    11,841Liabilities and Partners Capital:Accounts payable and accrued liabilities
    
    $
    1,462
    
    
    $
    893Notes and interest payable to Avatar
    
    
    3,724
    
    
    
    3,724Partners Capital of:Avatar
    
    
    1,380
    
    
    
    1,597Equity partner
    
    
    5,263
    
    
    
    5,627Total liabilities and partners capital
    
    $
    11,829
    
    
    $
    11,841
  Nine Months
    
    
    Three Months2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    6
    
    
    $
    43
    
    
    $
    1
    
    
    $
    12Costs and expenses
    
    
    967
    
    
    
    578
    
    
    
    340
    
    
    
    181Net loss from unconsolidated entities
    
    
    ($961
    )
    
    
    ($535
    )
    
    
    ($339
    )
    
    
    ($169
    )Avatars share of loss from unconsolidated entities
    
    
    ($331
    )
    
    
    ($215
    )
    
    
    ($124
    )
    
    
    ($67
    )
 21




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Recently Issued Accounting Pronouncements
  Estimated Development Liability for Sold Land
  September 30,
    
    
    December 31,2010
    
    
    2009Gross estimated unexpended costs
    
    $
    26,277
    
    
    $
    26,389Less costs relating to unsold homesites
    
    
    (5,909
    )
    
    
    (5,972
    )Estimated development liability for sold land
    
    $
    20,368
    
    
    $
    20,417
  Commitments and Contingencies
 Loss
Contingencies .
  22




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data)  (Unaudited)  continued
 Financial Information Relating To Reportable Segments
  Nine Months
    
    
    Three Months2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Segment revenuesPrimary residential
    
    $
    9,788
    
    
    $
    20,055
    
    
    $
    1,473
    
    
    $
    8,215Active adult communities
    
    
    23,987
    
    
    
    25,929
    
    
    
    6,934
    
    
    
    8,253Commercial and industrial and other land sales
    
    
    787
    
    
    
    2,071
    
    
    
    764
    
    
    
    7Other operations
    
    
    708
    
    
    
    873
    
    
    
    109
    
    
    
    34235,270
    
    
    
    48,928
    
    
    
    9,280
    
    
    
    16,817Unallocated revenuesInterest income
    
    
    401
    
    
    
    522
    
    
    
    147
    
    
    
    144Gain on repurchase of 4.50% Notes
    
    
    
    
    
    
    1,783
    
    
    
    
    
    
    
    Other
    
    
    827
    
    
    
    1,721
    
    
    
    146
    
    
    
    1,291Total revenues
    
    $
    36,498
    
    
    $
    52,954
    
    
    $
    9,573
    
    
    $
    18,252Operating income (loss):Segment operating income (loss)Primary residential
    
    
    ($3,771
    )
    
    
    ($6,230
    )
    
    
    ($1,268
    )
    
    
    ($1,971
    )Active adult communities
    
    
    (3,280
    )
    
    
    (3,782
    )
    
    
    (1,802
    )
    
    
    (1,529
    )Commercial and industrial and other land sales
    
    
    28
    
    
    
    1,929
    
    
    
    55
    
    
    
    (58
    )Other operations
    
    
    178
    
    
    
    203
    
    
    
    (92
    )
    
    
    98(6,845
    )
    
    
    (7,880
    )
    
    
    (3,107
    )
    
    
    (3,460
    )Unallocated income (expenses)Interest income
    
    
    401
    
    
    
    522
    
    
    
    147
    
    
    
    144Gain on repurchase of 4.50% Notes
    
    
    
    
    
    
    1,783
    
    
    
    
    
    
    
    Equity loss from unconsolidated entities
    
    
    (331
    )
    
    
    (215
    )
    
    
    (124
    )
    
    
    (67
    )General and administrative expenses
    
    
    (12,641
    )
    
    
    (12,924
    )
    
    
    (4,796
    )
    
    
    (3,913
    )Interest expense
    
    
    (4,288
    )
    
    
    (5,182
    )
    
    
    (1,126
    )
    
    
    (1,632
    )Other real estate expenses
    
    
    (2,486
    )
    
    
    (4,285
    )
    
    
    (1,033
    )
    
    
    (500
    )Impairment of the Poinciana Parkway
    
    
    
    
    
    
    (448
    )
    
    
    
    
    
    
    Loss before income taxes
    
    
    ($26,190
    )
    
    
    ($28,629
    )
    
    
    ($10,039
    )
    
    
    ($9,428
    )
 23




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (dollars in thousands except share and per share data)
    EXECUTIVE SUMMARY
    24




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 EXECUTIVE
SUMMARY  continued
   Subsequent Events
 JEN Transaction
   Arizona Assets
 
    
    CantaMia- a 1,781-unit active adult community located in the Estrella Mountain Ranch
Master Plan Community in Goodyear, Arizona. CantaMia is composed of three phases. On October
25, 2010, we acquired phase 1 consisting of 593 partially or fully developed lots, 29 houses
under construction, a partially completed recreation center and a fully finished sales
center; and an option for phases 2 and 3 consisting of 1,138 undeveloped lots. The option
price for phases 2 and 3 approximates $9,600, of which
$1,000 is due
by December 15, 2010.
    
    Various Arizona Properties- includes 99 developed or fully developed lots, 15 houses
completed or under construction and 16 developed lots which we have an option to acquire.
    
    Joseph Carl Homes, LLC- a Phoenix-based private home builder and the developer of
CantaMia.
 Florida Assets:
 
    
    Sharpe properties- 445 acres located in Orange County, Florida, comprised of 839 partially
developed single-family and townhome lots, a multi-family tract, and a two acre commercial
site.
  25




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (dollars in thousands except share and per share data)  continued
 EXECUTIVE
SUMMARY  continued
 Subsequent Events  continued
  Changes in Management and the Board of Directors
     Land Inventory
   26




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (dollars in thousands except share and per share data)  continued
 EXECUTIVE
SUMMARY  continued
 Land Inventory  continued
  Estimated Planned Lots/Units (1)Acquisition
    
    Contract
    
    
    
    
    
    Partially
    
    
    
    
    
    
    
    
    
    
    BookDate
    
    Date
    
    Developed
    
    
    Developed
    
    
    Raw (2)
    
    
    Total
    
    
    ValueResidentialOsceola County, FloridaPre-1980
    
    
    
    
    200
    
    
    
    
    
    
    
    2,200
    
    
    
    2,400
    
    
    $
    5,1841999-2001
    
    
    
    
    500
    
    
    
    700
    
    
    
    
    
    
    
    1,200
    
    
    
    44,9682003
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    7,8802004
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    1,400
    
    
    
    1,400
    
    
    
    19,3072006
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    1,600
    
    
    
    19,2812010
    
    2010
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    7,281Total Osceola County
    
    
    
    
    1,100
    
    
    
    700
    
    
    
    6,200
    
    
    
    8,000
    
    
    
    103,901Polk County, FloridaPre-1980
    
    
    
    
    900
    
    
    
    1,000
    
    
    
    2,400
    
    
    
    4,300
    
    
    
    21,0002003
    
    2002-2003
    
    
    900
    
    
    
    
    
    
    
    100
    
    
    
    1,000
    
    
    
    30,4222004
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    2,500
    
    
    
    19,966Total Polk County
    
    
    
    
    1,800
    
    
    
    1,000
    
    
    
    5,000
    
    
    
    7,800
    
    
    
    71,388St. Lucie County, Florida2009
    
    2009
    
    
    267
    
    
    
    364
    
    
    
    400
    
    
    
    1,031
    
    
    
    2,582Hernando County, Florida2004-2005
    
    2003
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    30Collier and Lee County, FloridaPre-1980
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    187Highlands County, FloridaPre-1980
    
    
    
    
    40
    
    
    
    
    
    
    
    40
    
    
    
    80
    
    
    
    102Santa Cruz County,(Rio Rico), ArizonaPre-1980
    
    
    
    
    600
    
    
    
    300
    
    
    
    3,700
    
    
    
    4,600
    
    
    
    10,361Pinal County, Arizona2010
    
    2010
    
    
    
    
    
    
    
    
    
    
    1,064
    
    
    
    1,064
    
    
    
    5,802Pima County, Arizona2009
    
    2009
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    3,765Total Residential
    
    
    
    
    3,943
    
    
    
    2,369
    
    
    
    16,404
    
    
    
    22,716
    
    
    $
    198,118
 Estimated Planned Lots/Units (1)Acquisition
    
    Contract
    
    
    
    
    
    Partially
    
    
    
    
    
    
    
    
    
    
    BookDate
    
    Date
    
    Developed
    
    
    Developed
    
    
    Raw (2)
    
    
    Total
    
    
    ValueConsolidated LLCs(4)Polk County, Florida2005
    
    2004
    
    
    200
    
    
    
    
    
    
    
    300
    
    
    
    500
    
    
    $
    1,774Martin
County, Florida1981-1987
    
    
    
    
    75
    
    
    
    
    
    
    
    200
    
    
    
    275
    
    
    
    1,666Total Consolidated LLCs
    
    
    275
    
    
    
    
    
    
    
    500
    
    
    
    775
    
    
    $
    3,440
 27




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except share and per share data)  continued
 EXECUTIVE
SUMMARY  continued
 Land Inventory  continued
 Acquisition
    
    Contract
    
    Estimated
    
    
    BookDate
    
    Date
    
    Acres
    
    
    ValueCommercial/Industrial/InstitutionalFloridaPre-1980
    
    
    
    
    1,300
    
    
    $
    7,0422004 (3)
    
    2004
    
    
    300
    
    
    
    14,8042005 (3)
    
    2004
    
    
    400
    
    
    
    15,996Total Florida
    
    
    
    
    2,000
    
    
    
    37,842ArizonaPre-1980
    
    
    
    
    200
    
    
    
    273Total Commercial/Industrial/Institutional
    
    
    2,200
    
    
    $
    38,115OtherPreserves, wetlands, open spacePre-1980
    
    
    
    
    
    
    
    
    3,175Other
    
    
    
    
    
    
    
    
    4,846Total Other
    
    
    
    
    
    
    
    $
    8,021
 
 (1)
    
    Estimated planned lots/units are based on historical densities for our land. New projects
may ultimately be developed into more or less than the number of lots/units stated.(2)
    
    We anticipate that with respect to our inventory of undeveloped land, new lots developed
over the next several years are likely to be developed at greater density per acre than the
density per acre we have undertaken over the past several years. We anticipate evolving
market demand for smaller, less amenitized and/or more affordable homes. Accordingly, the
number of lots we ultimately develop per acre from our inventory of raw land may exceed the
units set forth in this schedule.(3)
    
    During the fourth quarter 2008, our plans for this property changed from developing it as
single family housing to permitting as commercial/industrial/institutional land.(4)
    
    These landholdings were sold during 2009 to two newly formed LLCs in which we own a
minority interest. These LLCs are consolidated for accounting purposes. As a result, the
transactions did not qualify as sales for financial reporting purposes. 28




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 EXECUTIVE
SUMMARY  continued
    29




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 RESULTS OF OPERATIONS
  Nine Months
    
    
    Three Months2010
    
    
    2009
    
    
    2010
    
    
    2009Operating income (loss):Primary residentialRevenues
    
    $
    9,788
    
    
    $
    20,055
    
    
    $
    1,473
    
    
    $
    8,215Expenses
    
    
    13,559
    
    
    
    26,285
    
    
    
    2,741
    
    
    
    10,186Segment operating loss
    
    
    (3,771
    )
    
    
    (6,230
    )
    
    
    (1,268
    )
    
    
    (1,971
    )Active adult communitiesRevenues
    
    
    23,987
    
    
    
    25,929
    
    
    
    6,934
    
    
    
    8,253Expenses
    
    
    27,267
    
    
    
    29,711
    
    
    
    8,736
    
    
    
    9,782Segment operating loss
    
    
    (3,280
    )
    
    
    (3,782
    )
    
    
    (1,802
    )
    
    
    (1,529
    )Commercial and industrial and other land salesRevenues
    
    
    787
    
    
    
    2,071
    
    
    
    764
    
    
    
    7Expenses
    
    
    759
    
    
    
    142
    
    
    
    709
    
    
    
    65Segment operating income
    
    
    28
    
    
    
    1,929
    
    
    
    55
    
    
    
    (58
    )Other operationsRevenues
    
    
    708
    
    
    
    873
    
    
    
    109
    
    
    
    342Expenses
    
    
    530
    
    
    
    670
    
    
    
    201
    
    
    
    244Segment operating income (loss)
    
    
    178
    
    
    
    203
    
    
    
    (92
    )
    
    
    98Operating income (loss)
    
    
    (6,845
    )
    
    
    (7,880
    )
    
    
    (3,107
    )
    
    
    (3,460
    )Unallocated income (expenses):Interest income
    
    
    401
    
    
    
    522
    
    
    
    147
    
    
    
    144Gain on repurchase of 4.50% Notes
    
    
    
    
    
    
    1,783
    
    
    
    
    
    
    
    Equity loss from unconsolidated entities
    
    
    (331
    )
    
    
    (215
    )
    
    
    (124
    )
    
    
    (67
    )General and administrative expenses
    
    
    (12,641
    )
    
    
    (12,924
    )
    
    
    (4,796
    )
    
    
    (3,913
    )Interest expense
    
    
    (4,288
    )
    
    
    (5,182
    )
    
    
    (1,126
    )
    
    
    (1,632
    )Other real estate expenses
    
    
    (2,486
    )
    
    
    (4,285
    )
    
    
    (1,033
    )
    
    
    (500
    )Impairment of the Poinciana Parkway
    
    
    
    
    
    
    (448
    )
    
    
    
    
    
    
    Loss before income taxes
    
    
    (26,190
    )
    
    
    (28,629
    )
    
    
    (10,039
    )
    
    
    (9,428
    )Income tax benefit
    
    
    375
    
    
    
    1,447
    
    
    
    375
    
    
    
    617Net loss attributable to non-controlling interests
    
    
    (417
    )
    
    
    
    
    
    
    (145
    )
    
    
    Net loss
    
    
    ($25,398
    )
    
    
    ($27,182
    )
    
    
    ($9,519
    )
    
    
    ($8,811
    )
 30




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Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 RESULTS OF OPERATIONS  continued
  Number of
    
    
    
    
    
    
    Average PriceUnits
    
    
    Revenues
    
    
    Per UnitFor the nine months ended September 30,2010Primary residential
    
    
    39
    
    
    $
    7,966
    
    
    $
    204Active adult communities
    
    
    82
    
    
    
    15,337
    
    
    $
    187Total
    
    
    121
    
    
    $
    23,303
    
    
    $
    1932009Primary residential
    
    
    109
    
    
    $
    17,837
    
    
    $
    164Active adult communities
    
    
    71
    
    
    
    17,420
    
    
    $
    245Total
    
    
    180
    
    
    $
    35,257
    
    
    $
    196For the three months ended September 30,2010Primary residential
    
    
    4
    
    
    $
    854
    
    
    $
    214Active adult communities
    
    
    22
    
    
    
    4,244
    
    
    $
    193Total
    
    
    26
    
    
    $
    5,098
    
    
    $
    1962009Primary residential
    
    
    53
    
    
    $
    7,582
    
    
    $
    143Active adult communities
    
    
    23
    
    
    
    5,620
    
    
    $
    244Total
    
    
    76
    
    
    $
    13,202
    
    
    $
    174
 31




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Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 RESULTS OF OPERATIONS  continued
  GrossNumber of
    
    
    
    
    
    
    Contracts
    
    
    
    
    
    
    AverageContracts
    
    
    
    
    
    
    Signed, Net of
    
    
    
    
    
    
    Price PerSigned
    
    
    Cancellations
    
    
    Cancellations
    
    
    Dollar Value
    
    
    UnitFor the nine months ended September 30,2010Primary residential
    
    
    37
    
    
    
    (8
    )
    
    
    29
    
    
    $
    6,974
    
    
    $
    240Active adult communities
    
    
    106
    
    
    
    (15
    )
    
    
    91
    
    
    
    17,531
    
    
    $
    193Total
    
    
    143
    
    
    
    (23
    )
    
    
    120
    
    
    $
    24,505
    
    
    $
    2042009Primary residential
    
    
    148
    
    
    
    (25
    )
    
    
    123
    
    
    $
    19,926
    
    
    $
    162Active adult communities
    
    
    50
    
    
    
    (9
    )
    
    
    41
    
    
    
    8,247
    
    
    $
    201Total
    
    
    198
    
    
    
    (34
    )
    
    
    164
    
    
    $
    28,173
    
    
    $
    172For the three months ended September 30,2010Primary residential
    
    
    3
    
    
    
    (1
    )
    
    
    2
    
    
    $
    582
    
    
    $
    291Active adult communities
    
    
    28
    
    
    
    (8
    )
    
    
    20
    
    
    
    3,138
    
    
    $
    157Total
    
    
    31
    
    
    
    (9
    )
    
    
    22
    
    
    $
    3,720
    
    
    $
    1692009Primary residential
    
    
    40
    
    
    
    (6
    )
    
    
    34
    
    
    $
    5,420
    
    
    $
    159Active adult communities
    
    
    9
    
    
    
    (1
    )
    
    
    8
    
    
    
    1,557
    
    
    $
    195Total
    
    
    49
    
    
    
    (7
    )
    
    
    42
    
    
    $
    6,977
    
    
    $
    166
  Number of
    
    
    
    
    
    
    Average PriceUnits
    
    
    Dollar Volume
    
    
    Per UnitAs of September 30,2010Primary residential
    
    
    6
    
    
    $
    2,230
    
    
    $
    372Active adult communities
    
    
    18
    
    
    
    4,441
    
    
    $
    247Total
    
    
    24
    
    
    $
    6,671
    
    
    $
    2782009Primary residential
    
    
    30
    
    
    $
    6,690
    
    
    $
    223Active adult communities
    
    
    10
    
    
    
    2,305
    
    
    $
    231Total
    
    
    40
    
    
    $
    8,995
    
    
    $
    225
 32




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Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 RESULTS OF OPERATIONS  continued
      33




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 RESULTS OF OPERATIONS  continued
       34




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 RESULTS OF OPERATIONS  continued
      35




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 LIQUIDITY AND CAPITAL RESOURCES
        36




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 LIQUIDITY AND CAPITAL RESOURCES  continued
    Debt with Conversion
Options  Cash Conversion
 37




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 LIQUIDITY AND CAPITAL RESOURCES  continued
  September 30,
    
    
    December 31,2010
    
    
    20094.50% NotesPrincipal amount
    
    $
    64,804
    
    
    $
    64,804Unamortized discount
    
    
    (717
    )
    
    
    (1,794
    )Net carrying amount
    
    $
    64,087
    
    
    $
    63,010Equity Component, net of income tax benefit
    
    $
    13,737
    
    
    $
    13,737
      38




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##### Table of Contents



Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations  (dollars in thousands except
share and per share data)  continued
 LIQUIDITY AND CAPITAL RESOURCES  continued
      39




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (dollars in thousands except share and per share data)  continued
 LIQUIDITY AND CAPITAL RESOURCES  continued
     CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Consolidation
 40




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4. Controls and Procedures
   41




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (dollars in thousands except share and per share data)
 Repurchases of Equity Securities
  Total Number ofShares
    
    
    Maximum AmountPurchased as
    
    
    That May YetPart of a
    
    
    Be PurchasedTotal Number
    
    
    Average
    
    
    Publicly
    
    
    Under the Planof Shares
    
    
    Price Paid
    
    
    Announced Plan
    
    
    or Program (1)Purchased
    
    
    Per Share
    
    
    or Program (1)PeriodJuly 1, 2010 to July 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,304August 1, 2010 to August 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,304September 1, 2010 to September 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,304Total
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    On October 13, 2008, our Board of Directors amended its June 2005 authorization to
purchase the 4.50% Notes and/or common stock to allow expenditures up to $30,000, including
the $9,864 previously authorized. On October 17, 2008, we repurchased $35,920 principal
amount of the 4.50% Notes for approximately $28,112 including accrued interest. On December
12, 2008, our Board of Directors amended its June 2005 authorization to purchase the 4.50%
Notes and/or common stock to allow expenditures up to $30,000, including the $1,888
remaining after the October 2008 activities. On March 30, 2009, we repurchased $7,500
principal amount of the 4.50% Notes for approximately $6,038 including accrued interest. On
June 19, 2009, we repurchased $6,576 principal amount of the 4.50% Notes for approximately
$5,658 including accrued interest. As of September 30, 2010, the remaining authorization is
$18,304. 42




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##### Table of Contents



Item 6.   Exhibits
 10.1
    
    
    Second Amendment to Amended and Restated Employment Agreement dated
August 25, 2010, between Avatar Holdings Inc. and Patricia Kimball
Fletcher (filed as Exhibit 10.1 to Form 8-K dated August 25, 2010
(File No. 0-7616), and incorporated herein by reference).10.2
    
    
    Restricted Stock Unit Agreement dated August 25, 2010, between Avatar
Holdings Inc. and Patricia Kimball Fletcher (filed as Exhibit 10.2 to
Form 8-K dated August 25, 2010 (File No. 0-7616), and incorporated
herein by reference).31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith).31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith).32.1
    
    
    Certification of Chief Executive Officer required by 18 U.S.C.
Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of
2002) (furnished herewith).32.2
    
    
    Certification of Chief Financial Officer required by 18 U.S.C.
Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of
2002) (furnished herewith).
 43




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##### Table of Contents



SIGNATURES
  AVATAR HOLDINGS INC.Date: November 9, 2010
    By:
    /s/ Randy L. KotlerRandy L. KotlerExecutive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer) Date: November 9, 2010
    By:
    /s/ Michael P. RamaMichael P. RamaController and Chief Accounting Officer
(Principal Accounting Officer) 44




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##### Table of Contents



Exhibit Index
 10.1
    
    
    Second Amendment to Amended and Restated Employment Agreement dated
August 25, 2010, between Avatar Holdings Inc. and Patricia Kimball
Fletcher (filed as Exhibit 10.1 to Form 8-K dated August 25, 2010
(File No. 0-7616), and incorporated herein by reference).10.2
    
    
    Restricted Stock Unit Agreement dated August 25, 2010, between Avatar
Holdings Inc. and Patricia Kimball Fletcher (filed as Exhibit 10.2 to
Form 8-K dated August 25, 2010 (File No. 0-7616), and incorporated
herein by reference).31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith).31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith).32.1
    
    
    Certification of Chief Executive Officer required by 18 U.S.C.
Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of
2002) (furnished herewith).32.2
    
    
    Certification of Chief Financial Officer required by 18 U.S.C.
Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of
2002) (furnished herewith).
  45