##### 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 1934For the quarterly period ended September 30, 2008ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number0-7616
 AVATAR HOLDINGS INC.
  Delaware(State or other Jurisdiction of Incorporation or Organization)
    
    23-1739078(I.R.S. Employer Identification No.)
 201 Alhambra Circle, Coral Gables, Florida(Address of Principal Executive Offices)
    
    33134(Zip Code)
 Registrants telephone number, including area code (305) 442-7000
 
  x o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
  o x




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##### 



AVATAR HOLDINGS INC. AND SUBSIDIARIES
 INDEX
 PAGEPART I. Financial InformationItem 1. Financial Statements:Consolidated Balance Sheets  September 30, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Operations (Unaudited)  Nine and three months ended September 30, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows (Unaudited)  Nine months ended September 30, 2008 and 2007
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    32PART II. Other InformationItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 6. Exhibits
    
    
    34EX-31.1EX-31.2EX-32.1EX-32.2
 
  2




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PART I   FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 AVATAR HOLDINGS INC. AND SUBSIDIARIES
 (Unaudited)September 30,
    
    
    December 31,2008
    
    
    2007AssetsCash and cash equivalents
    
    $
    156,992
    
    
    $
    192,258Restricted cash
    
    
    1,479
    
    
    
    3,161Receivables, net
    
    
    10,102
    
    
    
    7,269Land and other inventories
    
    
    387,726
    
    
    
    389,457Property and equipment, net
    
    
    55,635
    
    
    
    56,502Poinciana Parkway
    
    
    18,062
    
    
    
    31,793Investment in unconsolidated joint ventures
    
    
    7,923
    
    
    
    8,002Prepaid expenses and other assets
    
    
    15,152
    
    
    
    18,099Deferred tax assets
    
    
    4,651
    
    
    
    Total Assets
    
    $
    657,722
    
    
    $
    706,541Liabilities and Stockholders EquityLiabilitiesAccounts payable
    
    $
    1,510
    
    
    $
    3,882Accrued and other liabilities
    
    
    14,459
    
    
    
    12,041Customer deposits and deferred revenues
    
    
    4,358
    
    
    
    4,916Deferred income taxes
    
    
    
    
    
    
    6,546Estimated development liability for sold land
    
    
    20,895
    
    
    
    20,687Notes, mortgage notes and other debt:Corporate
    
    
    114,800
    
    
    
    114,800Real estate
    
    
    111
    
    
    
    15,966Total Liabilities
    
    
    156,133
    
    
    
    178,838Commitments and ContingenciesStockholders EquityCommon Stock, par value $1 per shareAuthorized: 50,000,000 sharesIssued:  11,101,624 shares at September 30, 200811,076,644 shares at December 31, 2007
    
    
    11,102
    
    
    
    11,077Additional paid-in capital
    
    
    230,258
    
    
    
    227,591Retained earnings
    
    
    336,218
    
    
    
    365,024577,578
    
    
    
    603,692Treasury stock: at cost, 2,551,232 shares at September 30, 2008at cost, 2,551,232 shares at December 31, 2007
    
    
    (75,989
    )
    
    
    (75,989
    )Total Stockholders Equity
    
    
    501,589
    
    
    
    527,703Total Liabilities and Stockholders Equity
    
    $
    657,722
    
    
    $
    706,541
  3




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AVATAR HOLDINGS INC. AND SUBSIDIARIES
 Nine Months
    
    
    Three Months2008
    
    
    2007
    
    
    2008
    
    
    2007RevenuesReal estate revenues
    
    $
    75,179
    
    
    $
    222,951
    
    
    $
    21,533
    
    
    $
    54,423Interest income
    
    
    2,289
    
    
    
    6,349
    
    
    
    639
    
    
    
    2,112Other
    
    
    353
    
    
    
    1,855
    
    
    
    187
    
    
    
    920Total revenues
    
    
    77,821
    
    
    
    231,155
    
    
    
    22,359
    
    
    
    57,455ExpensesReal estate expenses
    
    
    107,595
    
    
    
    181,353
    
    
    
    53,049
    
    
    
    45,631General and administrative expenses
    
    
    15,355
    
    
    
    18,401
    
    
    
    4,372
    
    
    
    5,215Interest expense
    
    
    1,733
    
    
    
    
    
    
    
    782
    
    
    
    Total expenses
    
    
    124,683
    
    
    
    199,754
    
    
    
    58,203
    
    
    
    50,846Equity loss from unconsolidated joint ventures
    
    
    (551
    )
    
    
    (14
    )
    
    
    (89
    )
    
    
    (55
    )Income (loss) before income taxes
    
    
    (47,413
    )
    
    
    31,387
    
    
    
    (35,933
    )
    
    
    6,554Income tax benefit (expense)
    
    
    18,607
    
    
    
    (11,924
    )
    
    
    14,223
    
    
    
    (3,470
    )Net income (loss)
    
    
    ($28,806
    )
    
    $
    19,463
    
    
    
    ($21,710
    )
    
    $
    3,084Basic Earnings (Loss) Per Share
    
    
    ($3.37
    )
    
    $
    2.35
    
    
    
    ($2.54
    )
    
    $
    0.37Diluted Earnings (Loss) Per Share
    
    
    ($3.37
    )
    
    $
    1.98
    
    
    
    ($2.54
    )
    
    $
    0.35
  4




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AVATAR HOLDINGS INC. AND SUBSIDIARIES
 2008
    
    
    2007OPERATING ACTIVITIESNet income (loss)
    
    
    ($28,806
    )
    
    $
    19,463Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    2,910
    
    
    
    2,744Amortization of stock-based compensation
    
    
    2,246
    
    
    
    2,802Impairment of the Poinciana Parkway
    
    
    27,228
    
    
    
    Impairment of land and other inventories
    
    
    
    
    
    
    2,000Distributions (return) of earnings from an unconsolidated joint venture
    
    
    (132
    )
    
    
    (55
    )Equity loss from unconsolidated joint ventures
    
    
    551
    
    
    
    14Deferred income taxes
    
    
    (11,199
    )
    
    
    2,292Excess income tax benefit from exercise of stock options and restricted stock units
    
    
    2
    
    
    
    (1,897
    )Changes in operating assets and liabilities:Restricted cash
    
    
    1,682
    
    
    
    34Receivables, net
    
    
    (2,833
    )
    
    
    9,247Land and other inventories
    
    
    949
    
    
    
    13,132Prepaid expenses and other assets
    
    
    2,947
    
    
    
    719Accounts payable and accrued and other liabilities
    
    
    526
    
    
    
    (26,667
    )Customer deposits and deferred revenues
    
    
    (558
    )
    
    
    (9,586
    )NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
    
    
    (4,487
    )
    
    
    14,242INVESTING ACTIVITIESInvestment in property and equipment
    
    
    (1,836
    )
    
    
    (5,655
    )Investment
in Poinciana Parkway
    
    
    (13,497
    )
    
    
    (21,943
    )Investment in unconsolidated joint ventures
    
    
    (37
    )
    
    
    (136
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (15,370
    )
    
    
    (27,734
    )FINANCING ACTIVITIESPrincipal payments of real estate borrowings
    
    
    (15,855
    )
    
    
    (690
    )Proceeds from exercise of stock options
    
    
    500
    
    
    
    2,100Excess income tax benefit from exercise of stock options and restricted stock units
    
    
    (2
    )
    
    
    1,897Payment of withholding taxes related to restricted stock units withheld
    
    
    (52
    )
    
    
    (580
    )Purchase of treasury stock
    
    
    
    
    
    
    (965
    )NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
    
    
    (15,409
    )
    
    
    1,762DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (35,266
    )
    
    
    (11,730
    )Cash and cash equivalents at beginning of period
    
    
    192,258
    
    
    
    203,760CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    156,992
    
    
    $
    192,030SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIESConversion of 4.50% Notes into Equity
    
    $
    
    
    
    $
    200
  5




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AVATAR HOLDINGS INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements (Unaudited)  September 30, 2008
(Dollars in thousands except share and per share data)
 Basis of Financial Statement Presentation and Summary of Significant Accounting Policies
     Reclassifications
  Land and Other Inventories
  6




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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
 Accounting for
the Impairment or Disposal of Long-Lived Assets ,
   Housing communities:
 Disclosure about Segments of an
Enterprise and Related Information.
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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
 Land held for future development or sale:
  September 30,2008
    
    
    December 31,(Unaudited)
    
    
    2007Land developed and in process of development
    
    $
    230,219
    
    
    $
    229,526Land held for future development or sale
    
    
    95,546
    
    
    
    95,554Homes completed or under construction
    
    
    61,131
    
    
    
    63,755Other
    
    
    830
    
    
    
    622$
    387,726
    
    
    $
    389,457
    8




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Notes to Consolidated Financial Statements (dollars in thousands except share and per
share data) (Unaudited)  continued
 Property and Equipment and Poinciana Parkway
      9




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Property and Equipment and Poinciana Parkway  continued
  Notes, Mortgage Notes and Other Debt
    10




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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
   
    
    a reduction in the amount of the facility from $125,000 to $100,000 (the facility is
expandable up to $150,000, subject to certain conditions and lender approval);
    
    an approval for us to obtain financing for the Poinciana Parkway of up to $140,000, subject to
certain conditions;
 
    
    modifications to certain covenants including: (i) reducing the minimum adjusted
EBITDA/Debt Service ratio (as defined) from 2.75 to 2.0, and providing for an
alternative requirement of maintaining a maximum leverage ratio and minimum liquidity
level if the minimum adjusted EBITDA/Debt Service ratio cannot be maintained; (ii)
reducing the Leverage Ratio (as defined) from 2.0 to 1.75, and allowing us to net
unrestricted cash in excess of $35,000 against outstanding debt in determining total
liabilities; and (iii) amending our covenant regarding speculative homes and models
whereby if we maintain a Leverage Ratio (as defined) below 1.0, we have no financial
covenant as to the number of speculative homes and models we can maintain; however, if
our Leverage Ratio exceeds 1.0, the number of speculative homes and models cannot exceed
35% of unit closings for the trailing twelve month period; and
 
    
    an increased pricing of the facility as follows: (i) the LIBOR Margin is increased
from a range of 1.75% to 2.25% to a range of 2.0% to 2.75%, and depending on our
EBITDA/Debt Service ratio, our rate on outstanding borrowings could be increased up to
an additional 50 basis points; (ii) our fee for outstanding letters of credit increased
from 1% to 50 basis points below our LIBOR Margin; and (iii) our unused fee changed from
25 basis points to a range of 25 basis points to 50 basis points, depending on our
usage.
 Debtors Accounting for Changes in Line-of-Credit or
Revolving-Debt Arrangements,
  11




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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
     Warranty Costs
 
  Nine Months
    
    
    Three Months2008
    
    
    2007
    
    
    2008
    
    
    2007Accrued warranty reserve, beginning of period
    
    $
    1,134
    
    
    $
    2,319
    
    
    $
    645
    
    
    $
    1,649Estimated warranty expense
    
    
    567
    
    
    
    1,458
    
    
    
    205
    
    
    
    353Amounts charged against warranty reserve
    
    
    (1,151
    )
    
    
    (2,589
    )
    
    
    (300
    )
    
    
    (814
    )Accrued warranty reserve, end of period
    
    $
    550
    
    
    $
    1,188
    
    
    $
    550
    
    
    $
    1,188
 12




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Earnings (Loss) Per Share
 Earnings Per Share.
   Nine Months
    
    
    Three Months2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Basic earnings (loss) per share  net income (loss)
    
    
    ($28,806
    )
    
    $
    19,463
    
    
    
    ($21,710
    )
    
    $
    3,084Interest on 4.50% Notes, net of tax
    
    
    
    
    
    
    2,444
    
    
    
    
    
    
    
    815Diluted earnings (loss) per share  net income (loss)
    
    
    ($28,806
    )
    
    $
    21,907
    
    
    
    ($21,710
    )
    
    $
    3,899Denominator:Basic weighted average shares outstanding
    
    
    8,547,899
    
    
    
    8,272,476
    
    
    
    8,558,057
    
    
    
    8,305,170Effect of dilutive restricted stock units
    
    
    
    
    
    
    499,534
    
    
    
    
    
    
    
    553,320Effect of dilutive employee stock options
    
    
    
    
    
    
    26,369
    
    
    
    
    
    
    
    15,378Effect of dilutive 4.50% Notes
    
    
    
    
    
    
    2,277,450
    
    
    
    
    
    
    
    2,276,268Diluted weighted average shares outstanding
    
    
    8,547,899
    
    
    
    11,075,829
    
    
    
    8,558,057
    
    
    
    11,150,136
 Repurchase of Notes and Common Stock
  13




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Comprehensive Income (Loss)
  Share-Based Payments and Other Executive Compensation
      14




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Income Taxes
   Investments in Unconsolidated Joint Ventures
 Consolidation of Variable Interest Entities),
    15




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Recently Issued Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157,
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Applicability of
the Assessment of a Buyers Continuing Investment under FASB Statement No. 66. Accounting for
Sales of Real Estate, for Sales of Condominiums
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 16




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Recently Issued Accounting Pronouncements  continued
 Disclosures About Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging
Activities
 Estimated Development Liability for Sold Land
  September 30,2008
    
    
    December 31,(Unaudited)
    
    
    2007Gross estimated unexpended costs
    
    $
    26,825
    
    
    $
    26,737Less costs relating to unsold homesites
    
    
    (5,930
    )
    
    
    (6,050
    )Estimated development liability for sold land
    
    $
    20,895
    
    
    $
    20,687
  Commitments and Contingencies
 Accounting for Contingencies, .
 17




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Commitments and Contingencies  continued
  Financial Information Relating To Reportable Segments
  Nine Months
    
    
    Three Months2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Segment revenuesPrimary residential
    
    $
    32,616
    
    
    $
    134,762
    
    
    $
    10,743
    
    
    $
    28,770Active adult communities
    
    
    31,754
    
    
    
    66,636
    
    
    
    10,423
    
    
    
    14,894Commercial and industrial and other land sales
    
    
    9,729
    
    
    
    19,136
    
    
    
    167
    
    
    
    10,087Other operations
    
    
    1,166
    
    
    
    2,558
    
    
    
    276
    
    
    
    69675,265
    
    
    
    223,092
    
    
    
    21,609
    
    
    
    54,447Unallocated revenuesInterest income
    
    
    2,289
    
    
    
    6,349
    
    
    
    639
    
    
    
    2,112Other
    
    
    267
    
    
    
    1,714
    
    
    
    111
    
    
    
    896Total revenues
    
    $
    77,821
    
    
    $
    231,155
    
    
    $
    22,359
    
    
    $
    57,455Operating income (loss):Segment operating income (loss)Primary residential
    
    
    ($5,776
    )
    
    $
    21,988
    
    
    
    ($1,724
    )
    
    $
    1,243Active adult communities
    
    
    (1,868
    )
    
    
    9,335
    
    
    
    (727
    )
    
    
    729Commercial and industrial and other land sales
    
    
    9,234
    
    
    
    16,116
    
    
    
    127
    
    
    
    8,979Other operations
    
    
    (116
    )
    
    
    634
    
    
    
    (64
    )
    
    
    2111,474
    
    
    
    48,073
    
    
    
    (2,388
    )
    
    
    11,162Unallocated income (expenses)Impairment of the Poinciana Parkway
    
    
    (27,228
    )
    
    
    
    
    
    
    (27,228
    )
    
    
    Equity loss from unconsolidated joint ventures
    
    
    (551
    )
    
    
    (14
    )
    
    
    (89
    )
    
    
    (55
    )Interest income
    
    
    2,289
    
    
    
    6,349
    
    
    
    639
    
    
    
    2,112General and administrative expenses
    
    
    (15,355
    )
    
    
    (18,401
    )
    
    
    (4,372
    )
    
    
    (5,215
    )Interest expense
    
    
    (1,733
    )
    
    
    
    
    
    
    (782
    )
    
    
    Other real estate expenses, net
    
    
    (6,309
    )
    
    
    (4,620
    )
    
    
    (1,713
    )
    
    
    (1,450
    )Income (loss) before income taxes
    
    $
    (47,413
    )
    
    $
    31,387
    
    
    
    ($35,933
    )
    
    $
    6,554
 18




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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)
    EXECUTIVE SUMMARY
    19




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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
 EXECUTIVE SUMMARY  continued
      20




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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
  Nine Months
    
    
    Three Months2008
    
    
    2007
    
    
    2008
    
    
    2007Operating income:Primary residentialRevenues
    
    $
    32,616
    
    
    $
    134,762
    
    
    $
    10,743
    
    
    $
    28,770Expenses
    
    
    38,392
    
    
    
    112,774
    
    
    
    12,467
    
    
    
    27,527Segment operating income (loss)
    
    
    (5,776
    )
    
    
    21,988
    
    
    
    (1,724
    )
    
    
    1,243Active adult communitiesRevenues
    
    
    31,754
    
    
    
    66,636
    
    
    $
    10,423
    
    
    
    14,894Expenses
    
    
    33,622
    
    
    
    57,301
    
    
    
    11,150
    
    
    
    14,165Segment operating income (loss)
    
    
    (1,868
    )
    
    
    9,335
    
    
    
    (727
    )
    
    
    729Commercial and industrial and other land salesRevenues
    
    
    9,729
    
    
    
    19,136
    
    
    
    167
    
    
    
    10,087Expenses
    
    
    495
    
    
    
    3,020
    
    
    
    40
    
    
    
    1,108Segment operating income
    
    
    9,234
    
    
    
    16,116
    
    
    
    127
    
    
    
    8,979Other operationsRevenues
    
    
    1,166
    
    
    
    2,558
    
    
    
    276
    
    
    
    696Expenses
    
    
    1,282
    
    
    
    1,924
    
    
    
    340
    
    
    
    485Segment operating income (loss)
    
    
    (116
    )
    
    
    634
    
    
    
    (64
    )
    
    
    211Operating income (loss)
    
    
    1,474
    
    
    
    48,073
    
    
    
    (2,388
    )
    
    
    11,162Unallocated income (expenses):Impairment of the Poinciana Parkway
    
    
    (27,228
    )
    
    
    
    
    
    
    (27,228
    )
    
    
    Equity loss from unconsolidated joint ventures
    
    
    (551
    )
    
    
    (14
    )
    
    
    (89
    )
    
    
    (55
    )Interest income
    
    
    2,289
    
    
    
    6,349
    
    
    
    639
    
    
    
    2,112General and administrative expenses
    
    
    (15,355
    )
    
    
    (18,401
    )
    
    
    (4,372
    )
    
    
    (5,215
    )Interest expense
    
    
    (1,733
    )
    
    
    
    
    
    
    (782
    )
    
    
    Other real estate expenses, net
    
    
    (6,309
    )
    
    
    (4,620
    )
    
    
    (1,713
    )
    
    
    (1,450
    )Income (loss) before income taxes
    
    
    (47,413
    )
    
    
    31,387
    
    
    
    (35,933
    )
    
    
    6,554Income tax benefit (expense)
    
    
    18,607
    
    
    
    (11,924
    )
    
    
    14,223
    
    
    
    (3,470
    )Net income (loss)
    
    
    ($28,806
    )
    
    $
    19,463
    
    
    
    ($21,710
    )
    
    $
    3,084
 21




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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
  Number of
    
    
    
    
    
    
    Average PriceUnits
    
    
    Revenues
    
    
    Per UnitFor the nine months ended
September 30,2008Primary residential
    
    
    118
    
    
    $
    30,978
    
    
    $
    263Active adult communities
    
    
    83
    
    
    
    22,744
    
    
    $
    274Total
    
    
    201
    
    
    $
    53,722
    
    
    $
    2672007Primary residential
    
    
    439
    
    
    $
    131,486
    
    
    $
    300Active adult communities
    
    
    164
    
    
    
    58,504
    
    
    $
    357Total
    
    
    603
    
    
    $
    189,990
    
    
    $
    315For the three months ended
September 30,2008Primary residential
    
    
    36
    
    
    $
    10,375
    
    
    $
    288Active adult communities
    
    
    30
    
    
    
    7,815
    
    
    $
    261Total
    
    
    66
    
    
    $
    18,190
    
    
    $
    2762007Primary residential
    
    
    114
    
    
    $
    27,875
    
    
    $
    245Active adult communities
    
    
    37
    
    
    
    12,377
    
    
    $
    335Total
    
    
    151
    
    
    $
    40,252
    
    
    $
    267
 22




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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
  Gross Number
    
    
    
    
    
    
    Contracts
    
    
    
    
    
    
    Averageof Contracts
    
    
    
    
    
    
    Signed, Net of
    
    
    
    
    
    
    Price PerSigned
    
    
    Cancellations
    
    
    Cancellations
    
    
    Dollar Value
    
    
    UnitFor the nine months ended
September 30,2008Primary residential
    
    
    124
    
    
    
    (52
    )
    
    
    72
    
    
    $
    18,845
    
    
    $
    262Active adult communities
    
    
    109
    
    
    
    (35
    )
    
    
    74
    
    
    
    18,307
    
    
    $
    247Total
    
    
    233
    
    
    
    (87
    )
    
    
    146
    
    
    $
    37,152
    
    
    $
    2552007Primary residential
    
    
    436
    
    
    
    (176
    )
    
    
    260
    
    
    $
    55,078
    
    
    $
    212Active adult communities
    
    
    129
    
    
    
    (43
    )
    
    
    86
    
    
    
    27,006
    
    
    $
    314Total
    
    
    565
    
    
    
    (219
    )
    
    
    346
    
    
    $
    82,084
    
    
    $
    237For the three months ended
September 30,2008Primary residential
    
    
    19
    
    
    
    (11
    )
    
    
    8
    
    
    $
    2,145
    
    
    $
    268Active adult communities
    
    
    26
    
    
    
    (7
    )
    
    
    19
    
    
    
    4,754
    
    
    $
    250Total
    
    
    45
    
    
    
    (18
    )
    
    
    27
    
    
    $
    6,899
    
    
    $
    2562007Primary residential
    
    
    109
    
    
    
    (45
    )
    
    
    64
    
    
    $
    13,536
    
    
    $
    212Active adult communities
    
    
    29
    
    
    
    (16
    )
    
    
    13
    
    
    
    3,528
    
    
    $
    271Total
    
    
    138
    
    
    
    (61
    )
    
    
    77
    
    
    $
    17,064
    
    
    $
    222
  Number of
    
    
    Dollar
    
    
    Average PriceAs
of September 30,
    
    Units
    
    
    Volume
    
    
    Per Unit2008Primary residential
    
    
    26
    
    
    $
    8,929
    
    
    $
    343Active adult communities
    
    
    66
    
    
    
    19,632
    
    
    $
    297Total
    
    
    92
    
    
    $
    28,561
    
    
    $
    3102007Primary residential
    
    
    153
    
    
    $
    39,192
    
    
    $
    256Active adult communities
    
    
    139
    
    
    
    42,194
    
    
    $
    304Total
    
    
    292
    
    
    $
    81,386
    
    
    $
    279
 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) continued
 RESULTS OF OPERATIONS 
      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
 RESULTS OF OPERATIONS 
      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
 RESULTS OF OPERATIONS 
      LIQUIDITY AND CAPITAL RESOURCES
   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
 LIQUIDITY AND CAPITAL RESOURCES  continued
       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
 LIQUIDITY AND CAPITAL RESOURCES  continued
     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
 LIQUIDITY AND CAPITAL RESOURCES  continued
  
    
    a reduction in the amount of the facility from $125,000 to $100,000 (the facility is
expandable up to $150,000, subject to certain conditions and lender approval);
    
    an approval for us to obtain financing for the Poinciana Parkway of up to $140,000, subject to
certain conditions;
 
    
    an increased pricing of the facility as follows: (i) the LIBOR Margin is increased
from a range of 1.75% to 2.25% to a range of 2.0% to 2.75%, and depending on our
EBITDA/Debt Service ratio, our rate on outstanding borrowings could be increased up to
an additional 50 basis points; (ii) our fee for outstanding letters of credit increased
from 1% to 50 basis points below our LIBOR Margin; and (iii) our unused fee changed from
25 basis points to a range of 25 basis points to 50 basis points, depending on our
usage.
 Debtors Accounting for Changes in Line-of-Credit or
Revolving-Debt Arrangements,
     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
 LIQUIDITY AND CAPITAL RESOURCES  continued
       CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  30




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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
 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements Effective Date of FASB Statement No. 157,
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Applicability of
the Assessment of a Buyers Continuing Investment under FASB Statement No. 66. Accounting for
Sales of Real Estate, for Sales of Condominiums
 Business Combinations Business Combinations
 31




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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
 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS  continued
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Disclosures About Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging
Activities
 
 Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4.
    
    Controls and Procedures
   32




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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 Numberof Shares
    
    
    MaximumPurchased as
    
    
    Amount ThatPart of a
    
    
    May Yet BeTotal
    
    
    Average
    
    
    Publicly
    
    
    PurchasedNumber
    
    
    Price
    
    
    Announced
    
    
    Under theof Shares
    
    
    Paid Per
    
    
    Plan or
    
    
    Plan orPeriod
    
    Purchased
    
    
    Share
    
    
    Program (1)
    
    
    Program (1)July 1, 2008 to July 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    9,864August 1, 2008 to August 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    9,864September 1, 2008 to September 30, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    9,864Total
    
    
    
    
    
    $
    
    
    
    
    
 
 (1)
    
    On March 20, 2003, Avatars Board of Directors authorized the expenditure of up to $30,000
to purchase, from time to time, shares of its common stock and/or 7% Convertible Subordinated Notes
due April 2005 (the 7% Notes), which were subsequently called for redemption, in the open market,
through privately negotiated transactions or otherwise, depending on market and business conditions
and other factors. On June 29, 2005, Avatars Board of Directors amended the March 20, 2003
repurchase authorization to include the 4.50% Notes in addition to shares of its common stock.
During the three months ended September 30, 2008, Avatar did not repurchase shares of its common
stock and/or the 4.50% Notes. As of September 30, 2008, the remaining authorization for purchase of
shares of Avatars common stock and/or 4.50% Notes was $9,864. On October 13, 2008, our Board of
Directors amended its June 2005 authorization to repurchase the 4.50% Notes and/or common stock to allow expenditures up to $30,000, including the $9,864 previous authorization. On October 17, 2008, we
repurchased $35,920 principal amount of the 4.50% Notes for approximately $28,112 including accrued
interest. As of October 31, 2008, the remaining authorization approximates $1,900. 33




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##### Table of Contents



Item 6.
    
    Exhibits10.1
    
    First Amended and Restated Poinciana Parkway Regulatory Agreement,
dated as of July 25, 2008, by and between Avatar Properties Inc. and
Osceola County, Florida (filed as Exhibit 10.1 to Form 8-K dated July
29, 2008 (File No. 0-7616), and incorporated herein by reference).10.2
    
    Transportation Concurrency Agreement, dated December 15, 2006, by and
between Avatar Properties Inc. and Osceola County, Florida (filed as
Exhibit 10.2 to Form 8-K dated July 29, 2008 (File No. 0-7616), and
incorporated herein by reference).10.3
    
    Amendment to Transportation Concurrency Agreement, dated as of July
25, 2008, by and between Avatar Properties Inc. and Osceola County,
Florida (filed as Exhibit 10.3 to Form 8-K dated July 29, 2008 (File
No. 0-7616), and incorporated herein by reference).10.4
    
    First Amended and Restated Poinciana Parkway Regulatory Agreement,
dated as of August 6, 2008, by and between Avatar Properties Inc. and
Polk County, Florida (filed as Exhibit 10.1 to Form 8-K dated August
11, 2008 (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).
 34




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##### Table of Contents



SIGNATURES
 
 AVATAR HOLDINGS INC.Date:
    
    November 10, 2008
    
    By:
    
    /s/ Randy L. KotlerRandy L. KotlerExecutive Vice President, ChiefFinancial Officer and TreasurerDate:
    
    November 10, 2008
    
    By:
    
    /s/ Michael P. RamaMichael P. RamaController and Chief Accounting Officer
  35




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##### Table of Contents



Exhibit Index
 10.1
    
    First Amended and Restated Poinciana Parkway Regulatory Agreement,
dated as of July 25, 2008, by and between Avatar Properties Inc. and
Osceola County, Florida (filed as Exhibit 10.1 to Form 8-K dated July
29, 2008 (File No. 0-7616), and incorporated herein by reference).10.2
    
    Transportation Concurrency Agreement, dated December 15, 2006, by and
between Avatar Properties Inc. and Osceola County, Florida (filed as
Exhibit 10.2 to Form 8-K dated July 29, 2008 (File No. 0-7616), and
incorporated herein by reference).10.3
    
    Amendment to Transportation Concurrency Agreement, dated as of July
25, 2008, by and between Avatar Properties Inc. and Osceola County,
Florida (filed as Exhibit 10.3 to Form 8-K dated July 29, 2008 (File
No. 0-7616), and incorporated herein by reference).10.4
    
    First Amended and Restated Poinciana Parkway Regulatory Agreement,
dated as of August 6, 2008, by and between Avatar Properties Inc. and
Polk County, Florida (filed as Exhibit 10.1 to Form 8-K dated August
11, 2008 (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).
 36