##### 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 June 30, 2009
 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)
 Registrants telephone number, including area code (305) 442-7000
 
 þ o
 o o
  Large accelerated filer: o
    
    Accelerated filer: þ
    
    Non-accelerated filer: o
    
    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):Consolidated Balance Sheets June 30, 2009 and December 31, 2008
    
    
    3Consolidated Statements of Operations Six and three months ended June 30, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows Six months ended June 30, 2009 and 2008
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    48Item 4.
    
    Controls and Procedures
    
    
    48PART II.
    
    Other InformationItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    49Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    50Item 6.
    
    Exhibits
    
    
    51EX-10.2EX-10.3EX-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
 June 30,
    
    
    December 31,2009
    
    
    2008AssetsCash and cash equivalents
    
    $
    182,299
    
    
    $
    175,396Restricted cash
    
    
    1,217
    
    
    
    1,614Receivables, net
    
    
    3,939
    
    
    
    3,144Income tax receivable
    
    
    2,981
    
    
    
    21,503Land and other inventories
    
    
    289,232
    
    
    
    304,071Property and equipment, net
    
    
    51,660
    
    
    
    53,485Poinciana Parkway
    
    
    15,725
    
    
    
    16,168Investment in and notes receivable from unconsolidated entities
    
    
    5,816
    
    
    
    5,790Prepaid expenses and other assets
    
    
    9,598
    
    
    
    10,806Deferred income taxes
    
    
    
    
    
    
    2,835Total Assets
    
    $
    562,467
    
    
    $
    594,812Liabilities and Stockholders EquityLiabilitiesAccounts payable
    
    $
    367
    
    
    $
    1,484Accrued and other liabilities
    
    
    8,637
    
    
    
    8,677Customer deposits and deferred revenues
    
    
    2,725
    
    
    
    3,611Estimated development liability for sold land
    
    
    21,174
    
    
    
    20,468Notes, mortgage notes and other debt:Corporate
    
    
    62,293
    
    
    
    74,950Real estate
    
    
    56,014
    
    
    
    56,111Total Liabilities
    
    
    151,210
    
    
    
    165,301Commitments and contingenciesStockholders EquityCommon Stock, par value $1 per shareAuthorized: 50,000,000 sharesIssued: 11,495,523 shares at June 30, 2009
11,488,259 shares at December 31, 2008
    
    
    11,496
    
    
    
    11,488Additional paid-in capital
    
    
    245,158
    
    
    
    245,049Retained earnings
    
    
    233,540
    
    
    
    251,911490,194
    
    
    
    508,448Treasury stock: at cost, 2,658,461 shares at June 30, 2009
and December 31, 2008
    
    
    (78,937
    )
    
    
    (78,937
    )Total Stockholders Equity
    
    
    411,257
    
    
    
    429,511Total Liabilities and Stockholders Equity
    
    $
    562,467
    
    
    $
    594,812
  3




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##### Table of Contents



AVATAR HOLDINGS INC. AND SUBSIDIARIES
 Six Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesReal estate revenues
    
    $
    32,012
    
    
    $
    53,646
    
    
    $
    18,261
    
    
    $
    24,251Interest income
    
    
    378
    
    
    
    1,650
    
    
    
    179
    
    
    
    636Other
    
    
    2,312
    
    
    
    166
    
    
    
    915
    
    
    
    43Total revenues
    
    
    34,702
    
    
    
    55,462
    
    
    
    19,355
    
    
    
    24,930ExpensesReal estate expenses
    
    
    39,518
    
    
    
    55,234
    
    
    
    22,061
    
    
    
    29,020Impairment charges
    
    
    1,676
    
    
    
    
    
    
    
    928
    
    
    
    General and administrative expenses
    
    
    9,011
    
    
    
    10,983
    
    
    
    4,344
    
    
    
    5,846Interest expense
    
    
    3,550
    
    
    
    1,396
    
    
    
    1,713
    
    
    
    869Total expenses
    
    
    53,755
    
    
    
    67,613
    
    
    
    29,046
    
    
    
    35,735Equity losses from unconsolidated entities
    
    
    (148
    )
    
    
    (462
    )
    
    
    (86
    )
    
    
    (413
    )Loss before income taxes
    
    
    (19,201
    )
    
    
    (12,613
    )
    
    
    (9,777
    )
    
    
    (11,218
    )Income tax benefit
    
    
    830
    
    
    
    4,820
    
    
    
    
    
    
    
    4,297Net loss
    
    
    ($18,371
    )
    
    
    ($7,793
    )
    
    
    ($9,777
    )
    
    
    ($6,921
    )Basic and Diluted Loss Per Share
    
    
    ($2.12
    )
    
    
    ($0.91
    )
    
    
    ($1.13
    )
    
    
    ($0.81
    )
  4




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AVATAR HOLDINGS INC. AND SUBSIDIARIES
 2009
    
    
    2008OPERATING ACTIVITIESNet loss
    
    
    ($18,371
    )
    
    
    ($7,793
    )Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    2,788
    
    
    
    3,240Amortization of stock-based compensation
    
    
    980
    
    
    
    1,447Impairment of land and other inventories
    
    
    1,228
    
    
    
    Impairment of the Poinciana Parkway
    
    
    448
    
    
    
    Gain from repurchase of 4.50% Notes
    
    
    (1,783
    )
    
    
    Return of earnings from an unconsolidated entity
    
    
    (95
    )
    
    
    (133
    )Equity losses from unconsolidated entities
    
    
    148
    
    
    
    462Deferred income taxes
    
    
    2,005
    
    
    
    (1,096
    )Excess income tax benefit from exercise of stock options and restricted stock
units
    
    
    
    
    
    
    10Changes in operating assets and liabilities:Restricted cash
    
    
    397
    
    
    
    1,634Receivables, net
    
    
    (795
    )
    
    
    (2,878
    )Income tax receivable
    
    
    18,522
    
    
    
    Land and other inventories
    
    
    13,977
    
    
    
    (4,547
    )Prepaid expenses and other assets
    
    
    1,096
    
    
    
    2,319Accounts payable and accrued and other liabilities
    
    
    (970
    )
    
    
    (486
    )Customer deposits and deferred revenues
    
    
    (886
    )
    
    
    609NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    18,689
    
    
    
    (7,212
    )INVESTING ACTIVITIESInvestment in property and equipment
    
    
    (34
    )
    
    
    (938
    )Investment in Poinciana Parkway
    
    
    (5
    )
    
    
    (12,397
    )Investment in unconsolidated entities
    
    
    (23
    )
    
    
    (26
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (62
    )
    
    
    (13,361
    )FINANCING ACTIVITIESRepurchase of 4.50% Notes
    
    
    (11,627
    )
    
    
    Principal payments of real estate borrowings
    
    
    (97
    )
    
    
    (15,836
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    250Excess income tax benefit from exercise of stock options and restricted stock units
    
    
    
    
    
    
    (10
    )Payment of withholding taxes related to restricted stock units withheld
    
    
    
    
    
    
    (52
    )NET CASH USED IN FINANCING ACTIVITIES
    
    
    (11,724
    )
    
    
    (15,648
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    6,903
    
    
    
    (36,221
    )Cash and cash equivalents at beginning of period
    
    
    175,396
    
    
    
    192,258CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    182,299
    
    
    $
    156,037
  5




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AVATAR HOLDINGS INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements (Unaudited)  June 30, 2009
(Dollars in thousands except share and per share data)
 Basis of Financial Statement Presentation and Summary of Significant Accounting Policies
     Reclassifications
  Cash and Cash Equivalents:
  6




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Adoption of New Accounting Pronouncement
 Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)
  Capitalization of Interest Cost.
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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Adoption of New Accounting Pronouncement  continued
  As Originally
    
    
    As
    
    
    Effect ofReported
    
    
    Adjusted
    
    
    ChangeLand and other inventories
    
    $
    299,621
    
    
    $
    304,071
    
    
    $
    4,450Poinciana Parkway
    
    $
    15,310
    
    
    $
    16,168
    
    
    $
    858Prepaid expenses and other assets
    
    $
    12,162
    
    
    $
    10,806
    
    
    
    ($1,356
    )Notes, mortgage notes and other debt (Corporate)
    
    $
    78,880
    
    
    $
    74,950
    
    
    
    ($3,930
    )Additional paid-in capital
    
    $
    231,279
    
    
    $
    245,049
    
    
    $
    13,770Retained earnings
    
    $
    257,799
    
    
    $
    251,911
    
    
    
    ($5,888
    )
  Six Months
    
    
    Three MonthsAs Originally
    
    
    As
    
    
    Effect of
    
    
    As Originally
    
    
    As
    
    
    Effect ofReported
    
    
    Adjusted
    
    
    Change
    
    
    Reported
    
    
    Adjusted
    
    
    ChangeReal estate expenses
    
    $
    54,546
    
    
    $
    55,234
    
    
    $
    688
    
    
    $
    28,676
    
    
    $
    29,020
    
    
    $
    344Interest expense
    
    $
    951
    
    
    $
    1,396
    
    
    $
    445
    
    
    $
    594
    
    
    $
    869
    
    
    $
    275Loss before income taxes
    
    
    ($11,480
    )
    
    
    ($12,613
    )
    
    
    ($1,133
    )
    
    
    ($10,599
    )
    
    
    ($11,218
    )
    
    
    ($619
    )Income tax benefit
    
    $
    4,384
    
    
    $
    4,820
    
    
    $
    436
    
    
    $
    4,059
    
    
    $
    4,297
    
    
    $
    238Net loss
    
    
    ($7,096
    )
    
    
    ($7,793
    )
    
    
    ($697
    )
    
    
    ($6,540
    )
    
    
    ($6,921
    )
    
    
    ($381
    )Basic and diluted loss per share
    
    
    ($0.83
    )
    
    
    ($0.91
    )
    
    
    ($0.08
    )
    
    
    ($0.77
    )
    
    
    ($0.81
    )
    
    
    ($0.04
    )
 Land and Other Inventories:
  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
 Accounting for
the Impairment or Disposal of Long-Lived Assets ,
     
    
    The average price on sales closed from primary residential homebuilding operations
has decreased approximately 43% from $323 in fiscal year 2006 to $183 during the six
months ended June 30, 2009. Our average sales price on sales contracts entered into
during the six and three months ended June 30, 2009 declined to $163 and $151,
respectively, compared to $261 and $270 for the six and three months ended June 30,
2008, respectively. Additionally, the average contribution margin on closings from
primary residential homebuilding operations has declined from approximately 34% in
fiscal year 2006 to approximately 5% during the six months ended
June 30, 2009. The average contribution margin was approximately
10% during the first quarter of 2009.
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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
 
    
    The average price on sales closed from active adult homebuilding operations has
decreased approximately 17% from $298 in fiscal year 2006 to $246 during the six months
ended June 30, 2009. Our average sales price on sales contracts entered into during the
six and three months ended June 30, 2009 declined to $203 and $220, respectively,
compared to $246 and $274 for the six and three months ended June 30, 2008,
respectively. Additionally, the average contribution margin on closings from active
adult homebuilding operations has declined from approximately 33% in fiscal year 2006 to
approximately 17% during the six months ended June 30, 2009. The
average contribution margin was approximately 19% during the first
quarter of 2009.
  Housing communities:
   Land developed and/or held for future development or sale:
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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
    June 30,
    
    
    December 31,2009
    
    
    2008Land developed and in process of development
    
    $
    152,569
    
    
    $
    153,623Land held for future development or sale
    
    
    96,049
    
    
    
    96,054Homes completed or under construction
    
    
    40,083
    
    
    
    53,692Other
    
    
    531
    
    
    
    702$
    289,232
    
    
    $
    304,071
    11




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Property and Equipment
    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
    June 30,
    
    
    December 31,2009
    
    
    20084.50% NotesPrincipal amount
    
    $
    64,804
    
    
    $
    78,880Unamortized discount
    
    
    (2,511
    )
    
    
    (3,930
    )Net carrying amount
    
    $
    62,293
    
    
    $
    74,950Equity Component, net of income tax benefit
    
    $
    13,737
    
    
    $
    13,770
  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
   
    
    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) of 1.0 or less, 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,
  15




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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
       16




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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
   Six Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Accrued warranty reserve, beginning of period
    
    $
    468
    
    
    $
    1,134
    
    
    $
    421
    
    
    $
    757Estimated warranty expense
    
    
    337
    
    
    
    362
    
    
    
    242
    
    
    
    193Amounts charged against warranty reserve
    
    
    (292
    )
    
    
    (851
    )
    
    
    (150
    )
    
    
    (305
    )Accrued warranty reserve, end of period
    
    $
    513
    
    
    $
    645
    
    
    $
    513
    
    
    $
    645
 Loss Per Share
 Earnings Per Share.
 17




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Loss Per Share  continued
   Six Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Basic and diluted loss per share  net loss
    
    
    ($18,371
    )
    
    
    ($7,793
    )
    
    
    ($9,777
    )
    
    
    ($6,921
    )Denominator:Basic and diluted weighted average shares
outstanding
    
    
    8,654,284
    
    
    
    8,542,765
    
    
    
    8,655,811
    
    
    
    8,545,350
 Repurchase of Common Stock and Notes
  Comprehensive Loss
  Share-Based Payments and Other Executive Compensation
   18




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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  continued
   Income Taxes
  Accounting for Income Taxes (
   19




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Fair Value Disclosures
 Fair
Value Measurements
 Determining Whether a Market Is Not Active
and a Transaction Is Not Distressed
 Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of
Financial Instruments, Interim
Financial Reporting
  Level 1:
    
    Fair value determined based on quoted market prices in active markets for
identical assets and liabilitiesLevel 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.
   20




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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
    
    
    June 30, 2009
    
    
    LossesHomes completed or under construction
    
    Level 2
    
    $
    10,120
    
    
    $
    798Poinciana
Parkway
    
    Level 3
    
    $
    15,725
    
    
    $
    130
      June 30, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueCash and cash equivalents
    
    $
    182,299
    
    
    $
    182,299
    
    
    $
    175,396
    
    
    $
    175,396Restricted cash
    
    $
    1,217
    
    
    $
    1,217
    
    
    $
    1,614
    
    
    $
    1,614Receivables, net
    
    $
    3,939
    
    
    $
    3,939
    
    
    $
    3,144
    
    
    $
    3,144Income tax receivable
    
    $
    2,981
    
    
    $
    2,981
    
    
    $
    21,503
    
    
    $
    21,503Notes, mortgage notes and other debt:Corporate:4.50% Notes
    
    $
    62,293
    
    
    $
    52,410
    
    
    $
    74,950
    
    
    $
    59,752Real estate:5.50% Term Bonds payable
    
    $
    111
    
    
    $
    102
    
    
    $
    111
    
    
    $
    100Amended Unsecured Credit Facility
    
    $
    55,903
    
    
    $
    53,982
    
    
    $
    56,000
    
    
    $
    53,195
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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Fair
Value Disclosures  continued
  Cash and cash equivalents and Restricted cash:
 Receivables, net and Income tax receivable:
 4.50% Notes:
 Real Estate Notes Payable:
 Investments in and Notes Receivable from Unconsolidated Entities
 Consolidation of Variable Interest Entities Consolidated Financial Statements,
    22




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Investments in and Notes Receivable from Unconsolidated Entities  continued
  June 30,
    
    
    December 31,2009
    
    
    2008Assets:Cash
    
    $
    613
    
    
    $
    645Receivables
    
    
    1,500
    
    
    
    1,500Land and other inventory
    
    
    10,736
    
    
    
    10,686Total assets
    
    $
    12,849
    
    
    $
    12,831Liabilities and Partners Capital:Accounts payable and accrued liabilities
    
    $
    839
    
    
    $
    731Notes and interest payable to Avatar
    
    
    3,725
    
    
    
    3,669Partners Capital of:Avatar
    
    
    2,091
    
    
    
    2,121Equity partner
    
    
    6,194
    
    
    
    6,310Total liabilities and partners capital
    
    $
    12,849
    
    
    $
    12,831
  Six Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    31
    
    
    $
    260
    
    
    $
    16
    
    
    $
    230Costs and expenses
    
    
    397
    
    
    
    1,174
    
    
    
    226
    
    
    
    1,056Net loss from unconsolidated entities
    
    
    ($366
    )
    
    
    ($914
    )
    
    
    ($210
    )
    
    
    ($826
    )Avatars share of loss from unconsolidated entities
    
    
    ($148
    )
    
    
    ($462
    )
    
    
    ($86
    )
    
    
    ($413
    )
 Recently Issued Accounting Pronouncements
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 23




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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
  Disclosure by Public
Entities (Enterprises) About Transfers of Financial Assets and Interests in Variable Interest
Entities Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Subsequent Events
 24




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##### Table of Contents



Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Recently Issued Accounting Pronouncements  continued
 FASB Accounting Standards Codification
 Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140 ( Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,
 Amendments to FASB Interpretation No. 46(R)
 The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 , The Hierarchy of Generally Accepted Accounting
Principles
 25




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##### Table of Contents



Notes to Consolidated Financial Statements (dollars in thousands except share and per share data) (Unaudited)  continued
 Estimated Development Liability for Sold Land
  June 30,
    
    
    December 31,2009
    
    
    2008Gross estimated unexpended costs
    
    $
    26,645
    
    
    $
    26,518Less costs relating to unsold homesites
    
    
    (5,471
    )
    
    
    (6,050
    )Estimated development liability for sold land
    
    $
    21,174
    
    
    $
    20,468
  Commitments and Contingencies
 Accounting for Contingencies, .
  26




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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
  Six Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Segment revenuesPrimary residential
    
    $
    11,840
    
    
    $
    21,873
    
    
    $
    6,304
    
    
    $
    12,068Active adult communities
    
    
    17,676
    
    
    
    21,331
    
    
    
    11,478
    
    
    
    9,706Commercial and industrial and other land sales
    
    
    2,064
    
    
    
    9,562
    
    
    
    239
    
    
    
    2,134Other operations
    
    
    531
    
    
    
    890
    
    
    
    303
    
    
    
    32832,111
    
    
    
    53,656
    
    
    
    18,324
    
    
    
    24,236Unallocated revenuesInterest income
    
    
    378
    
    
    
    1,650
    
    
    
    179
    
    
    
    636Gain on repurchase of 4.50% Notes
    
    
    1,783
    
    
    
    
    
    
    
    418
    
    
    
    Other
    
    
    430
    
    
    
    156
    
    
    
    434
    
    
    
    58Total revenues
    
    $
    34,702
    
    
    $
    55,462
    
    
    $
    19,355
    
    
    $
    24,930Operating income (loss):Segment operating income (loss)Primary residential
    
    
    ($4,259
    )
    
    
    ($4,400
    )
    
    
    ($2,361
    )
    
    
    ($2,134
    )Active adult communities
    
    
    (2,253
    )
    
    
    (1,481
    )
    
    
    (821
    )
    
    
    (1,458
    )Commercial and industrial and other land sales
    
    
    1,987
    
    
    
    9,107
    
    
    
    209
    
    
    
    2,037Other operations
    
    
    105
    
    
    
    (52
    )
    
    
    94
    
    
    
    (137
    )(4,420
    )
    
    
    3,174
    
    
    
    (2,879
    )
    
    
    (1,692
    )Unallocated income (expenses)Interest income
    
    
    378
    
    
    
    1,650
    
    
    
    179
    
    
    
    636Gain on repurchase of 4.50% Notes
    
    
    1,783
    
    
    
    
    
    
    
    418
    
    
    
    Equity loss from unconsolidated entities
    
    
    (148
    )
    
    
    (462
    )
    
    
    (86
    )
    
    
    (413
    )General and administrative expenses
    
    
    (9,011
    )
    
    
    (10,983
    )
    
    
    (4,344
    )
    
    
    (5,846
    )Interest expense
    
    
    (3,550
    )
    
    
    (1,396
    )
    
    
    (1,713
    )
    
    
    (869
    )Other real estate expenses
    
    
    (3,785
    )
    
    
    (4,596
    )
    
    
    (1,222
    )
    
    
    (3,034
    )Impairment of the Poinciana Parkway
    
    
    (448
    )
    
    
    
    
    
    
    (130
    )
    
    
    Loss before income taxes
    
    
    ($19,201
    )
    
    
    ($12,613
    )
    
    
    ($9,777
    )
    
    
    ($11,218
    )
 27




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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
  28




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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
     Land Inventory
   29




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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
 Land Inventory  continued
  Estimated Planned
Lots/Units Remaining (1)Acquisition
    
    Contract
    
    
    
    
    
    
    Partially
    
    
    
    
    
    
    
    
    
    
    BookDate
    
    Date
    
    
    Developed
    
    
    Developed
    
    

Raw(2)
    
    
    Total
    
    
    ValueResidentialOsceola County, FloridaPre-1980
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    2,200
    
    
    
    2,400
    
    
    $
    5,1981999-2001
    
    
    
    
    
    
    500
    
    
    
    700
    
    
    
    
    
    
    
    1,200
    
    
    
    45,2482003
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    7,8802004
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    1,400
    
    
    
    1,400
    
    
    
    19,3072006
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    1,600
    
    
    
    19,280Total Osceola County
    
    
    
    
    
    
    700
    
    
    
    700
    
    
    
    6,200
    
    
    
    7,600
    
    
    
    96,913Polk County, FloridaPre-1980
    
    
    
    
    
    
    900
    
    
    
    1,000
    
    
    
    2,400
    
    
    
    4,300
    
    
    
    21,3692003
    
    
    2002-2003
    
    
    
    900
    
    
    
    
    
    
    
    100
    
    
    
    1,000
    
    
    
    32,6702004
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    2,500
    
    
    
    19,9662005
    
    
    2004
    
    
    
    200
    
    
    
    
    
    
    
    300
    
    
    
    500
    
    
    
    5,987Total Polk County
    
    
    2,000
    
    
    
    1,000
    
    
    
    5,300
    
    
    
    8,300
    
    
    
    79,992Martin County, Florida1981-1987
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    200
    
    
    
    275
    
    
    
    6,828Palm Beach County, Florida(3)2005
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    6,680Hillsborough County, Florida2002
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    1,631Hernando County, Florida2004-2005
    
    
    2003
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    30Collier County, FloridaPre-1980
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    191Highlands County, FloridaPre-1980
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    40
    
    
    
    80
    
    
    
    108Santa Cruz County (Rio Rico), ArizonaPre-1980
    
    
    
    
    
    
    600
    
    
    
    300
    
    
    
    3,700
    
    
    
    4,600
    
    
    
    10,211Total Residential
    
    
    
    
    
    
    3,635
    
    
    
    2,005
    
    
    
    15,540
    
    
    
    21,180
    
    
    $
    202,584
 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
 EXECUTIVE SUMMARY  continued
 Land Inventory  continued
 Acquisition
    
    Contract
    
    
    Estimated
    
    
    BookDate
    
    Date
    
    
    Acres
    
    
    ValueCommercial/Industrial/InstitutionalFloridaPre-1980
    
    
    
    
    
    
    1,300
    
    
    $
    7,4302004 (4)
    
    
    2004
    
    
    
    300
    
    
    
    14,7652005 (4)
    
    
    2004
    
    
    
    400
    
    
    
    15,541Total Florida
    
    
    2,000
    
    
    
    37,736ArizonaPre-1980
    
    
    
    
    
    
    200
    
    
    
    267Total Commercial/Industrial/Institutional
    
    
    2,200
    
    
    $
    38,003OtherPreserves, wetlands, open spacePre-1980
    
    
    
    
    
    
    
    
    
    $
    3,175Other
    
    
    
    
    
    
    
    
    
    
    4,856Total Other
    
    
    -
    
    
    $
    8,031
 
 (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 develop at a greater density per acre than the
density per acre we have undertaken over the past several years. We
anticipate evolving market demand for smaller 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)
    
    Units represent approximately 300,000 square feet of planned condominium-type
residential units.(4)
    
    During the 4th quarter 2008, our plans for this property
changed from developing it as single family housing to permitting as commercial/industrial/institutional. 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
 EXECUTIVE
SUMMARY  continued
     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
  Six Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Operating income (loss):Primary residentialRevenues
    
    $
    11,840
    
    
    $
    21,873
    
    
    $
    6,304
    
    
    $
    12,068Expenses
    
    
    16,099
    
    
    
    26,273
    
    
    
    8,665
    
    
    
    14,202Segment operating loss
    
    
    (4,259
    )
    
    
    (4,400
    )
    
    
    (2,361
    )
    
    
    (2,134
    )Active adult communitiesRevenues
    
    
    17,676
    
    
    
    21,331
    
    
    
    11,478
    
    
    
    9,706Expenses
    
    
    19,929
    
    
    
    22,812
    
    
    
    12,299
    
    
    
    11,164Segment operating loss
    
    
    (2,253
    )
    
    
    (1,481
    )
    
    
    (821
    )
    
    
    (1,458
    )Commercial and industrial and other land salesRevenues
    
    
    2,064
    
    
    
    9,562
    
    
    
    239
    
    
    
    2,134Expenses
    
    
    77
    
    
    
    455
    
    
    
    30
    
    
    
    97Segment operating income
    
    
    1,987
    
    
    
    9,107
    
    
    
    209
    
    
    
    2,037Other operationsRevenues
    
    
    531
    
    
    
    890
    
    
    
    303
    
    
    
    328Expenses
    
    
    426
    
    
    
    942
    
    
    
    209
    
    
    
    465Segment operating income (loss)
    
    
    105
    
    
    
    (52
    )
    
    
    94
    
    
    
    (137
    )Operating income (loss)
    
    
    (4,420
    )
    
    
    3,174
    
    
    
    (2,879
    )
    
    
    (1,692
    )Unallocated income (expenses):Interest income
    
    
    378
    
    
    
    1,650
    
    
    
    179
    
    
    
    636Gain on repurchase of 4.50% Notes
    
    
    1,783
    
    
    
    
    
    
    
    418
    
    
    
    Equity loss from unconsolidated entities
    
    
    (148
    )
    
    
    (462
    )
    
    
    (86
    )
    
    
    (413
    )General and administrative expenses
    
    
    (9,011
    )
    
    
    (10,983
    )
    
    
    (4,344
    )
    
    
    (5,846
    )Interest expense
    
    
    (3,550
    )
    
    
    (1,396
    )
    
    
    (1,713
    )
    
    
    (869
    )Other real estate expenses
    
    
    (3,785
    )
    
    
    (4,596
    )
    
    
    (1,222
    )
    
    
    (3,034
    )Impairment of the Poinciana Parkway
    
    
    (448
    )
    
    
    
    
    
    
    (130
 )
    
    
    Loss before income taxes
    
    
    (19,201
    )
    
    
    (12,613
    )
    
    
    (9,777
    )
    
    
    (11,218
    )Income tax benefit
    
    
    830
    
    
    
    4,820
    
    
    
    
    
    
    
    4,297Net loss
    
    
    ($18,371
    )
    
    
    ($7,793
    )
    
    
    ($9,777
    )
    
    
    ($6,921
    )
 33




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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 
  Number of
    
    
    
    
    
    
    Average PriceUnits
    
    
    Revenues
    
    
    Per UnitFor the six months ended June 30,2009Primary residential
    
    
    56
    
    
    $
    10,255
    
    
    $
    183Active adult communities
    
    
    48
    
    
    
    11,800
    
    
    $
    246Total
    
    
    104
    
    
    $
    22,055
    
    
    $
    2122008Primary residential
    
    
    82
    
    
    $
    20,603
    
    
    $
    251Active adult communities
    
    
    53
    
    
    
    14,929
    
    
    $
    282Total
    
    
    135
    
    
    $
    35,532
    
    
    $
    263For the three months ended June 30,2009Primary residential
    
    
    34
    
    
    $
    5,571
    
    
    $
    164Active adult communities
    
    
    36
    
    
    
    8,728
    
    
    $
    242Total
    
    
    70
    
    
    $
    14,299
    
    
    $
    2042008Primary residential
    
    
    46
    
    
    $
    11,294
    
    
    $
    246Active adult communities
    
    
    24
    
    
    
    6,761
    
    
    $
    282Total
    
    
    70
    
    
    $
    18,055
    
    
    $
    258
 34




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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 
  Gross Number
    
    
    
    
    
    
    Contracts
    
    
    
    
    
    
    Averageof Contracts
    
    
    
    
    
    
    Signed, Net of
    
    
    
    
    
    
    Price PerSigned
    
    
    Cancellations
    
    
    Cancellations
    
    
    Dollar Value
    
    
    UnitFor the six months ended June 30,2009Primary residential
    
    
    108
    
    
    
    (19
    )
    
    
    89
    
    
    $
    14,506
    
    
    $
    163Active adult communities
    
    
    41
    
    
    
    (8
    )
    
    
    33
    
    
    
    6,690
    
    
    $
    203Total
    
    
    149
    
    
    
    (27
    )
    
    
    122
    
    
    $
    21,196
    
    
    $
    1742008Primary residential
    
    
    105
    
    
    
    (41
    )
    
    
    64
    
    
    $
    16,700
    
    
    $
    261Active adult communities
    
    
    83
    
    
    
    (28
    )
    
    
    55
    
    
    
    13,553
    
    
    $
    246Total
    
    
    188
    
    
    
    (69
    )
    
    
    119
    
    
    $
    30,253
    
    
    $
    254For the three months ended June 30,2009Primary residential
    
    
    60
    
    
    
    (10
    )
    
    
    50
    
    
    $
    7,555
    
    
    $
    151Active adult communities
    
    
    18
    
    
    
    (3
    )
    
    
    15
    
    
    
    3,303
    
    
    $
    220Total
    
    
    78
    
    
    
    (13
    )
    
    
    65
    
    
    $
    10,858
    
    
    $
    1672008Primary residential
    
    
    48
    
    
    
    (20
    )
    
    
    28
    
    
    $
    7,564
    
    
    $
    270Active adult communities
    
    
    47
    
    
    
    (9
    )
    
    
    38
    
    
    
    10,416
    
    
    $
    274Total
    
    
    95
    
    
    
    (29
    )
    
    
    66
    
    
    $
    17,980
    
    
    $
    272
  Number of
    
    
    Dollar
    
    
    Average PriceUnits
    
    
    Volume
    
    
    Per UnitAs of June 30,2009Primary residential
    
    
    49
    
    
    $
    8,853
    
    
    $
    181Active adult communities
    
    
    25
    
    
    
    6,367
    
    
    $
    255Total
    
    
    74
    
    
    $
    15,220
    
    
    $
    2062008Primary residential
    
    
    54
    
    
    $
    17,159
    
    
    $
    318Active adult communities
    
    
    77
    
    
    
    22,693
    
    
    $
    295Total
    
    
    131
    
    
    $
    39,852
    
    
    $
    304
 35




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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 
      36




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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 
      37




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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 
        38




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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 
   LIQUIDITY AND CAPITAL RESOURCES
     39




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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
 LIQUIDITY AND CAPITAL RESOURCES  continued
      40




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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
 LIQUIDITY AND CAPITAL RESOURCES  continued
    June 30,
    
    
    December 31,2009
    
    
    20084.50% NotesPrincipal amount
    
    $
    64,804
    
    
    $
    78,880Unamortized discount
    
    
    (2,511
    )
    
    
    (3,930
    )Net carrying amount
    
    $
    62,293
    
    
    $
    74,950Equity Component, net of income tax benefit
    
    $
    13,737
    
    
    $
    13,770
   41




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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
 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;
    
    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) of 1.0 or less, 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,
   42




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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
 LIQUIDITY AND CAPITAL RESOURCES  continued
       43




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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
 LIQUIDITY AND CAPITAL RESOURCES  continued
  CovenantFinancial Covenant
    
    Requirement
    
    
    
    ActualMinimum Tangible Net Worth
    
    $
    259,927
    
    
    
    $
    411,257Leverage Ratio (a)
    
    Less than or equal to 1.00
    
    
    
    
    0.04EBITDA/Debt Service Ratio
    
    
    (b
    )
    
    
    
    (b
    )AFFCO Ratio
    
    
    (b
    )
    
    
    
    (b
    )Liquidity/Cash Requirements
    
    $
    75,000/$35,000
    
    
    
    $
    185,343/$182,299Notes Coverage Ratio
    
    Greater than or equal to 2.00
    
    
    
    
    4.5Investments in real estate
related joint ventures
(as a percent of Tangible
Net Worth)
    
    Less than or equal to 25%
    
    
    
    1.4
    %Book value of raw land,
land under development
and developed lots (as a
percent of Tangible Net
Worth)
    
    Less than or equal to 150%
    
    
    
    59
    %
 
 (a)
    
    The Leverage Ratio requirement varies based on our Adjusted EBITDA/Debt Service
Ratio. If our Adjusted EBITDA/Debt Service Ratio is greater than or equal to 2.00 to 1,
the Leverage Ratio requirement is less than or equal to 1.75 to 1. If our Adjusted
EBITDA/Debt Service Ratio is greater than or equal to 1.50 to 1, the Leverage Ratio
requirement is less than or equal to 1.50 to 1. If our Adjusted EBITDA/Debt Service
Ratio is greater than or equal to 1.00 to 1, the Leverage Ratio requirement is less
than or equal to 1.25 to 1. If our Adjusted EBITDA/Debt Service Ratio is less than 1.00
to 1, the Leverage Ratio requirement is less than or equal to 1.00 to 1. (b)
    
    Our Adjusted EBITDA/Debt Service Ratio of negative 8.9 was less than 1.00 to 1
as of June 30, 2009. Our AFFCO Ratio of 3.7 was greater than 1.50 to 1 as of June 30,
2009. We are required to maintain Liquidity of $75,000 of which $35,000 is cash and
cash equivalents.
    44




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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
 LIQUIDITY AND CAPITAL RESOURCES  continued
      45




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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
 LIQUIDITY AND CAPITAL RESOURCES  continued
   CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Business Combinations Business Combinations
 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
 46




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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
 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS  continued
  Disclosure by Public
Entities (Enterprises) About Transfers of Financial Assets and Interests in Variable Interest
Entities Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Subsequent Events
 FASB Accounting Standards Codification
 Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140 ( Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,
 47




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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
 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS  continued
 Amendments to FASB Interpretation No. 46(R)
 The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 , The Hierarchy of Generally Accepted Accounting
Principles,
 
 Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4. Controls and Procedures
   48




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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 ofSharesPurchased as
    
    
    Maximum AmountPart of a
    
    
    That May YetTotal Number
    
    
    Average
    
    
    Publicly
    
    
    Be Purchasedof Shares
    
    
    Price Paid
    
    
    Announced Plan
    
    
    Under the PlanPeriod
    
    Purchased
    
    
    Per Share
    
    
    or Program (1)
    
    
    or Program (1)April 1, 2009 to April 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,962May 1, 2009 to May 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,962June 1, 2009 to June 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,304Total
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    On March 20, 2003, our Board of Directors authorized the expenditure of up to $30,000
to purchase, from time to time, shares of Avatars 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, our Board
of Directors amended the March 20, 2003 repurchase authorization to include the 4.50% Notes
in addition to shares of our common stock. 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 June 30, 2009, the remaining authorization is $18,304. 49




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  ELECTION OF DIRECTORS
 Name
    
    Votes FOR
    
    
    WITHHELDPaul D. Barnett
    
    
    5,894,594
    
    
    
    43,615Milton H. Dresner
    
    
    5,858,593
    
    
    
    79,616Roger W. Einiger
    
    
    5,893,405
    
    
    
    44,804Gerald D. Kelfer
    
    
    5,890,857
    
    
    
    47,352Joshua Nash
    
    
    5,892,039
    
    
    
    46,170Kenneth T. Rosen
    
    
    5,890,945
    
    
    
    47,264Joel M. Simon
    
    
    5,893,799
    
    
    
    44,410Beth A. Stewart
    
    
    5,893,704
    
    
    
    44,505
 APPOINTMENT OF AUDITORS
 Shares Voted 
FOR
    
    Shares Voted
AGAINST
    
    Shares
ABSTAINED
    
    Broker
NON-VOTES5,924,867
    
    6,034
    
    7,308
    
    0
 50




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##### Table of Contents



Item 6. Exhibits
 10.1
    
    
    First Amendment to Amended and Restated Credit Agreement, dated as of
May 21, 2009, by and among Avatar Properties Inc. (Borrower),
Avatar Holdings Inc. (Guarantor), the several lenders from time to
time parties thereto (Lenders), and Wachovia Bank, National
Association (Agent and Lender) (filed as Exhibit 10.1 to Form 8-K
dated May 26, 2009 (File No. 0-7616), and incorporated by reference).10.2
    
    
    Director Compensation (filed herewith).10.3
    
    
    Form of Non-Employee Director Amended and Restated Restricted Stock
Unit Agreement (filed herewith).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).
 51




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SIGNATURES
  AVATAR HOLDINGS INC.Date: August 10, 2009
    By:
    /s/ Randy L. KotlerRandy L. KotlerExecutive Vice President, Chief
Financial Officer and Treasurer Date: August 10, 2009
    By:
    /s/ Michael P. RamaMichael P. RamaController and Chief Accounting Officer 52




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##### Table of Contents



Exhibit Index
 10.1
    
    
    First Amendment to Amended and Restated Credit Agreement, dated as of
May 21, 2009, by and among Avatar Properties Inc. (Borrower),
Avatar Holdings Inc. (Guarantor), the several lenders from time to
time parties thereto (Lenders), and Wachovia Bank, National
Association (Agent and Lender) (filed as Exhibit 10.1 to Form 8-K
dated May 26, 2009 (File No. 0-7616), and incorporated by reference).10.2
    
    
    Director Compensation (filed herewith).10.3
    
    
    Form of Non-Employee Director Amended and Restated Restricted Stock
Unit Agreement (filed herewith).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).
 53