##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 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(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o þ




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##### 



AVATAR HOLDINGS INC. AND SUBSIDIARIES
 INDEX
 PAGEPART I. Financial InformationItem 1. Financial Statements (Unaudited):Consolidated Balance Sheets 
September 30, 2009 and December 31,
2008
    
    
    3Consolidated Statements of Operations 
Nine and three months ended September 30, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows 
Nine months ended September 30, 2009 and
2008
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of
Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    51Item 4. Controls and Procedures
    
    
    51PART II. Other InformationItem 1A. Risk Factors
    
    
    52Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    59Item 6. Exhibits
    
    
    60EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I    FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AVATAR HOLDINGS INC. AND SUBSIDIARIES
 September 30,
    
    
    December 31,2009
    
    
    2008AssetsCash and cash equivalents
    
    $
    218,547
    
    
    $
    175,396Restricted cash
    
    
    1,438
    
    
    
    1,614Receivables, net
    
    
    4,241
    
    
    
    3,144Income tax receivable
    
    
    3,604
    
    
    
    21,503Land and other inventories
    
    
    287,309
    
    
    
    304,071Property and equipment, net
    
    
    50,832
    
    
    
    53,485Poinciana Parkway
    
    
    16,062
    
    
    
    16,168Investment in and notes receivable from unconsolidated entities
    
    
    5,786
    
    
    
    5,790Prepaid expenses and other assets
    
    
    8,319
    
    
    
    10,806Deferred income taxes
    
    
    
    
    
    
    2,835Total Assets
    
    $
    596,138
    
    
    $
    594,812Liabilities and Stockholders EquityLiabilitiesAccounts payable
    
    $
    261
    
    
    $
    1,484Accrued and other liabilities
    
    
    12,693
    
    
    
    8,677Customer deposits and deferred revenues
    
    
    2,475
    
    
    
    3,611Estimated development liability for sold land
    
    
    21,459
    
    
    
    20,468Notes, mortgage notes and other debt:Corporate
    
    
    62,652
    
    
    
    74,950Real estate
    
    
    56,002
    
    
    
    56,111Total Liabilities
    
    
    155,542
    
    
    
    165,301Commitments and contingenciesStockholders EquityCommon Stock, par value $1 per shareAuthorized: 50,000,000 sharesIssued: 13,745,523 shares at September 30, 200911,488,259 shares at December 31, 2008
    
    
    13,746
    
    
    
    11,488Additional paid-in capital
    
    
    281,058
    
    
    
    245,049Retained earnings
    
    
    224,729
    
    
    
    251,911519,533
    
    
    
    508,448Treasury stock: at cost, 2,658,461 shares at September 30, 2009
and December 31, 2008
    
    
    (78,937
    )
    
    
    (78,937
    )Total Stockholders Equity
    
    
    440,596
    
    
    
    429,511Total Liabilities and Stockholders Equity
    
    $
    596,138
    
    
    $
    594,812
 See notes to consolidated financial statements.
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##### Table of Contents



AVATAR HOLDINGS INC. AND SUBSIDIARIES
 Nine Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesReal estate revenues
    
    $
    48,749
    
    
    $
    75,179
    
    
    $
    16,737
    
    
    $
    21,533Interest income
    
    
    522
    
    
    
    2,289
    
    
    
    144
    
    
    
    639Other
    
    
    3,683
    
    
    
    353
    
    
    
    1,371
    
    
    
    187Total revenues
    
    
    52,954
    
    
    
    77,821
    
    
    
    18,252
    
    
    
    22,359ExpensesReal estate expenses
    
    
    61,254
    
    
    
    81,399
    
    
    
    21,736
    
    
    
    26,165Impairment charges
    
    
    2,008
    
    
    
    27,228
    
    
    
    332
    
    
    
    27,228General and administrative expenses
    
    
    12,924
    
    
    
    15,355
    
    
    
    3,913
    
    
    
    4,372Interest expense
    
    
    5,182
    
    
    
    2,510
    
    
    
    1,632
    
    
    
    1,114Total expenses
    
    
    81,368
    
    
    
    126,492
    
    
    
    27,613
    
    
    
    58,879Equity losses from unconsolidated entities
    
    
    (215
    )
    
    
    (551
    )
    
    
    (67
    )
    
    
    (89
    )Loss before income taxes
    
    
    (28,629
    )
    
    
    (49,222
    )
    
    
    (9,428
    )
    
    
    (36,609
    )Income tax benefit
    
    
    1,447
    
    
    
    19,304
    
    
    
    617
    
    
    
    14,484Net loss
    
    $
    (27,182
    )
    
    $
    (29,918
    )
    
    $
    (8,811
    )
    
    $
    (22,125
    )Basic and Diluted Loss Per Share
    
    $
    (3.13
    )
    
    $
    (3.50
    )
    
    $
    (1.01
    )
    
    $
    (2.59
    )
 See notes to consolidated financial statements.
 4




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##### Table of Contents



AVATAR HOLDINGS INC. AND SUBSIDIARIES
 2009
    
    
    2008OPERATING ACTIVITIESNet loss
    
    $
    (27,182
    )
    
    $
    (29,918
    )Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    4,066
    
    
    
    4,815Amortization of stock-based compensation
    
    
    1,455
    
    
    
    2,246Impairment of land and other inventories
    
    
    1,560
    
    
    
    27,228Impairment of the Poinciana Parkway
    
    
    448
    
    
    
    Gain from repurchase of 4.50% Notes
    
    
    (1,783
    )
    
    
    Return of earnings from an unconsolidated entity
    
    
    (148
    )
    
    
    (132
    )Equity losses from unconsolidated entities
    
    
    215
    
    
    
    551Deferred income taxes
    
    
    2,005
    
    
    
    (11,896
    )Excess income tax benefit from exercise of stock options and restricted stock
units
    
    
    
    
    
    
    2Changes in operating assets and liabilities:Restricted cash
    
    
    176
    
    
    
    1,682Receivables, net
    
    
    (1,097
    )
    
    
    (2,833
    )Income tax receivable
    
    
    17,899
    
    
    
    Land and other inventories
    
    
    15,735
    
    
    
    76Prepaid expenses and other assets
    
    
    2,375
    
    
    
    3,724Accounts payable and accrued and other liabilities
    
    
    2,418
    
    
    
    526Customer deposits and deferred revenues
    
    
    (1,136
    )
    
    
    (558
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    17,006
    
    
    
    (4,487
    )INVESTING ACTIVITIESInvestment in property and equipment
    
    
    (46
    )
    
    
    (1,836
    )Investment in Poinciana Parkway
    
    
    (342
    )
    
    
    (13,497
    )Investment in unconsolidated entities
    
    
    (7
    )
    
    
    (37
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (395
    )
    
    
    (15,370
    )FINANCING ACTIVITIESRepurchase of 4.50% Notes
    
    
    (11,627
    )
    
    
    Principal payments of real estate borrowings
    
    
    (109
    )
    
    
    (15,855
    )Net proceeds from issuance of common stock
    
    
    38,276
    
    
    
    Proceeds from exercise of stock options
    
    
    
    
    
    
    500Excess income tax benefit from exercise of stock options and restricted stock units
    
    
    
    
    
    
    (2
    )Payment of withholding taxes related to restricted stock units withheld
    
    
    
    
    
    
    (52
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    26,540
    
    
    
    (15,409
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    43,151
    
    
    
    (35,266
    )Cash and cash equivalents at beginning of period
    
    
    175,396
    
    
    
    192,258CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    218,547
    
    
    $
    156,992
 See notes to consolidated financial statements.
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AVATAR HOLDINGS INC. AND SUBSIDIARIES  
 Notes to Consolidated Financial Statements (Unaudited)  September 30, 2009
 (Dollars in thousands except share and per share data)
 Basis of Financial Statement Presentation and Summary of Significant Accounting Policies
     Reclassifications
  Recently Issued Accounting Pronouncements
 Generally Accepted Accounting Principles 
Overall FASB Accounting Standards Codification
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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
  Business Combinations
 Subsequent Events  Overall
 Investments  Debt and Equity Securities 
Overall  Transition and Open Effective Date Information
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 Consolidation
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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
 Transition and Open Effective Date
Information
 Fair Value Measurements and Disclosures (Topic
820)  Measuring Liabilities at Fair Value
 Adoption of New Accounting Pronouncement
 Debt
with Conversion Options  Cash Conversion
  8




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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
    )
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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
  Nine Months
    
    Three MonthsAs Originally
    
    As
    
    Effect of
    
    As Originally
    
    As
    
    Effect ofReported
    
    Adjusted
    
    Change
    
    Reported
    
    Adjusted
    
    ChangeReal estate expenses
    
    $
    80,367
    
    
    $
    81,399
    
    
    $
    1,032
    
    
    $
    25,821
    
    
    $
    26,165
    
    
    $
    344Interest expense
    
    $
    1,733
    
    
    $
    2,510
    
    
    $
    777
    
    
    $
    782
    
    
    $
    1,114
    
    
    $
    332Loss before income taxes
    
    $
    (47,413
    )
    
    $
    (49,222
    )
    
    $
    (1,809
    )
    
    $
    (35,933
    )
    
    $
    (36,609
    )
    
    $
    (676
    )Income tax benefit
    
    $
    18,607
    
    
    $
    19,304
    
    
    $
    697
    
    
    $
    14,223
    
    
    $
    14,484
    
    
    $
    261Net loss
    
    $
    (28,806
    )
    
    $
    (29,918
    )
    
    $
    (1,112
    )
    
    $
    (21,710
    )
    
    $
    (22,125
    )
    
    $
    (415
    )Basic and diluted loss per share
    
    $
    (3.37
    )
    
    $
    (3.50
    )
    
    $
    (0.13
    )
    
    $
    (2.54
    )
    
    $
    (2.59
    )
    
    $
    (0.05
    )
 Cash and Cash Equivalents
  Land and Other Inventories
  10




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Land and Other Inventories  continued
 Property, Plant and Equipment
     
    
    The average price on sales closed from primary residential homebuilding operations
has decreased approximately 49% from $323 in fiscal year 2006 to $164 during the nine
months ended September 30, 2009. Our average sales price on sales contracts entered into
during the nine and three months ended September 30, 2009 declined to $162 and $159,
respectively, compared to $262 and $268 for the nine and three months ended September
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 nine months ended September 30, 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 18% from $298 in fiscal year 2006 to $245 during the nine months
ended September 30, 2009. Our average sales price on sales contracts entered into during
the nine and three months ended September 30, 2009 declined to $201 and $195,
respectively, compared to $247 and $250 for the nine and three months ended September
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 15% during the nine months ended September 30, 2009.
  Housing communities:
   Land developed and/or held for future development or sale:
 12




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Land and Other Inventories  continued
    September 30,
    
    
    December 31,2009
    
    
    2008Land developed and in process of development
    
    $
    153,168
    
    
    $
    153,623Land held for future development or sale
    
    
    96,029
    
    
    
    96,054Homes completed or under construction
    
    
    30,321
    
    
    
    53,692Recent property acquisition
    
    
    7,326
    
    
    
    Other
    
    
    465
    
    
    
    702$
    287,309
    
    
    $
    304,071
    13




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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
   Property and Equipment
    Poinciana Parkway
   14




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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
  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
 September 30,
    
    
    December 31,2009
    
    
    20084.50% NotesPrincipal amount
    
    $
    64,804
    
    
    $
    78,880Unamortized discount
    
    
    (2,152
    )
    
    
    (3,930
    )Net carrying amount
    
    $
    62,652
    
    
    $
    74,950Equity Component, net of income tax benefit
    
    $
    13,737
    
    
    $
    13,770
    
    
    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
 17




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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
 
    
    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.
     18




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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
  19




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Warranty Costs  continued
  Nine Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Accrued warranty reserve, beginning of period
    
    $
    468
    
    
    $
    1,134
    
    
    $
    513
    
    
    $
    645Estimated warranty expense
    
    
    541
    
    
    
    567
    
    
    
    204
    
    
    
    205Amounts charged against warranty reserve
    
    
    (524
    )
    
    
    (1,151
    )
    
    
    (232
    )
    
    
    (300
    )Accrued warranty reserve, end of period
    
    $
    485
    
    
    $
    550
    
    
    $
    485
    
    
    $
    550
 Common Stock Offering
  20




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Loss Per Share
 Earnings Per Share.
   Nine Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Basic and diluted loss per share  net loss
    
    $
    (27,182
    )
    
    $
    (29,918
    )
    
    $
    (8,811
    )
    
    $
    (22,125
    )Denominator:Basic and diluted weighted average shares
outstanding
    
    
    8,680,873
    
    
    
    8,547,899
    
    
    
    8,733,183
    
    
    
    8,558,057
 Repurchase of Common Stock and Notes
  Comprehensive Loss
  21




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Share-Based Payments and Other Executive Compensation
     Income Taxes
  Income Taxes
  22




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Income Taxes  continued
   Fair Value Disclosures
 Fair Value Measurements and Disclosures
 Overall
 Fair Value Measurements and
Disclosures  Overall  Transition and Open Effective Date Information
 Financial Instruments  Overall 
Transition and Open Effective Date Information
 23




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Fair Value Disclosures  continued
  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.
    Fair Value
    
    Fair Value atNon-financial Assets
    
    Hierarchy
    
    September 30, 2009
    
    LossesHomes completed or under construction
    
    Level 2
    
    $
    5,405
    
    
    $
    332
   24




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Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Fair Value Disclosures  continued
  September 30, 2009
    
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueCash and cash equivalents
    
    $
    218,547
    
    
    $
    218,547
    
    
    $
    175,396
    
    
    $
    175,396Restricted cash
    
    $
    1,438
    
    
    $
    1,438
    
    
    $
    1,614
    
    
    $
    1,614Receivables, net
    
    $
    4,241
    
    
    $
    4,241
    
    
    $
    3,144
    
    
    $
    3,144Income tax receivable
    
    $
    3,604
    
    
    $
    3,604
    
    
    $
    21,503
    
    
    $
    21,503Notes, mortgage notes and other debt:Corporate:4.50% Notes
    
    $
    62,652
    
    
    $
    58,648
    
    
    $
    74,950
    
    
    $
    59,752Real estate:5.50% Term Bonds payable
    
    $
    111
    
    
    $
    102
    
    
    $
    111
    
    
    $
    100Amended Unsecured Credit Facility
    
    $
    55,891
    
    
    $
    54,005
    
    
    $
    56,000
    
    
    $
    53,195
 In estimating the fair value of financial instruments, we used the following methods and
assumptions:
 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
  25




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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
     September 30,
    
    
    December 31,2009
    
    
    2008Assets:Cash
    
    $
    513
    
    
    $
    645Receivables
    
    
    1,500
    
    
    
    1,500Land and other inventory
    
    
    10,732
    
    
    
    10,686Total assets
    
    $
    12,745
    
    
    $
    12,831Liabilities and Partners Capital:Accounts payable and accrued liabilities
    
    $
    835
    
    
    $
    731Notes and interest payable to Avatar
    
    
    3,724
    
    
    
    3,669Partners Capital of:Avatar
    
    
    2,062
    
    
    
    2,121Equity partner
    
    
    6,124
    
    
    
    6,310Total liabilities and partners capital
    
    $
    12,745
    
    
    $
    12,831
  Nine Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    43
    
    
    $
    250
    
    
    $
    12
    
    
    $
    (10
    )Costs and expenses
    
    
    578
    
    
    
    1,342
    
    
    
    181
    
    
    
    168Net loss from unconsolidated entities
    
    $
    (535
    )
    
    $
    (1,092
    )
    
    $
    (169
    )
    
    $
    (178
    )Avatars share of loss from unconsolidated entities
    
    $
    (215
    )
    
    $
    (551
    )
    
    $
    (67
    )
    
    $
    (89
    )
 26




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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
  September 30,
    
    
    December 31,2009
    
    
    2008Gross estimated unexpended costs
    
    $
    26,931
    
    
    $
    26,518Less costs relating to unsold homesites
    
    
    (5,472
    )
    
    
    (6,050
    )Estimated development liability for sold land
    
    $
    21,459
    
    
    $
    20,468
  Commitments and Contingencies
 Loss
Contingencies .
  27




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##### Table of Contents



Notes to Consolidated Financial Statements (dollars in thousands except share and per share
data) (Unaudited)  continued
 Financial Information Relating To Reportable Segments
  Nine Months
    
    Three MonthsRevenues:
    
    2009
    
    2008
    
    2009
    
    2008Segment revenuesPrimary residential
    
    $
    20,055
    
    
    $
    32,616
    
    
    $
    8,215
    
    
    $
    10,743Active adult communities
    
    
    25,929
    
    
    
    31,754
    
    
    
    8,253
    
    
    
    10,423Commercial and industrial and other land sales
    
    
    2,071
    
    
    
    9,729
    
    
    
    7
    
    
    
    167Other operations
    
    
    873
    
    
    
    1,166
    
    
    
    342
    
    
    
    27648,928
    
    
    
    75,265
    
    
    
    16,817
    
    
    
    21,609Unallocated revenuesInterest income
    
    
    522
    
    
    
    2,289
    
    
    
    144
    
    
    
    639Gain on repurchase of 4.50% Notes
    
    
    1,783
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    1,721
    
    
    
    267
    
    
    
    1,291
    
    
    
    111Total revenues
    
    $
    52,954
    
    
    $
    77,821
    
    
    $
    18,252
    
    
    $
    22,359Operating
income (loss):Segment operating income (loss)Primary residential
    
    $
    (6,230
    )
    
    $
    (6,298
    )
    
    $
    (1,971
    )
    
    $
    (1,898
    )Active adult communities
    
    
    (3,782
    )
    
    
    (2,333
    )
    
    
    (1,529
    )
    
    
    (852
    )Commercial and industrial and other land sales
    
    
    1,929
    
    
    
    9,234
    
    
    
    (58
    )
    
    
    127Other operations
    
    
    203
    
    
    
    (116
    )
    
    
    98
    
    
    
    (64
    )(7,880
    )
    
    
    487
    
    
    
    (3,460
    )
    
    
    (2,687
    )Unallocated income (expenses)Interest income
    
    
    522
    
    
    
    2,289
    
    
    
    144
    
    
    
    639Gain on repurchase of 4.50% Notes
    
    
    1,783
    
    
    
    
    
    
    
    
    
    
    
    Equity loss from unconsolidated entities
    
    
    (215
    )
    
    
    (551
    )
    
    
    (67
    )
    
    
    (89
    )General and administrative expenses
    
    
    (12,924
    )
    
    
    (15,355
    )
    
    
    (3,913
    )
    
    
    (4,372
    )Interest expense
    
    
    (5,182
    )
    
    
    (2,510
    )
    
    
    (1,632
    )
    
    
    (1,114
    )Other real estate expenses, net
    
    
    (4,285
    )
    
    
    (6,354
    )
    
    
    (500
    )
    
    
    (1,758
    )Impairment of the Poinciana Parkway
    
    
    (448
    )
    
    
    (27,228
    )
    
    
    
    
    
    
    (27,228
    )Loss before income taxes
    
    $
    (28,629
    )
    
    $
    (49,222
    )
    
    $
    (9,428
    )
    
    $
    (36,609
    )
 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)
    EXECUTIVE SUMMARY
  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
 EXECUTIVE SUMMARY  continued
      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
 EXECUTIVE SUMMARY  continued
 Common Stock Offering
  Land Inventory
   31




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##### Table of Contents



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) (2)Acquisition
    
    Contract
    
    
    
    
    
    Partially
    
    
    
    
    
    
    
    
    
    BookDate
    
    Date
    
    Developed
    
    Developed
    
    Raw (3)
    
    Total
    
    ValueResidentialOsceola County, FloridaPre-1980
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    2,200
    
    
    
    2,400
    
    
    $
    5,2251999-2001
    
    
    
    
    
    
    500
    
    
    
    700
    
    
    
    
    
    
    
    1,200
    
    
    
    45,2392003
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    7,8802004
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    1,400
    
    
    
    1,400
    
    
    
    19,3072006
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    1,600
    
    
    
    19,281Total Osceola County
    
    
    
    
    
    
    700
    
    
    
    700
    
    
    
    6,200
    
    
    
    7,600
    
    
    
    96,932Polk
County, FloridaPre-1980
    
    
    
    
    
    
    900
    
    
    
    1,000
    
    
    
    2,400
    
    
    
    4,300
    
    
    $
    21,5372003
    
    
    2002-2003
    
    
    
    900
    
    
    
    
    
    
    
    100
    
    
    
    1,000
    
    
    
    32,6282004
    
    
    2002-2003
    
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    2,500
    
    
    
    19,9662005
    
    
    2004
    
    
    
    200
    
    
    
    
    
    
    
    300
    
    
    
    500
    
    
    
    6,043Total Polk County
    
    
    
    
    
    
    2,000
    
    
    
    1,000
    
    
    
    5,300
    
    
    
    8,300
    
    
    
    80,174Martin County, Florida1981-1987
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    200
    
    
    
    275
    
    
    
    6,902Palm Beach County, Florida
(4)2005
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    6,680Hillsborough County, Florida2002
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    1,629Hernando County, Florida2004-2005
    
    
    2003
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    30Collier County, FloridaPre-1980
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    191Highlands County, FloridaPre-1980
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    40
    
    
    
    80
    
    
    
    104Santa Cruz County (Rio Rico),
ArizonaPre-1980
    
    
    
    
    
    
    600
    
    
    
    300
    
    
    
    3,700
    
    
    
    4,600
    
    
    
    10,495Total Residential
    
    
    
    
    
    
    3,635
    
    
    
    2,005
    
    
    
    15,540
    
    
    
    21,180
    
    
    $
    203,137
 32




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands except share and per share data)  continued
 EXECUTIVE SUMMARY  continued
 Land Inventory  continued
 Acquisition
    
    Contract
    
    Estimated
    
    BookDate
    
    Date
    
    Acres
    
    ValueCommercial/Industrial/InstitutionalFloridaPre-1980
    
    
    
    
    
    
    1,300
    
    
    $
    7,4302004 (5)
    
    
    2004
    
    
    
    300
    
    
    
    14,7652005 (5)
    
    
    2004
    
    
    
    400
    
    
    
    15,576Total Florida
    
    
    
    
    
    
    2,000
    
    
    $
    37,771ArizonaPre-1980
    
    
    
    
    
    
    200
    
    
    
    267Total Commercial/Industrial/Institutional


    
    
    
    
    
    2,200

    
    
    $
    38,038OtherPreserves, wetlands, open
spacePre-1980
    
    
    
    
    
    
    
    
    
    $
    3,175Other
    
    
    
    
    
    
    
    
    
    
    4,847Total Other
    
    
    
    
    
    
    
    
    
    $
    8,022
 
 (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)
    
    On September 24, 2009, we acquired 87 completed and partially completed homes,
267 developed lots, 364 partially developed lots and approximately 400 undeveloped master
planned lots in a residential community located in St. Lucie County, Florida. The purchase
price was approximately $7,326. We have not finalized the allocation of
the purchase price to the specific components of the property for this acquisition;
therefore the developed, partially developed and undeveloped lots
have not yet been included in this
schedule.(3)
    
    We anticipate that with respect to our inventory of undeveloped land, new lots
developed over the next several years are likely to be developed at greater density per
acre than the density per acre we have undertaken over the past several years. We
anticipate evolving market demand for smaller 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.(4)
    
    Units represent approximately 300,000 square feet of planned condominium-type
residential units.(5)
    
    During the 4th quarter 2008, our plans for this property changed from developing
it as single family housing to permitting as commercial/industrial/institutional land. 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
 EXECUTIVE SUMMARY  continued
     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
  Nine Months
    
    
    Three Months2009
    
    
    2008
    
    
    2009
    
    
    2008Operating
income (loss):Primary residentialRevenues
    
    $
    20,055
    
    
    $
    32,616
    
    
    $
    8,215
    
    
    $
    10,743Expenses
    
    
    26,285
    
    
    
    38,914
    
    
    
    10,186
    
    
    
    12,641Segment operating loss
    
    
    (6,230
    )
    
    
    (6,298
    )
    
    
    (1,971
    )
    
    
    (1,898
    )Active adult communitiesRevenues
    
    
    25,929
    
    
    
    31,754
    
    
    
    8,253
    
    
    
    10,423Expenses
    
    
    29,711
    
    
    
    34,087
    
    
    
    9,782
    
    
    
    11,275Segment operating loss
    
    
    (3,782
    )
    
    
    (2,333
    )
    
    
    (1,529
    )
    
    
    (852
    )Commercial and industrial and other land salesRevenues
    
    
    2,071
    
    
    
    9,729
    
    
    
    7
    
    
    
    167Expenses
    
    
    142
    
    
    
    495
    
    
    
    65
    
    
    
    40Segment operating income
    
    
    1,929
    
    
    
    9,234
    
    
    
    (58
    )
    
    
    127Other operationsRevenues
    
    
    873
    
    
    
    1,166
    
    
    
    342
    
    
    
    276Expenses
    
    
    670
    
    
    
    1,282
    
    
    
    244
    
    
    
    340Segment operating income (loss)
    
    
    203
    
    
    
    (116
    )
    
    
    98
    
    
    
    (64
    )Operating income (loss)
    
    
    (7,880
    )
    
    
    487
    
    
    
    (3,460
    )
    
    
    (2,687
    )Unallocated income (expenses):Interest income
    
    
    522
    
    
    
    2,289
    
    
    
    144
    
    
    
    639Gain on repurchase of 4.50% Notes
    
    
    1,783
    
    
    
    
    
    
    
    
    
    
    
    Equity loss from unconsolidated entities
    
    
    (215
    )
    
    
    (551
    )
    
    
    (67
    )
    
    
    (89
    )General and administrative expenses
    
    
    (12,924
    )
    
    
    (15,355
    )
    
    
    (3,913
    )
    
    
    (4,372
    )Interest expense
    
    
    (5,182
    )
    
    
    (2,510
    )
    
    
    (1,632
    )
    
    
    (1,114
    )Other real estate expenses, net
    
    
    (4,285
    )
    
    
    (6,354
    )
    
    
    (500
    )
    
    
    (1,758
    )Impairment of the Poinciana Parkway
    
    
    (448
    )
    
    
    (27,228
    )
    
    
    
    
    
    
    (27,228
    )Loss before income taxes
    
    
    (28,629
    )
    
    
    (49,222
    )
    
    
    (9,428
    )
    
    
    (36,609
    )Income tax benefit
    
    
    1,447
    
    
    
    19,304
    
    
    
    617
    
    
    
    14,484Net loss
    
    $
    (27,182
    )
    
    $
    (29,918
    )
    
    $
    (8,811
    )
    
    $
    (22,125
    )
 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 
  Number of
    
    
    
    
    
    
    Average PriceUnits
    
    
    Revenues
    
    
    Per UnitFor
the nine months ended September 30,2009Primary residential
    
    
    109
    
    
    $
    17,837
    
    
    $
    164Active adult communities
    
    
    71
    
    
    
    17,420
    
    
    $
    245Total
    
    
    180
    
    
    $
    35,257
    
    
    $
    1962008Primary residential
    
    
    118
    
    
    $
    30,978
    
    
    $
    263Active adult communities
    
    
    83
    
    
    
    22,744
    
    
    $
    274Total
    
    
    201
    
    
    $
    53,722
    
    
    $
    267For
the three months ended September 30,2009Primary residential
    
    
    53
    
    
    $
    7,582
    
    
    $
    143Active adult communities
    
    
    23
    
    
    
    5,620
    
    
    $
    244Total
    
    
    76
    
    
    $
    13,202
    
    
    $
    1742008Primary residential
    
    
    36
    
    
    $
    10,375
    
    
    $
    288Active adult communities
    
    
    30
    
    
    
    7,815
    
    
    $
    261Total
    
    
    66
    
    
    $
    18,190
    
    
    $
    276
 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 
  Gross Number
    
    
    
    
    
    
    Contracts
    
    
    
    
    
    
    Averageof Contracts
    
    
    
    
    
    
    Signed, Net of
    
    
    
    
    
    
    Price PerSigned
    
    
    Cancellations
    
    
    Cancellations
    
    
    Dollar Value
    
    
    UnitFor
the nine months ended September 30,2009Primary residential
    
    
    148
    
    
    
    (25
    )
    
    
    123
    
    
    $
    19,926
    
    
    $
    162Active adult communities
    
    
    50
    
    
    
    (9
    )
    
    
    41
    
    
    
    8,247
    
    
    $
    201Total
    
    
    198
    
    
    
    (34
    )
    
    
    164
    
    
    $
    28,173
    
    
    $
    1722008Primary residential
    
    
    124
    
    
    
    (52
    )
    
    
    72
    
    
    $
    18,845
    
    
    $
    262Active adult communities
    
    
    109
    
    
    
    (35
    )
    
    
    74
    
    
    
    18,307
    
    
    $
    247Total
    
    
    233
    
    
    
    (87
    )
    
    
    146
    
    
    $
    37,152
    
    
    $
    255For the three months ended September
30,2009Primary residential
    
    
    40
    
    
    
    (6
    )
    
    
    34
    
    
    $
    5,420
    
    
    $
    159Active adult communities
    
    
    9
    
    
    
    (1
    )
    
    
    8
    
    
    
    1,557
    
    
    $
    195Total
    
    
    49
    
    
    
    (7
    )
    
    
    42
    
    
    $
    6,977
    
    
    $
    1662008Primary residential
    
    
    19
    
    
    
    (11
    )
    
    
    8
    
    
    $
    2,145
    
    
    $
    268Active adult communities
    
    
    26
    
    
    
    (7
    )
    
    
    19
    
    
    
    4,754
    
    
    $
    250Total
    
    
    45
    
    
    
    (18
    )
    
    
    27
    
    
    $
    6,899
    
    
    $
    256
  Number of
    
    
    Dollar
    
    
    Average PriceUnits
    
    
    Volume
    
    
    Per UnitAs of
September 30,2009Primary residential
    
    
    30
    
    
    $
    6,690
    
    
    $
    223Active adult communities
    
    
    10
    
    
    
    2,305
    
    
    $
    231Total
    
    
    40
    
    
    $
    8,995
    
    
    $
    2252008Primary residential
    
    
    26
    
    
    $
    8,929
    
    
    $
    343Active adult communities
    
    
    66
    
    
    
    19,632
    
    
    $
    295Total
    
    
    92
    
    
    $
    28,561
    
    
    $
    310
 37




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##### Table of Contents



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




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands except share and per share data)  continued
 RESULTS OF OPERATIONS 
        40




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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
    41




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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
       42




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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
    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
  September 30,
    
    
    December 31,2009
    
    
    20084.50%
NotesPrincipal amount
    
    $
    64,804
    
    
    $
    78,880Unamortized discount
    
    
    (2,152
    )
    
    
    (3,930
    )Net carrying amount
    
    $
    62,652
    
    
    $
    74,950Equity Component, net of income tax benefit
    
    $
    13,737
    
    
    $
    13,770
    
    
    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
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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
 
    
    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.
      45




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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
      CovenantFinancial Covenant
    
    Requirement
    
    ActualMinimum Tangible Net Worth
    
    
    $288,783
    
    
    $440,596Leverage Ratio (a)
    
    Less than or equal to 1.00
    
    
    0.02EBITDA/Debt Service Ratio
    
    
    
    (b)
    
    
    (b
    )AFFCO Ratio
    
    
    
    (b)
    
    
    (b
    )Liquidity/Cash Requirements
    
    
    $75,000/$35,000
    
    
    $221,603/$218,547Notes 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%
    
    
    1.3
    %Book value of raw land,
land under development
and developed lots (as a
percent of Tangible Net
Worth)
    
    Less than or equal to 150%
    
    
    57
    %
 46




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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)
    
    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 11.8 was less than 1.00 to 1
as of September 30, 2009. Our AFFCO Ratio of 1.20 was less than 1.50 to 1 as of
September 30, 2009. We are required to maintain Liquidity of $75,000 of which $35,000
is cash and cash equivalents.
      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
 LIQUIDITY AND CAPITAL RESOURCES  continued
      CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  48




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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
 Generally Accepted Accounting Principles -
Overall FASB Accounting Standards Codification
 Business Combinations
 Subsequent Events  Overall
 Investments  Debt and Equity Securities -
Overall  Transition and Open Effective Date Information
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 49




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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
 Consolidation
 Transition and Open Effective Date
Information
 Fair Value Measurements and Disclosures (Topic
820)  Measuring Liabilities at Fair Value
 50




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Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4. Controls and Procedures
   51




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PART II  OTHER INFORMATION
 
 Item 1A. Risk Factors (dollars in thousands except share and per share data)
  The economic recession we are experiencing may continue for an extended period, has created greater
uncertainty in our ability to forecast our business needs, and has adversely affected our business
and results of operations compared to prior periods
   Our industry is highly cyclical and is affected by general economic conditions and other factors
beyond our control
  The current economic environment has increased our deficit funding obligations for club and
homeowner association obligations
  52




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##### Table of Contents



Item 1A. Risk Factors (dollars in thousands except share and per share data)  continued
 A continuing decline in real estate values could result in additional impairment write-downs
  We are concentrated geographically, which could adversely affect our business
  Our access to financing may be limited
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Item 1A. Risk Factors (dollars in thousands except share and per share data)  continued
  Further decline in the capital markets or fluctuations in interest rates could have a further
adverse effect on our business
  Our success significantly depends on our key personnel and our ability to retain personnel
  Our joint ventures and equity partnerships may not achieve anticipated results
  Our business is subject to substantial competition
  54




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##### Table of Contents



Item 1A. Risk Factors (dollars in thousands except share and per share data)  continued
  We are subject to extensive governmental regulation and environmental considerations
    Certain events could trigger the acceleration of payment of our 4.50% Notes
  55




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##### Table of Contents



Item 1A. Risk Factors (dollars in thousands except share and per share data)  continued
 Failure to purchase replacement property or obtain an extension of time in which to do so could
result in a reduction in available cash
  We are subject to construction defect and home warranty claims arising in the ordinary course of
business, which may lead to additional reserves or expenses
   If we do not secure funding for our Poinciana Parkway project on commercially reasonable terms and
commence construction by February 14, 2011, we will be in default under our agreements with Polk
and Osceola Counties regarding the Poinciana Parkway, and we may not recover our investment in the
Poinciana Parkway, which has already been substantially impaired
  56




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##### Table of Contents



Item 1A. Risk Factors (dollars in thousands except share and per share data)  continued
   The price of our common stock may fluctuate and you could lose all or a significant part of your
investment
  
    
    announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
    
    variations in quarterly operating results;
    
    general economic conditions;
    
    war, terrorist acts and epidemic disease;
    
    future sales of our common stock or securities linked to our common stock;
    
    investor perceptions of us and the home building industry; and
    
    the failure of securities analysts to cover our common stock, or to the
extent covered, changes in financial estimates by analysts or a downgrade
 of our stock or sector by analysts.
  57




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##### Table of Contents



Item 1A. Risk Factors (dollars in thousands except share and per share data)  continued
 Future sales of common stock by our existing stockholders may cause our stock price to fall
  Our share price could decline if a large number of shares of our common stock or equity-related
securities become eligible for future sale
  We have never paid dividends on our common stock, and we do not anticipate paying any cash
dividends in the foreseeable future
  58




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##### Table of Contents



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, 2009 to July 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,304August 1, 2009 to August 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,304September 1, 2009 to September 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 (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 September 30, 2009, the
remaining authorization is $18,304. 59




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##### Table of Contents



Item 6. Exhibits
 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).
 60




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##### Table of Contents



SIGNATURES
  AVATAR HOLDINGS INC.Date: November 9, 2009
    By:
    /s/ Randy L. KotlerRandy L. KotlerExecutive Vice President, Chief
Financial Officer and TreasurerDate: November 9, 2009
    By:
    /s/ Michael P. RamaMichael P. RamaController and Chief Accounting Officer 61




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Exhibit Index
 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).
 62