##### 



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 333-130488
 Stanley-Martin Communities, LLC
  DELAWARE
    
    03-0410135(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 
 Registrants telephone number, including area code:
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
 NONE
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ




---



##### 



Stanley-Martin Communities, LLC
 Item
    
    
    
    PageNo.
    
    
    
    No.Part I1
    
    Business
    
    
    31A
    
    Risk Factors
    
    
    181B
    
    Unresolved Staff Comments
    
    
    262
    
    Properties
    
    
    263
    
    Legal Proceedings
    
    
    264
    
    Submission of Matters to a Vote of Security Holders
    
    
    26Part II5
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    276
    
    Selected Financial Data
    
    
    277
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    297A
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    398
    
    Financial Statements and Supplementary Data
    
    
    419
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    649A
    
    Controls and Procedures
    
    
    649B
    
    Other Information
    
    
    64Part III10
    
    Directors, Executive Officers and Corporate Governance
    
    
    6511
    
    Executive Compensation
    
    
    6512
    
    Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters
    
    
    6813
    
    Certain Relationships and Related Transactions
    
    
    6814
    
    Principal Accountant Fees and Services
    
    
    69Part IV15
    
    Exhibits and Financial Statement Schedules
    
    
    71Signatures
    
    
    76




---



##### 



PART I
 
 ITEM 1. BUSINESS
 Overview
      Reorganization
   
 (1)
    
    Neighborhood Holdings, LLC is not a guarantor of our $150 million
senior subordinated notes (the Notes) or subject to the
covenants of the indenture governing the Notes. In addition to
Stanley-Martin Communities, LLC, Neighborhood Holdings has one
other subsidiary, Stanley Martin Woodlands, LLC as of December
31, 2006. On September 22, 2006, Neighborhood Holdings
contributed Wildewood Residential, LLC to our wholly owned
subsidiary, Neighborhoods Capital, LLC (Capital).




---



##### 



4 (2)
    
    Stanley-Martin Communities, LLC, the registrant, and
Stanley-Martin Financing Corp. are co-issuers of the Notes.
Stanley-Martin Financing Corp. is a wholly owned subsidiary of
Stanley-Martin Communities, LLC and was formed for the sole
purpose of serving as a co-issuer of the Notes.(3)
    
    Stanley-Martin Communities, LLC owns 51% of the membership
interests of First Excel Title, LLC (FET) . Excel Title
Corporation, which provides certain management and administrative
services to First Excel Title, LLC, owns the other 49% of the
membership interests.(4)
    
    Neighborhoods Capital, LLC and certain of its subsidiaries are
borrowers and guarantors under our senior secured credit
facility.(5)
    
    Stanley-Martin Communities, LLC owns 75% of the membership
interests of First Heritage Mortgage, LLC and a third party owns
the other 25% of the membership interests.(6)
    
    First Excel Title, LLC, First Heritage Mortgage, LLC, Stanley
Martin Companies, Inc. and certain other subsidiaries of ours do
not guarantee the Notes. See Risk Factors  Risks Related to the
Notes and Our Indebtedness  The Notes will be effectively
subordinated to all indebtedness of our subsidiaries that are not
guarantors of the Notes.(7)
    
    On January 1, 2007, Stanley Martin Companies, Inc. was converted
to a Maryland limited liability company, Stanley Martin
Companies, LLC.




---



##### 



5 
 MARKET OVERVIEW
 The information contained in this section is based on numerous assumptions, including
assumptions regarding the continued population growth rate of the Washington, D.C. metropolitan
area and the continued economic health of the region.
  Positive Employment Trends
  Annual Net Change in Job Growth (Non-Farm)
 
  Uemployment Rates




---



##### 



6  Total Federal Spending
 
 Continued Population Growth
  Metro Washington, DC Population Growth




---



##### 



7 Appealing Demographics
  3rd Quarter 2006 Median Family Income by Metropolitan Statistical Area
 
 Current Market Conditions
  NoVa Inventory: SF & TH Only
Metropolitan Regional Information Systems, Inc.




---



##### 



8 Competitive Strengths
 Long-Term Focus and Success in the Washington, D.C. Metropolitan Area
  Attractive Market Fundamentals
  Significant Land Portfolio
  Product and Customer Diversification
  Operational Excellence
  Experienced Management Team




---



##### 



9 Business Strategy
 Capitalize on Valuable Land Position and Continue Disciplined Approach to Inventory Management
  Pursue Disciplined Growth in Attractive Areas
  Provide High Quality Construction, Outstanding Service, Innovative Designs and Relative Value
  Markets and Products
  
    
    historical and projected population growth;
 historical and projected job growth;
    
    internal and external demographic and marketing studies;
    
    historical housing sales;
    
    building lot availability and price;
    
    existing homes available for sale;
    
    days on the market for sale of new homes and resale of existing homes;
    
    level and nature of competition;




---



##### 



10 
 
    
    new home sale absorption rates for existing projects;
    
    suitability for development generally within a one to four-year time period from the beginning of the development
process to the delivery of the last home;
    
    financial review as to the feasibility of the proposed project, including projected profit margins and return on capital;
    
    results of environmental and legal due diligence; and
    
    proximity to local traffic corridors, places of employment and commercial centers.
 Product Mix
    Our Communities
  Virginia
 Arlington, Alexandria
 Beauregard Station.
 Shirlington Crest.
 Fairfax County
 Bell Manor Estates
 Fair Oaks Landing.




---



##### 



11 Kendall Square.
 Linden Tree Estates.
 Old Mill Station.
 Spring Park Station.
 Loudoun County
 Brambleton.
 Greene Mill Preserve.
 Prince William County
 Coles Run Manor.
 Hope Hill Crossing.
 Occoquan Landing.
 Powells Landing.
 Smalls Crossing.
 Stonewall Manor.
 Stoney Branch Crossing.




---



##### 



12 Maryland
 St. Marys County
 Wildewood.
  Our Communities
 2006 Deliveries
    
    
    Backlog as of 12/31/06
    
    
    2006 New Unit OrdersTotal
    
    
    
    
    
    
    AverageNumber
    
    
    
    
    
    
    Price of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average Selling
    
    
    RemainingCommunity
    
    of Lots
    
    
    Units
    
    
    Units
    
    
    Units
    
    
    Value (1)
    
    
    Units
    
    
    Value
    
    
    Price
    
    
    Lots(2)Single-Family HomesBell Manor Estates
    
    
    26
    
    
    
    26
    
    
    $
    971,241
    
    
    
    
    
    
    $
    
    
    
    
    13
    
    
    $
    12,606,209
    
    
    $
    969,708
    
    
    
    Bell Manor III (3)
    
    
    10
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    10Brambleton (4)
    
    
    188
    
    
    
    31
    
    
    $
    710,343
    
    
    
    4
    
    
    $
    2,737,365
    
    
    
    22
    
    
    $
    14,381,940
    
    
    $
    653,725
    
    
    
    80Coles Run Manor
    
    
    111
    
    
    
    46
    
    
    $
    659,158
    
    
    
    6
    
    
    $
    3,614,893
    
    
    
    23
    
    
    $
    14,549,210
    
    
    $
    632,574
    
    
    
    65Glynn Tarra Estates
    
    
    40
    
    
    
    11
    
    
    $
    963,843
    
    
    
    
    
    
    $
    
    
    
    
    2
    
    
    $
    1,662,110
    
    
    $
    831,055
    
    
    
    6Greene Mill Preserve I
    
    
    18
    
    
    
    5
    
    
    $
    872,164
    
    
    
    8
    
    
    $
    6,604,853
    
    
    
    10
    
    
    $
    8,279,425
    
    
    $
    827,943
    
    
    
    13Greene Mill Preserve II
    
    
    17
    
    
    
    5
    
    
    $
    796,730
    
    
    
    4
    
    
    $
    2,852,384
    
    
    
    4
    
    
    $
    2,863,925
    
    
    $
    715,981
    
    
    
    12Hope Hill Crossing (5)
    
    
    311
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    311Linden Tree Estates(6)
    
    
    12
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    12Lionsfield Valley
    
    
    49
    
    
    
    25
    
    
    $
    616,459
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    (94,665
    )
    
    $
    
    
    
    
    Moncure Woods
    
    
    75
    
    
    
    6
    
    
    $
    698,909
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    (10,038
    )
    
    $
    
    
    
    
    Mount Gilead
    
    
    47
    
    
    
    11
    
    
    $
    723,410
    
    
    
    
    
    
    $
    
    
    
    
    8
    
    
    $
    5,391,274
    
    
    $
    673,909
    
    
    
    Occoquan Landing
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    $
    5,045,795
    
    
    
    7
    
    
    $
    5,045,795
    
    
    $
    720,828
    
    
    
    38Old Mill Station
    
    
    33
    
    
    
    21
    
    
    $
    803,820
    
    
    
    3
    
    
    $
    2,232,127
    
    
    
    15
    
    
    $
    11,760,084
    
    
    $
    784,006
    
    
    
    12Powells Landing II
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    $
    2,973,344
    
    
    
    4
    
    
    $
    2,973,344
    
    
    $
    743,336
    
    
    
    25Reserve at Martins Pointe
    
    
    59
    
    
    
    1
    
    
    $
    920,000
    
    
    
    
    
    
    $
    
    
    
    
    1
    
    
    $
    920,000
    
    
    $
    920,000
    
    
    
    Smalls Crossing (7)
    
    
    34
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    34Stonewall Manor II
    
    
    25
    
    
    
    17
    
    
    $
    762,865
    
    
    
    
    
    
    $
    
    
    
    
    2
    
    
    $
    1,342,985
    
    
    $
    671,493
    
    
    
    2Stoney Branch
    
    
    25
    
    
    
    12
    
    
    $
    658,464
    
    
    
    1
    
    
    $
    622,839
    
    
    
    6
    
    
    $
    3,541,391
    
    
    $
    590,232
    
    
    
    13Wildewood (8)
    
    
    644
    
    
    
    83
    
    
    $
    447,127
    
    
    
    20
    
    
    $
    9,579,429
    
    
    
    72
    
    
    $
    33,403,820
    
    
    $
    463,942
    
    
    
    561TownhomesBeauregard Station (6)
    
    
    41
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    41Kendall Square (9)
    
    
    73
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    73Fair Oaks Landing
    
    
    73
    
    
    
    
    
    
    $
    
    
    
    
    23
    
    
    $
    13,228,982
    
    
    
    23
    
    
    $
    13,228,982
    
    
    $
    575,173
    
    
    
    73Spring Park Station
    
    
    41
    
    
    
    15
    
    
    $
    557,694
    
    
    
    5
    
    
    $
    2,897,660
    
    
    
    20
    
    
    $
    11,263,074
    
    
    $
    563,154
    
    
    
    26Shirlington Crest (10)
    
    
    173
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    173Wildewood (8)
    
    
    337
    
    
    
    37
    
    
    $
    305,161
    
    
    
    
    
    
    $
    
    
    
    
    19
    
    
    $
    5,899,598
    
    
    $
    310,505
    
    
    
    300Future Development (11)

    776
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    776352
    
    
    
    
    
    
    
    85
    
    
    $
    52,389,671
    
    
    
    251
    
    
    $
    149,008,463
    
    
    
    
    
    
    
    2,656
 
 (1)
    
    Does not include options or change orders.(2)
    
    Includes backlog.(3)
    
    Sales expected to begin spring 2007.(4)
    
    Our Brambleton community is being built in phases. For information regarding the status of these phases, please see the community description above.(5)
    
    Sales expected to commence autumn 2008.(6)
    
    Sales expected to commence late summer 2007.(7)
    
    Sales began in February 2007.




---



##### 



13 (8)
    
    Our Wildewood community is being built in phases. For information regarding the status of these phases, please see the community description above.(9)
    
    Sales expected to commence late spring 2007.(10)
    
    Sales expected to commence summer 2007.(11)
    
    Future development includes land owned or on which the Company has an option on land it intends to purchase. The time frame of future development is beyond six months and therefore, subject to change. Operations
 Land Acquisition and Development
      Purchasing and Construction




---



##### 



14    Design
   Customer Service and Quality Control
  Warranty




---



##### 



15   Marketing and Sales
    Customer Financial Services
 Mortgage Services
  Title Insurance Services
  Backlog




---



##### 



16   Seasonality
  Competition
   
    
    our long-term experience within the Washington, D.C. metropolitan area;
    
    the relative price affordability of our homes;
    
    our responsiveness to market conditions, which we believe helps us capitalize on opportunities for advantageous land
acquisitions in desirable locations; and
    
    our reputation for innovative and affordable designs, high quality construction and outstanding customer service.
  Government Regulation and Environmental Matters




---



##### 



17     Employees
  Properties
  Legal Proceedings
  Available Information
 http://www.sec.gov




---



##### 



18 
 ITEM 1A. RISK FACTORS
    Risks Related to the Notes and Our Indebtedness
 Our substantial indebtedness could adversely affect our financial health and prevent us from
fulfilling our obligations under the Notes.
   
    
    make it more difficult for us to satisfy our obligations with respect to the Notes;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,
thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
    
    place us at a competitive disadvantage compared to our competitors that have less debt or greater financial
resources than we do; and
    
    limit our ability to borrow additional funds.




---



##### 



19 To service our indebtedness, we will require a significant amount of cash. Our ability to
generate cash depends on many factors beyond our control.
    The right to receive payments on the Notes is junior to our existing indebtedness and
possibly all of our future borrowings. Further, the guarantees of the Notes are junior to all of our guarantors existing
indebtedness and possibly to all their future borrowings.
   We may not have the ability to raise the funds necessary to finance an offer to purchase Notes
in connection with a change of control or a decline in our Consolidated Tangible Net Worth.
   Not all of our subsidiaries will guarantee the Notes. Therefore, the Notes will be effectively
subordinated to all indebtedness of our subsidiaries that are not guarantors of the Notes.




---



##### 



20    Federal and state statutes allow courts, under specific circumstances, to void guarantees and
require noteholders to return payments received from guarantors.
  
    
    received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and
    
    was insolvent or rendered insolvent by reason of such incurrence; or
    
    was engaged in a business or transaction for which the guarantors remaining assets constituted unreasonably small capital; or
    
    intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature; or
    
    intended to hinder, delay or defraud that guarantors creditors.
   
    
    the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; or
    
    if the present fair saleable value of its assets was less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
    
    it could not pay its debts as they become due.
  The ability to transfer the Notes may be limited by the absence of an active trading market,
and an active trading market may not develop for the Notes.
  
    
    the number of holders of notes;
    
    our operating performance and financial condition;
    
    the market for similar securities;
    
    the interest of securities dealers in making a market in the notes; and
    
    prevailing interest rates.




---



##### 



21 
  Stanley-Martin Financing Corp. has only nominal assets from which to make payments on the
Notes.
  Risks Relating to Our Structure
 We depend on distributions from our operating subsidiaries to pay interest on the Notes.
Contractual or legal restrictions applicable to our subsidiaries could limit distributions from them.
  A portion of our cash flow will be used to make payments to Neighborhood Holdings to
distribute to the holders of its Class A and Class B membership interests.
  The principal members of Neighborhood Holdings exercise control over the operation of our
business and may have interests that conflict with the interests of the noteholders.




---



##### 



22 Risks Related to Our Business
 A deterioration in economic conditions generally could decrease demand and pricing for our
homes.
  Inventory risk could adversely impact our operations and profitability.
  If we are unable to obtain sufficient capital to operate and develop our business, our results
of operations and revenues could decline.
  Because the majority of our customers finance their home purchases, interest rate increases,
inflation or decreases in the availability of mortgage financing could lead to fewer home sales, which would reduce our
revenues.
  Because of our geographic concentration in the Washington, D.C. metropolitan area, home prices
and sales activities in this area have a significant impact on our profitability.
  Government regulations concerning the development of land and the homebuilding process could
restrict our business activities, increase our operating expenses and cause our revenues to decline.




---



##### 



23   Compliance with, and liabilities under, applicable environmental laws may adversely affect us,
which could reduce our profits.
   Government regulation could affect our related financial services operations and adversely
affect our business or financial results.
  We compete on several levels with homebuilders, some of which have longer operating histories
and/or greater resources than us, which could hurt our margins and future earnings.
  Natural disasters, adverse weather conditions and conditions in nature beyond our control
could delay deliveries, increase costs and decrease demand for new homes, which could harm our business and financial condition.




---



##### 



24 We may be subject to potential liabilities as a result of construction defect, product
liability and warranty claims, which could adversely affect our business.
   We experience variability in our operating results on a quarterly basis and accordingly, our
historical performance may not be a meaningful indicator of our future performance.
  Acts of war or terrorism may seriously harm our business.
  Downward changes in general economic, real estate construction or other business conditions
could adversely affect our business or our financial results.
  Future increases in interest rates, reductions in mortgage availability or increases in the
effective costs of owning a home could prevent potential customers from buying our homes and adversely affect our business or our
financial results.
  Our future growth may require additional capital, which may not be available.




---



##### 



25 Competition for homebuyers could reduce our deliveries or decrease our profitability.
   Our success depends on our ability to acquire land suitable for residential homebuilding at
reasonable prices, in accordance with our land investment criteria.
   Supply shortages and other risks related to the demand for skilled labor and building
materials could increase costs and delay deliveries.
  Homebuilding is subject to warranty and liability claims in the ordinary course of business
that can be significant.
  Inflation may result in increased costs that we may not be able to recoup if demand declines.




---



##### 



26 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 Properties
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




---



##### 



27 
 PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  
 ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousandsStatement of Operations Data:Homebuilding Revenue (1)
    
    $
    238,373
    
    
    $
    255,707
    
    
    $
    158,864
    
    
    $
    146,873
    
    
    $
    150,690Cost of sales (2)
    
    
    189,730
    
    
    
    178,583
    
    
    
    118,012
    
    
    
    112,167
    
    
    
    117,814Gross homebuilding profit
    
    
    48,643
    
    
    
    77,124
    
    
    
    40,852
    
    
    
    34,706
    
    
    
    32,876Financial and management
services revenue
    
    
    11,910
    
    
    
    15,553
    
    
    
    9,626
    
    
    
    9,213
    
    
    
    7,445Selling, general and
administrative expense
    
    
    (43,066
    )
    
    
    (46,953
    )
    
    
    (29,703
    )
    
    
    (24,857
    )
    
    
    (21,768
    )Minority interest
    
    
    (767
    )
    
    
    (1,113
    )
    
    
    (579
    )
    
    
    (709
    )
    
    
    (553
    )Other, net
    
    
    1,876
    
    
    
    1,622
    
    
    
    888
    
    
    
    (50
    )
    
    
    235Net income (3)
    
    $
    18,596
    
    
    $
    46,233
    
    
    $
    21,084
    
    
    $
    18,303
    
    
    $
    18,235Other Financial Data:Gross homebuilding
margins(4)
    
    
    20.4
    %
    
    
    30.2
    %
    
    
    25.7
    %
    
    
    23.6
    %
    
    
    21.8
    %Depreciation and
amortization
    
    $
    586
    
    
    $
    379
    
    
    $
    275
    
    
    $
    203
    
    
    $
    139Ratio of earnings to fixed
charges (5)
    
    
    1.5
    x
    
    
    4.0
    x
    
    
    4.8x
    
    
    
    9.2
    x
    
    
    9.7xOperating Data:Net new home orders
    
    
    251
    
    
    
    317
    
    
    
    335
    
    
    
    306
    
    
    
    325Homes closed (6)
    
    
    352
    
    
    
    352
    
    
    
    302
    
    
    
    282
    
    
    
    318Average sales price of
homes closed (6)
    
    $
    622
    
    
    $
    712
    
    
    $
    525
    
    
    $
    521
    
    
    $
    473Backlog at end of period,
homes (7)
    
    
    85
    
    
    
    186
    
    
    
    221
    
    
    
    188
    
    
    
    164Backlog at end of period,
contract value (7)
    
    $
    52,390
    
    
    $
    122,933
    
    
    $
    148,819
    
    
    $
    97,293
    
    
    $
    80,311
 Year Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in thousands)Balance Sheet Data:Cash
    
    $
    2,846
    
    
    $
    44,331
    
    
    $
    2,044
    
    
    $
    1,876
    
    
    $
    8,742Inventory
    
    $
    281,966
    
    
    $
    228,873
    
    
    $
    178,026
    
    
    $
    94,059
    
    
    $
    66,803Total assets
    
    $
    300,096
    
    
    $
    294,220
    
    
    $
    195,428
    
    
    $
    105,460
    
    
    $
    89,611Total debt
    
    $
    205,500
    
    
    $
    191,974
    
    
    $
    127,100
    
    
    $
    57,519
    
    
    $
    42,738Members capital and
stockholders deficit
    
    $
    71,124
    
    
    $
    65,348
    
    
    $
    46,183
    
    
    $
    36,274
    
    
    $
    33,918
 
 (1)
    
    Homebuilding Revenue includes land sales of $19.3 million, $5.1 million and $0.2 million in land sales 2006, 2005 and 2004, respectively. There were no land sales in 2003 or 2002.(2)
    
    Cost of Sales includes land cost of $16.0 million, $3.9 million and $0.2 million million in 2006, 2005 and 2004, respectively and includes a $9.2 impairment charge in 2006.(3)
    
    Because we are structured as a limited liability company, income tax obligations are paid by our members and are not borne by
us. Therefore, our net income is higher than it would be if we were structured as a C corporation. Historically we have
made distributions to our stockholders and members in amounts necessary for them to pay income taxes on their share of the net income. After June 30, 2005 our subsidiary, Stanley Martin Companies, Inc., became a C corporation and, therefore,
subject to federal and state income taxes. On January 1, 2007 Stanley Martin Companies, Inc. was converted to a Maryland limited liability company and thus is no longer a taxable entity.(4)
    
    Gross homebuilding margin is calculated by dividing gross homebuilding profit by homebuilding revenue. The 2006 gross homebuilding margin is inclusive of an impairment charge of $9.2 million related to our real estate inventory and contract
land deposits. There were no impairments in the prior four (4) years. The gross homebuilding margin before impairment is 24.3%.(5)
    
    In calculating the ratio of earnings to fixed charges, earnings consisted of (a) pre-tax income from operations before adjustment
for minority interests in consolidated subsidiaries or income or loss from equity investees, plus (b) fixed charges, plus
(c) amortization of capitalized interest, plus (d) distributed income from equity investees, minus (e) capitalized interest. Fixed
charges are comprised of (a) interest incurred, both expensed and capitalized, (b) debt issue cost amortization in the period and
(c) the portion of rental expense representative of the interest factor. (See Exhibit 12)




---



##### 



28 (6)
    
    A home is included in homes closed when units are completed and title is transferred to the buyer at settlement.(7)
    
    Backlog consists of homes under contract but not yet closed at the end of the period. There can be no assurance that homes
counted as backlog will close at their contracted price or at all.




---



##### 



29 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
 This Managements Discussion and Analysis of Financial Condition and Results of Operations
should be read in connection with the other sections of this prospectus, including Business,
Selected Historical Consolidated and Combined Financial and Other Data, and our combined
financial statements including the notes thereto. The various sections of this MD&A contain a
number of forward-looking statements, all of which are based on our current expectations and could
be affected by the uncertainties and risk factors described throughout this prospectus and
particularly in the Risk Factors section. Our actual results may differ materially from those
discussed below.
 Forward looking statements give current expectations or forecasts of future events. Words
such as anticipate, expect, intend, plan, believe, seek, estimate, and other words
and terms of similar meaning in connection with discussions of future operating or financial
performance signify forward-looking statements. From time to time, we also may provide oral or
written forward-looking statements in other materials released to the public. Such statements are
made in good faith by us to the Safe Harbor provisions of the Reform Act. We undertake no
obligation to update publicly or revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.
 Such forward-looking statements involve known risks, uncertainties and other factors that may
cause our actual results, performance or achievements to be materially different from our future
results, performance or achievements expressed or implied by the forward-looking statements. Such
factors include, among other things, those set forth under Item 1A-Risk Factors.
 The Company




---



##### 



30 Economic Environment
      Application of Critical Accounting Estimates and Policies




---



##### 



31 Revenue Recognition
 Homebuilding.
 Mortgage Loans and Title Fees.
 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities a
replacement of FASB Statement 125
   Homebuilding Inventory
   Consolidation of
Variable Interest Entities
 Warranty/Product Liability Accruals




---



##### 



32  Derivative Financial Instruments
 Accounting for Derivative Instruments and Hedging Activities.




---



##### 



33 Results of Operations
 Selected Homebuilding Operating Data
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Homes Closed:Single-family
    
    
    300
    
    
    
    294
    
    
    
    104Townhome
    
    
    52
    
    
    
    58
    
    
    
    198352
    
    
    
    352
    
    
    
    302Average Sales Price of Homes Closed:Single-family
    
    $
    665
    
    
    $
    729
    
    
    $
    584Townhome
    
    $
    378
    
    
    $
    626
    
    
    $
    494Average sales price of homes closed
    
    $
    622
    
    
    $
    712
    
    
    $
    525Revenue from Homes Closed:Single-family
    
    $
    199,434
    
    
    $
    214,266
    
    
    $
    60,767Townhome
    
    
    19,656
    
    
    
    36,296
    
    
    
    97,862$
    219,090
    
    
    $
    250,562
    
    
    $
    158,629Revenue from Land Sales:
    
    $
    19,283
    
    
    $
    5,145
    
    
    $
    235New Orders (homes):Single-family
    
    
    189
    
    
    
    298
    
    
    
    210Townhome
    
    
    62
    
    
    
    19
    
    
    
    125251
    
    
    
    317
    
    
    
    335Average Sales Price of New Orders:Single-family
    
    $
    628
    
    
    $
    708
    
    
    $
    653Townhome
    
    $
    490
    
    
    $
    302
    
    
    $
    527Average sales price of all new orders
    
    $
    594
    
    
    $
    684
    
    
    $
    606Backlog at End of Period (homes):Single-family
    
    
    57
    
    
    
    168
    
    
    
    164Townhome
    
    
    28
    
    
    
    18
    
    
    
    5785
    
    
    
    186
    
    
    
    221Backlog Contract Value at End of Period:Single-family
    
    $
    36,263
    
    
    $
    117,857
    
    
    $
    115,836Townhome
    
    
    16,127
    
    
    
    5,076
    
    
    
    32,983$
    52,390
    
    
    $
    122,933
    
    
    $
    148,819Average Sales Price Backlog Value at End of PeriodSingle-family
    
    $
    636
    
    
    $
    702
    
    
    $
    706Townhome
    
    $
    576
    
    
    $
    282
    
    
    $
    579Average sales price backlog value for all homes in backlog
    
    $
    616
    
    
    $
    661
    
    
    $
    673




---



##### 



34 Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Revenue.
     New Orders and Backlog.
  Gross Homebuilding Margin.




---



##### 



35 Selling and Marketing.
 General and Administrative.
 Gain (loss) on derivative contracts.
  Other Income, net.
 Minority interest.
 Net Income.
 Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Revenue.




---



##### 



36  New Orders and Backlog.
   Gross Homebuilding Margin.
 Selling and Marketing expense.
 General and Administrative.
 Gain (loss) on derivative contracts.
  Other Income, net.




---



##### 



37 Minority interest.
 Net Income.
 Seasonality and Variability in Quarterly Results
  Liquidity and Capital Resources
 Liquidity
  Cash Flows from Operating Activities.
 Cash Flows used in Investing Activities.
 Cash Flows from Financing Activities.
 Capital Resources




---



##### 



38     2006
    
    
    2005($ in thousands)Net Income
    
    $
    18,596
    
    
    $
    46,233Permitted Tax Distributions (1)
    
    $
    7,334
    
    
    $
    18,234Class A Interests (2)
    
    
    4,000
    
    
    
    3,320Neighborhood Holdings Overhead (2)
    
    
    379
    
    
    
    6950% Net Income (3)
    
    
    1,107
    
    
    
    5,227$5.0 million basket
    
    
    
    
    
    
    Total Distribution
    
    $
    12,820
    
    
    $
    26,850
 
 (1)
    
    Blended tax rate(2)
    
    Limited to amount actually paid(3)
    
    Limited by Ratio Exception  Contractual Obligations
  Total
    
    
    <1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5+ Years(dollars in thousands)Senior Subordinated Notes (1)
    
    $
    150,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    150,000Senior secured credit facility (2)
    
    
    52,750
    
    
    
    
    
    
    
    52,750
    
    
    
    
    
    
    
    Deferred Purchase money deed
of trust (3)
    
    
    2,750
    
    
    
    2,750
    
    
    
    
    
    
    
    
    
    
    
    Operating leases (4)
    
    
    8,626
    
    
    
    1,006
    
    
    
    1,939
    
    
    
    1,816
    
    
    
    3,865Total
    
    $
    214,126
    
    
    $
    3,756
    
    
    $
    54,689
    
    
    $
    1,816
    
    
    $
    153,865
 
 (1)
    
    On August 10, 2005 we issued ten year $150.0 million senior
subordinated notes which will mature August 10, 2015. We cannot
redeem the notes before August 15, 2010 subject to certain
exceptions. The notes bear interest at 9.75% which is paid twice
a year each February 15 and August 15. The above amounts do not
include interest.(2)
    
    Borrowings under the senior secured credit facility carry a
floating interest rate equal to one month LIBOR plus a margin




---



##### 



39 based on our senior debt ratio. The margin ranges from 175 to
225 basis points and was 175 basis points at December 31, 2006. We
have fixed the rate on $50.0 million of floating debt by virtue
of three separate swap agreements. See Quantitative and
Qualitative disclosures about Market Risk. The above amounts do
not include interest.(3)
    
    Deferred purchase money deed of trust, bearing interest at 8.00%
was paid in full January 31, 2007 with proceeds from our senior
secured credit facility. The above amounts do not include
interest.(4)
    
    Represents rent payments on noncancellable leases for office
space in Virginia and Maryland with various lease expiration
dates through 2016.   Off-Balance Sheet Arrangements
  Land Option Contracts.
 Letters of Credit and Completion Bonds.
 Interest Rates and Inflation
   
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Quantitative and Qualitative Disclosures About Market Risk




---



##### 



40




---



##### 



41 
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 PageReport of Independent Registered Public Accounting Firm
    
    
    42Consolidated and Combined Balance Sheets at December 31, 2006 and 2005
    
    
    43Consolidated and Combined Statements of Operations for the years ended December 31, 2006, 2005 and 2004
    
    
    44Consolidated and Combined Statements of Members Capital and ShareholdersDeficit for the years ended
December 31, 2006, 2005 and 2004
    
    
    45Consolidated and Combined Statements of Cash Flows for the yeas ended December 31, 2006, 2005 and 2004
    
    
    46Notes to the Consolidated and Combined Financial Statements
    
    
    47-63




---



##### 



42 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




---



##### 



43 STANLEY-MARTIN COMMUNITIES, LLC
 
 Consolidated and Combined Balance Sheets
 December 31,2006
    
    
    2005ASSETSCash and cash equivalents
    
    $
    2,845,724
    
    
    $
    44,331,867Real estate inventory
    
    
    281,965,819
    
    
    
    228,872,874Deposits and escrows, net
    
    
    4,504,954
    
    
    
    10,767,085Property and equipment, net
    
    
    2,135,396
    
    
    
    1,862,760Due from related parties
    
    
    154,851
    
    
    
    294,394Accounts receivable
    
    
    1,725,563
    
    
    
    2,085,789Deferred financing costs, net
    
    
    4,724,913
    
    
    
    5,275,389Other assets, net
    
    
    2,038,357
    
    
    
    730,033$
    300,095,577
    
    
    $
    294,220,191LIABILITIES AND MEMBERS CAPITALLiabilities:Debt
    
    $
    205,500,000
    
    
    $
    191,973,798Accounts payable and accrued expenses
    
    
    6,508,057
    
    
    
    12,653,428Due to related parties
    
    
    9,020
    
    
    
    3,204,251Accrued interest payable
    
    
    5,880,755
    
    
    
    7,263,439Purchaser deposits
    
    
    2,802,833
    
    
    
    7,280,346Cost to complete and customer service reserves
    
    
    5,592,766
    
    
    
    5,163,659Other liabilities
    
    
    2,226,596
    
    
    
    878,458Total liabilities
    
    
    228,520,027
    
    
    
    228,417,379Minority interest
    
    
    451,105
    
    
    
    454,439Members capital
    
    
    71,124,445
    
    
    
    65,348,373$
    300,095,577
    
    
    $
    294,220,191




---



##### 



44 STANLEY-MARTIN COMMUNITIES, LLC
 
 Consolidated and Combined Statements of Operations
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Revenues:Homebuilding sales  homes
    
    $
    219,089,702
    
    
    $
    250,561,585
    
    
    $
    158,628,674Land Sales
    
    
    19,283,490
    
    
    
    5,145,000
    
    
    
    235,000Financial services
    
    
    11,800,327
    
    
    
    15,451,724
    
    
    
    9,437,475Management services
    
    
    109,992
    
    
    
    101,728
    
    
    
    188,250Total revenues
    
    
    250,283,511
    
    
    
    271,260,037
    
    
    
    168,489,399Operating expenses:Cost of sales  homes
    
    
    164,538,117
    
    
    
    174,714,166
    
    
    
    117,831,927Cost of land sales
    
    
    15,969,350
    
    
    
    3,868,746
    
    
    
    180,552Impairment of real estate inventory and contract land
deposits
    
    
    9,222,797
    
    
    
    
    
    
    
    Selling and marketing expense
    
    
    15,036,547
    
    
    
    15,616,940
    
    
    
    8,708,303General and administrative expenses
    
    
    28,029,613
    
    
    
    31,335,993
    
    
    
    20,994,326Operating income
    
    
    17,487,087
    
    
    
    45,724,192
    
    
    
    20,774,291Gain (loss) on derivative contracts, net
    
    
    391,046
    
    
    
    228,844
    
    
    
    (118,111
    )Other income, net
    
    
    1,485,011
    
    
    
    1,393,685
    
    
    
    1,006,517Net income before minority interest
    
    
    19,363,144
    
    
    
    47,346,721
    
    
    
    21,662,697Minority interest
    
    
    (767,072
    )
    
    
    (1,113,253
    )
    
    
    (578,777
    )Net income
    
    $
    18,596,072
    
    
    $
    46,233,468
    
    
    $
    21,083,920




---



##### 



45 STANLEY-MARTIN COMMUNITIES, LLC
 
 Consolidated and Combined Statements of Members Capital and Stockholders Deficit
 Additional
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    
    
    
    
    Stockholders
    
    
    MembersStock
    
    
    Capital
    
    
    Deficit
    
    
    Deficit
    
    
    Capital
    
    
    TotalBalance at January 1, 2004
    
    $
    237,500
    
    
    $
    4,342,940
    
    
    $
    (35,592,674
    )
    
    $
    (31,012,234
    )
    
    $
    67,286,729
    
    
    $
    36,274,495Contribution from
members-Wildewood
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    480,000
    
    
    
    480,000Dividends to stockholders
    
    
    
    
    
    
    
    
    
    
    (1,600,000
    )
    
    
    (1,600,000
    )
    
    
    
    
    
    
    (1,600,000
    )Contributions from members
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,710,000
    
    
    
    1,710,000Distributions to members
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,765,000
    )
    
    
    (11,765,000
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    (8,598,910
    )
    
    
    (8,598,910
    )
    
    
    29,682,830
    
    
    
    21,083,920Balance at December 31, 2004
    
    
    237,500
    
    
    
    4,342,940
    
    
    
    (45,791,584
    )
    
    
    (41,211,144
    )
    
    
    87,394,559
    
    
    
    46,183,415Dividends to stockholders
    
    
    
    
    
    
    
    
    
    
    (218,510
    )
    
    
    (218,510
    )
    
    
    
    
    
    
    (218,510
    )Distributions to members
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,908,225
    )
    
    
    (6,908,225
    )Net income (loss) from
January 1, 2005 to June 30,
2005
    
    
    
    
    
    
    
    
    
    
    (5,687,661
    )
    
    
    (5,687,661
    )
    
    
    27,897,273
    
    
    
    22,209,612Reorganization of ownership
interests into
Stanley-Martin Communities,
LLC on June 30, 2005
    
    
    (237,500
    )
    
    
    (4,342,940
    )
    
    
    51,697,755
    
    
    
    47,117,315
    
    
    
    (47,117,315
    )
    
    
    Distributions to member
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,941,775
    )
    
    
    (19,941,775
    )Net income from July 1,
2005 to December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,023,856
    
    
    
    24,023,856Balance at December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,348,373
    
    
    
    65,348,373Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,596,072
    
    
    
    18,596,072Distributions to member
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,820,000
    )
    
    
    (12,820,000
    )Balance at December 31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    71,124,445
    
    
    $
    71,124,445




---



##### 



46 STANLEY-MARTIN COMMUNITIES, LLC
 
 Consolidated and Combined Statements of Cash Flows
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    18,596,072
    
    
    $
    46,233,468
    
    
    $
    21,083,920Adjustments to reconcile net income to net cash provided by (used in) operating
activities:Impairment
    
    
    9,222,797
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    586,438
    
    
    
    379,171
    
    
    
    274,643Changes in fair value of derivative contracts
    
    
    16,683
    
    
    
    414,588
    
    
    
    (64,847
    )Minority interest
    
    
    767,072
    
    
    
    1,113,253
    
    
    
    578,777Change in:Real estate inventory
    
    
    (62,962,079
    )
    
    
    (21,341,804
    )
    
    
    (78,927,249
    )Accounts receivable and other assets
    
    
    (964,781
    )
    
    
    (668,503
    )
    
    
    (696,082
    )Due from related parties, net
    
    
    (3,055,688
    )
    
    
    4,615,824
    
    
    
    (1,536,860
    )Deposits and escrows
    
    
    4,772,131
    
    
    
    (1,043,154
    )
    
    
    (2,541,445
    )Accounts payable and accrued expenses
    
    
    (279,451
    )
    
    
    2,760,446
    
    
    
    1,774,129Purchaser deposits
    
    
    (4,477,513
    )
    
    
    (923,539
    )
    
    
    3,871,987Accrued interest payable
    
    
    (1,382,684
    )
    
    
    6,868,322
    
    
    
    195,852Other liabilities
    
    
    626,446
    
    
    
    564,814
    
    
    
    (159,412
    )Total adjustments
    
    
    (57,130,629
    )
    
    
    (7,260,582
    )
    
    
    (77,230,507
    )Net cash provided by (used in) operating activities
    
    
    (38,534,557
    )
    
    
    38,972,886
    
    
    
    (56,146,587
    )Cash flows used in investing activities:Purchases of property and equipment
    
    
    (859,074
    )
    
    
    (1,271,271
    )
    
    
    (493,823
    )Leasehold inducement
    
    
    721,692
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (137,382
    )
    
    
    (1,271,271
    )
    
    
    (493,823
    )Cash flows from financing activities:Proceeds from issuance of subordinated senior notes
    
    
    
    
    
    
    150,000,000
    
    
    
    Borrowings of loans payable
    
    
    11,508,576
    
    
    
    
    
    
    
    23,625,732Repayments of loans payable
    
    
    (53,482,374
    )
    
    
    (12,291,967
    )
    
    
    (983,729
    )Draws on (repayments of) line of credit, net
    
    
    52,750,000
    
    
    
    (99,689,635
    )
    
    
    46,939,635Financing costs
    
    
    
    
    
    
    (5,516,754
    )
    
    
    Contributions from members
    
    
    
    
    
    
    
    
    
    
    2,190,000Distributions to members
    
    
    (12,820,000
    )
    
    
    (26,850,000
    )
    
    
    (12,765,000
    )Distributions to stockholders
    
    
    
    
    
    
    (218,510
    )
    
    
    (1,600,000
    )Distributions to minority partners
    
    
    (770,406
    )
    
    
    (847,000
    )
    
    
    (598,309
    )Net cash provided by (used in) financing activities
    
    
    (2,814,204
    )
    
    
    4,586,134
    
    
    
    56,808,329Net increase (decrease) in cash and cash equivalents
    
    
    (41,486,143
    )
    
    
    42,287,749
    
    
    
    167,919Cash and cash equivalents at beginning of year
    
    
    44,331,867
    
    
    
    2,044,118
    
    
    
    1,876,199Cash and cash equivalents at end of year
    
    $
    2,845,724
    
    
    $
    44,331,867
    
    
    $
    2,044,118Supplemental disclosures of cash flow information:Cash paid during the year for interest net of capitalized interest of $19,106,562
  $12,485,232, and $4,884,680 respectively
    
    $
    179,527
    
    
    $
    190,870
    
    
    $
    206,279Supplemental disclosure of noncash financing activity:Seller financing in connection with land acquisition
    
    $
    2,750,000
    
    
    $
    26,855,000
    
    
    $
    Distribution of noncash assets and liabilities of Homebuilding and
Homes entities, net of cash distribution of $15,944
    
    $
    
    
    
    $
    193,066
    
    
    $
    




---



##### 



47 STANLEY-MARTIN COMMUNITIES, LLC
 
 NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
 (1) Summary of Significant Accounting Policies
 (a) Background and Principles of Consolidation and Combination
       Consolidation of Variable Interest Entities




---



##### 



48 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
  (b) Use of Estimates in the Preparation of Financial Statements
  (c) Revenue Recognition
 Homebuilding
  Mortgage Loans and Title Fees
  Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities a
replacement of FASB Statement 125, b
    (d) Homebuilding Inventory




---



##### 



49 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
   (e) Warranty and Product Liability Accruals
  2006
    
    
    2005Balance, beginning of year
    
    $
    1,014,738
    
    
    $
    654,718Provision
    
    
    1,590,015
    
    
    
    1,699,697Payments
    
    
    (1,361,702
    )
    
    
    (1,339,677
    )Balance, end of year
    
    $
    1,243,051
    
    
    $
    1,014,738
 (f) Cash and Cash Equivalents
  (g) Financial Instruments
 Accounting for Derivative Instruments and Hedging Activities
 (h) Property and Equipment
  Useful LivesOffice furniture and equipment
    
    3-10 yearsLeasehold improvements
    
    Life of leaseMotor Vehicles
    
    3 Years
 (i) Income Taxes




---



##### 



50 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
  (j) Reclassifications
  (2) Real Estate Inventory
  December 31,2006
    
    
    2005Land
    
    $
    202,786,222
    
    
    $
    158,964,181Construction costs
    
    
    52,768,575
    
    
    
    57,280,249Finance Costs
    
    
    26,411,022
    
    
    
    12,628,444$
    281,965,819
    
    
    $
    228,872,874
   December 31,2006
    
    2005
    
    2004Interest incurred and capitalized
    
    $
    19,106,562
    
    
    $
    12,485,232
    
    
    $
    4,884,680Interest cost unrelated to homebuilidng
    
    $
    179,527
    
    
    $
    190,870
    
    
    $
    206,279Capitalized interest included in cost of sales
    
    $
    8,787,519
    
    
    $
    4,781,856
    
    
    $
    3,047,801
  (3) Property and Equipment
  December 31,2006
    
    
    2005Office furniture and equipment
    
    $
    3,572,257
    
    
    $
    2,764,198Leasehold improvements
    
    
    732,245
    
    
    
    681,498Motor vehicles
    
    
    97,843
    
    
    
    97,8434,402,345
    
    
    
    3,543,539Less accumulated depreciation
    
    
    (2,266,949
    )
    
    
    (1,680,779
    )$
    2,135,396
    
    
    $
    1,862,760




---



##### 



51 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 (4) Debt
  December 31,2006
    
    
    2005Senior subordinated notes, bearing interest at 9.75% payable semi-annually
on February 15 and August 15, due August 2015
    
    $
    150,000,000
    
    
    $
    150,000,000Purchase money deed of trust notes, bearing interest at 5%, due February 2006
    
    
    
    
    
    
    26,855,000Acquisition, development and construction notes payable secured by certain
real estate inventory bearing interest at prime plus 1.5% (8.75% at December
31, 2005)
    
    
    
    
    
    
    10,118,798Acquisition, development and construction notes payable secured by the
Companys ownership interest in Wildewood Residential, LLC, bearing interest
at 22% (8% paid quarterly, 14% paid at maturity) due 2009
    
    
    
    
    
    
    5,000,000Senior credit facility, $150 million line of credit, bearing interest at one
month LIBOR plus 1.75% to 2.25% (7.10% and 6.14% at December 31, 2006 and
2005, respectively) due December 2009
    
    
    52,750,000
    
    
    
    Deferred purchase money deed of trust, bearing interest at 8.00%, paid
in full January 31, 2007 with proceeds from senior credit facility
    
    
    2,750,000
    
    
    
    $
    205,500,000
    
    
    $
    191,973,798
     2006
    
    
    2005Net Income
    
    $
    18,596,072
    
    
    $
    46,233,468Permitted Tax Distributions (1)
    
    $
    7,334,291
    
    
    $
    18,234,480Class A Interests (2)
    
    
    4,000,000
    
    
    
    3,319,680Neighborhood Holdings Overhead (2)
    
    
    378,719
    
    
    
    69,00050% Net Income (3)
    
    
    1,106,990
    
    
    
    5,226,840$5.0 million basket
    
    
    
    
    
    
    Total Distributions
    
    $
    12,820,000
    
    
    $
    26,850,000
 
 (1)
    
    Blended tax rate(2)
    
    Limited to amount actually paid(3)
    
    Limited by Ratio Exception




---



##### 



52 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 (5) Derivative Instruments and Hedging Activities
   (6) Financial Services Revenues
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Loan origination fees
    
    $
    6,572,670
    
    
    $
    9,112,598
    
    
    $
    4,892,570Gain on sale of mortgages
    
    
    4,534,223
    
    
    
    5,667,332
    
    
    
    4,116,959Title insurance premiums
    
    
    693,434
    
    
    
    671,794
    
    
    
    427,946Financial services revenue
    
    $
    11,800,327
    
    
    $
    15,451,724
    
    
    $
    9,437,475
 (7) Leases
   Year Ending December 31:2007
    
    $
    1,005,9242008
    
    
    981,6432009
    
    
    958,1012010
    
    
    912,4952011
    
    
    903,228Thereafter
    
    
    3,864,636$
    8,626,027
  (8) Minority Interest
   (9) Segment Reporting




---



##### 



53 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
     2006FinancialHomebuilding
    
    Services
    
    TotalsRevenues
    
    $
    238,483,184
    
    
    $
    11,800,327
    
    
    $
    250,283,511Depreciation and amortization
    
    
    425,028
    
    
    
    161,410
    
    
    
    586,438Segment net income
    
    
    16,821,685
    
    
    
    1,774,387
    
    
    
    18,596,072Segment assets
    
    
    296,714,492
    
    
    
    3,381,085
    
    
    
    300,095,577Expenditures for segment assets
    
    
    669,615
    
    
    
    189,459
    
    
    
    859,074
 2005FinancialHomebuilding
    
    Services
    
    TotalsRevenues
    
    $
    255,808,313
    
    
    $
    15,451,724
    
    
    $
    271,260,037Depreciation and amortization
    
    
    249,441
    
    
    
    129,730
    
    
    
    379,171Segment net income
    
    
    43,685,517
    
    
    
    2,547,951
    
    
    
    46,233,468Segment assets
    
    
    289,561,573
    
    
    
    4,658,618
    
    
    
    294,220,191Expenditures for segment assets
    
    
    1,142,669
    
    
    
    128,602
    
    
    
    1,271,271
 2004FinancialHomebuilding
    
    Services
    
    TotalsRevenues
    
    $
    159,051,924
    
    
    $
    9,437,475
    
    
    $
    168,489,399Depreciation and amortization
    
    
    199,248
    
    
    
    75,395
    
    
    
    274,643Segment net income
    
    
    19,589,859
    
    
    
    1,494,061
    
    
    
    21,083,920Segment assets
    
    
    193,260,311
    
    
    
    2,167,719
    
    
    
    195,428,030Expenditures for segment assets
    
    
    194,958
    
    
    
    298,865
    
    
    
    493,823
 (10) Supplemental Guarantor and Non-Guarantor Information




---



##### 



54 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
  Condensed Consolidating Balance Sheet as of December 31, 2006
 Non-Guarantor
    
    
    OtherGuarantor
    
    
    Homebuilding
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash
    
    $
    
    
    
    $
    888,326
    
    
    $
    1,138,737
    
    
    $
    818,661
    
    
    $
    
    
    
    $
    2,845,724Real estate inventory
    
    
    331,751
    
    
    
    154,273,600
    
    
    
    129,634,439
    
    
    
    
    
    
    
    (2,273,971
    )
    
    
    281,965,819Deposits and escrows
    
    
    
    
    
    
    2,248,729
    
    
    
    2,256,225
    
    
    
    
    
    
    
    
    
    
    
    4,504,954Due from related parties
    
    
    151,653,013
    
    
    
    (57,852,696
    )
    
    
    (93,627,117
    )
    
    
    
    
    
    
    (18,349
    )
    
    
    154,851Accounts receivable
    
    
    
    
    
    
    391,581
    
    
    
    20,903
    
    
    
    1,313,079
    
    
    
    
    
    
    
    1,725,563Investment in affiliates
    
    
    72,343,504
    
    
    
    77,235,473
    
    
    
    
    
    
    
    
    
    
    
    (149,578,977
    )
    
    
    Other assets
    
    
    4,724,914
    
    
    
    237,551
    
    
    
    2,686,856
    
    
    
    1,249,345
    
    
    
    
    
    
    
    8,898,666$
    229,053,182
    
    
    $
    177,422,564
    
    
    $
    42,110,043
    
    
    $
    3,381,085
    
    
    $
    (151,871,297
    )
    
    $
    300,095,577Debt
    
    $
    150,000,000
    
    
    
    52,750,000
    
    
    $
    2,750,000
    
    
    $
    
    
    
    $
    
    
    
    $
    205,500,000Accounts payable and
accrued expenses
    
    
    171,660
    
    
    
    347,437
    
    
    
    4,107,814
    
    
    
    1,900,764
    
    
    
    (19,618
    )
    
    
    6,508,057Due to related parties
    
    
    
    
    
    
    
    
    
    
    9,020
    
    
    
    
    
    
    
    
    
    
    
    9,020Purchaser deposits
    
    
    
    
    
    
    1,732,634
    
    
    
    1,070,199
    
    
    
    
    
    
    
    
    
    
    
    2,802,833Cost to complete
and customer service
reserves
    
    
    
    
    
    
    5,533,374
    
    
    
    59,392
    
    
    
    
    
    
    
    
    
    
    
    5,592,766Other liabilities
    
    
    5,484,375
    
    
    
    1,141,319
    
    
    
    1,481,657
    
    
    
    
    
    
    
    
    
    
    
    8,107,351155,656,035
    
    
    
    61,504,764
    
    
    
    9,478,082
    
    
    
    1,900,764
    
    
    
    (19,618
    )
    
    
    228,520,027Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451,105
    
    
    
    
    
    
    
    451,105Members capital
    
    
    73,397,147
    
    
    
    115,917,800
    
    
    
    32,631,961
    
    
    
    1,029,216
    
    
    
    (151,851,679
    )
    
    
    71,124,445$
    229,053,182
    
    
    $
    177,422,564
    
    
    $
    42,110,043
    
    
    $
    3,381,085
    
    
    $
    (151,871,297
    )
    
    $
    300,095,577




---



##### 



55 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 Condensed Combining Balance Sheet as of December 31, 2005
 Non-Guarantor
    
    
    OtherGuarantor
    
    
    Homebuilding
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash
    
    $
    
    
    
    $
    32,429,244
    
    
    $
    9,362,014
    
    
    $
    2,540,609
    
    
    $
    
    
    
    $
    44,331,867Real estate inventory
    
    
    
    
    
    
    161,819,314
    
    
    
    67,321,138
    
    
    
    
    
    
    
    (267,578
    )
    
    
    228,872,874Deposits and escrows
    
    
    
    
    
    
    11,033,222
    
    
    
    707,969
    
    
    
    
    
    
    
    (974,106
    )
    
    
    10,767,085Due from related parties
    
    
    151,284,652
    
    
    
    13,810,626
    
    
    
    5,610,979
    
    
    
    
    
    
    
    (170,411,863
    )
    
    
    294,394Accounts receivable
    
    
    
    
    
    
    246,708
    
    
    
    235,869
    
    
    
    1,603,212
    
    
    
    
    
    
    
    2,085,789Investment in affiliates
    
    
    64,824,153
    
    
    
    10,865,666
    
    
    
    
    
    
    
    
    
    
    
    (75,689,819
    )
    
    
    Other assets
    
    
    5,275,389
    
    
    
    254,072
    
    
    
    1,823,924
    
    
    
    514,797
    
    
    
    
    
    
    
    7,868,182$
    221,384,194
    
    
    $
    230,458,852
    
    
    $
    85,061,893
    
    
    $
    4,658,618
    
    
    $
    (247,343,366
    )
    
    $
    294,220,191Debt
    
    $
    150,000,000
    
    
    
    
    
    
    $
    41,973,798
    
    
    $
    
    
    
    $
    
    
    
    $
    191,973,798Accounts payable and
accrued expenses
    
    
    90,000
    
    
    
    2,633,019
    
    
    
    6,919,805
    
    
    
    3,010,604
    
    
    
    
    
    
    
    12,653,428Due to related parties
    
    
    196,044
    
    
    
    150,162,521
    
    
    
    13,337,674
    
    
    
    
    
    
    
    (160,491,988
    )
    
    
    3,204,251Purchaser deposits
    
    
    
    
    
    
    6,656,310
    
    
    
    1,598,142
    
    
    
    
    
    
    
    (974,106
    )
    
    
    7,280,346Cost to complete and
customer service
reserves
    
    
    
    
    
    
    5,104,821
    
    
    
    58,838
    
    
    
    
    
    
    
    
    
    
    
    5,163,659Other liabilities
    
    
    5,850,000
    
    
    
    657,638
    
    
    
    1,634,259
    
    
    
    
    
    
    
    
    
    
    
    8,141,897156,136,044
    
    
    
    165,214,309
    
    
    
    65,522,516
    
    
    
    3,010,604
    
    
    
    (161,466,094
    )
    
    
    228,417,379Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    454,439
    
    
    
    
    
    
    
    454,439Members capital
    
    
    65,248,150
    
    
    
    65,244,543
    
    
    
    19,539,377
    
    
    
    1,193,575
    
    
    
    (85,877,272
    )
    
    
    65,348,373$
    221,384,194
    
    
    $
    230,458,852
    
    
    $
    85,061,893
    
    
    $
    4,658,618
    
    
    $
    (247,343,366
    )
    
    $
    294,220,191




---



##### 



56 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 Condensed Combining Statement of Operations for the
Year Ended December 31, 2006
 Non-Guarantor
    
    
    OtherGuarantor
    
    
    Homebuilding
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedHomebuilding sales-homes
    
    $
    
    
    
    $
    210,724,519
    
    
    $
    16,044,067
    
    
    $
    
    
    
    $
    (7,678,884
    )
    
    $
    219,089,702Land sales
    
    
    
    
    
    
    133,257
    
    
    
    19,150,233
    
    
    
    
    
    
    
    
    
    
    
    19,283,490Financial services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,800,327
    
    
    
    
    
    
    
    11,800,327Management services
    
    
    
    
    
    
    
    
    
    
    14,444,874
    
    
    
    
    
    
    
    (14,334,882
    )
    
    
    109,992Total revenues
    
    
    
    
    
    
    210,857,776
    
    
    
    49,639,174
    
    
    
    11,800,327
    
    
    
    (22,013,766
    )
    
    
    250,283,511Cost of sales-homes
    
    
    
    
    
    
    173,266,199
    
    
    
    12,222,068
    
    
    
    
    
    
    
    (20,950,150
    )
    
    
    164,538,117Cost of land sales
    
    
    
    
    
    
    63,042
    
    
    
    15,906,308
    
    
    
    
    
    
    
    
    
    
    
    15,969,350Impairment
    
    
    
    
    
    
    8,137,430
    
    
    
    1,085,367
    
    
    
    
    
    
    
    
    
    
    
    9,222,797Selling and marketing
expenses
    
    
    
    
    
    
    14,383,234
    
    
    
    1,511,137
    
    
    
    124,405
    
    
    
    (982,229
    )
    
    
    15,036,547General and administrative
expenses
    
    
    827,857
    
    
    
    1,923,261
    
    
    
    16,486,404
    
    
    
    9,134,463
    
    
    
    (342,372
    )
    
    
    28,029,613Operating income (loss)
    
    
    (827,857
    )
    
    
    13,084,610
    
    
    
    2,427,890
    
    
    
    2,541,459
    
    
    
    260,985
    
    
    
    17,487,087Equity in earnings of
affiliates
    
    
    18,730,458
    
    
    
    20,528,330
    
    
    
    
    
    
    
    
    
    
    
    (39,258,788
    )
    
    
    Gain on derivative
contracts, net
    
    
    
    
    
    
    391,046
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391,046Other income, net
    
    
    1,745
    
    
    
    921,037
    
    
    
    562,229
    
    
    
    
    
    
    
    
    
    
    
    1,485,011Net income before
minority interest
    
    
    17,904,346
    
    
    
    34,925,023
    
    
    
    2,990,119
    
    
    
    2,541,459
    
    
    
    (38,997,803
    )
    
    
    19,363,144Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (767,072
    )
    
    
    
    
    
    
    (767,072
    )Net income
    
    $
    17,904,346
    
    
    $
    34,925,023
    
    
    $
    2,990,119
    
    
    $
    1,774,387
    
    
    $
    (38,997,803
    )
    
    $
    18,596,072




---



##### 



57 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 Condensed Combining Statement of Operations for the
Year Ended December 31, 2005
 Non-Guarantor
    
    
    OtherGuarantor
    
    
    Homebuilding
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedHomebuilding sales-homes
    
    $
    
    
    
    $
    250,561,585
    
    
    $
    5,793,101
    
    
    $
    
    
    
    $
    (5,793,101
    )
    
    $
    250,561,585Land sales
    
    
    
    
    
    
    150,000
    
    
    
    4,995,000
    
    
    
    
    
    
    
    
    
    
    
    5,145,000Financial services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,451,724
    
    
    
    
    
    
    
    15,451,724Management services
    
    
    78,358
    
    
    
    
    
    
    
    14,585,942
    
    
    
    
    
    
    
    (14,562,572
    )
    
    
    101,728Total revenues
    
    
    78,358
    
    
    
    250,711,585
    
    
    
    25,374,043
    
    
    
    15,451,724
    
    
    
    (20,355,673
    )
    
    
    271,260,037Cost of sales-homes
    
    
    
    
    
    
    188,887,189
    
    
    
    4,739,506
    
    
    
    
    
    
    
    (18,912,529
    )
    
    
    174,714,166Cost of land sales
    
    
    
    
    
    
    140,000
    
    
    
    3,728,746
    
    
    
    
    
    
    
    
    
    
    
    3,868,746Selling and marketing
expenses
    
    
    
    
    
    
    14,913,216
    
    
    
    816,049
    
    
    
    
    
    
    
    (112,325
    )
    
    
    15,616,940General and administrative
expenses
    
    
    751,297
    
    
    
    2,504,423
    
    
    
    16,864,323
    
    
    
    11,895,592
    
    
    
    (679,642
    )
    
    
    31,335,993Operating income (loss)
    
    
    (672,939
    )
    
    
    44,266,757
    
    
    
    (774,581
    )
    
    
    3,556,132
    
    
    
    (651,177
    )
    
    
    45,724,192Equity in earnings of
affiliates
    
    
    1,528,320
    
    
    
    46,499,348
    
    
    
    
    
    
    
    
    
    
    
    (48,027,668
    )
    
    
    Gain on derivative
contracts, net
    
    
    
    
    
    
    123,772
    
    
    
    
    
    
    
    105,072
    
    
    
    
    
    
    
    228,844Other income, net
    
    
    
    
    
    
    1,084,345
    
    
    
    327,956
    
    
    
    
    
    
    
    (18,616
    )
    
    
    1,393,685Net income (loss)
before
minority interest
    
    
    855,381
    
    
    
    91,974,222
    
    
    
    (446,625
    )
    
    
    3,661,204
    
    
    
    (48,697,461
    )
    
    
    47,346,721Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,113,253
    )
    
    
    
    
    
    
    (1,113,253
    )Net income (loss)
    
    $
    855,381
    
    
    $
    91,974,222
    
    
    $
    (446,625
    )
    
    $
    2,547,951
    
    
    $
    (48,697,461
    )
    
    $
    46,233,468




---



##### 



58 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 Condensed Combining Statement of Operations for the
Year Ended December 31, 2004
 Non-Guarantor
    
    
    OtherGuarantor
    
    
    Homebuilding
    
    
    Non-GuarantorSubsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedHomebuilding sales-homes
    
    $
    158,628,674
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    158,628,674Land sales
    
    
    235,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235,000Financial services
    
    
    
    
    
    
    
    
    
    
    9,437,475
    
    
    
    
    
    
    
    9,437,475Management services
    
    
    
    
    
    
    10,656,180
    
    
    
    
    
    
    
    (10,467,930
    )
    
    
    188,250Total revenues
    
    
    158,863,674
    
    
    
    10,656,180
    
    
    
    9,437,475
    
    
    
    (10,467,930
    )
    
    
    168,489,399Cost of sales-homes
    
    
    127,245,842
    
    
    
    1,054,015
    
    
    
    
    
    
    
    (10,467,930
    )
    
    
    117,831,927Cost of land sales
    
    
    180,552
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180,552Selling and marketing expenses
    
    
    8,440,384
    
    
    
    267,919
    
    
    
    
    
    
    
    
    
    
    
    8,708,303General and administrative expenses
    
    
    2,064,918
    
    
    
    11,821,720
    
    
    
    7,258,333
    
    
    
    (150,645
    )
    
    
    20,994,326Operating income
    
    
    20,931,978
    
    
    
    (2,487,474
    )
    
    
    2,179,142
    
    
    
    150,645
    
    
    
    20,774,291Loss on derivative contracts, net
    
    
    (57,345
    )
    
    
    (252
    )
    
    
    (60,514
    )
    
    
    
    
    
    
    (118,111
    )Other income, net
    
    
    321,726
    
    
    
    881,226
    
    
    
    (45,790
    )
    
    
    (150,645
    )
    
    
    1,006,517Net income (loss) before
minority interest
    
    
    21,196,359
    
    
    
    (1,606,500
    )
    
    
    2,072,838
    
    
    
    
    
    
    
    21,662,697Minority interest
    
    
    
    
    
    
    
    
    
    
    (578,777
    )
    
    
    
    
    
    
    (578,777
    )Net income (loss)
    
    $
    21,196,359
    
    
    $
    (1,606,500
    )
    
    $
    1,494,061
    
    
    $
    
    
    
    $
    21,083,920




---



##### 



59 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 Condensed Consolidating and Combining Statement of Cash Flows for the
Year Ended December 31, 2006
 Non-GuarantorGuarantor
    
    
    Homebuilding
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net income
    
    $
    17,904,346
    
    
    $
    34,925,023
    
    
    $
    2,990,119
    
    
    $
    1,774,387
    
    
    $
    (38,997,803
    )
    
    $
    18,596,072Equity in earnings of
affiliates
    
    
    (7,964,308
    )
    
    
    (66,369,807
    )
    
    
    
    
    
    
    
    
    
    
    74,334,115
    
    
    
    Changes in real estate
inventory
    
    
    (390,650
    )
    
    
    (1,176,903
    )
    
    
    (63,400,919
    )
    
    
    
    
    
    
    2,006,393
    
    
    
    (62,962,079
    )Other operating activities
    
    
    3,270,612
    
    
    
    (51,664,487
    )
    
    
    94,104,500
    
    
    
    (2,536,470
    )
    
    
    (37,342,705
    )
    
    
    5,831,450Net cash provided by
(used in) operating
activities
    
    
    12,820,000
    
    
    
    (84,286,174
    )
    
    
    33,693,700
    
    
    
    (762,083
    )
    
    
    
    
    
    
    (38,534,557
    )Investing activities:Net cash provided by
(used in) investing
activities
    
    
    
    
    
    
    (4,744
    )
    
    
    56,821
    
    
    
    (189,459
    )
    
    
    
    
    
    
    (137,382
    )Financing activities:Issuance of debt
    
    
    
    
    
    
    
    
    
    
    11,508,576
    
    
    
    
    
    
    
    
    
    
    
    11,508,576Repayments of loans
payable
    
    
    
    
    
    
    
    
    
    
    (53,482,374
    )
    
    
    
    
    
    
    
    
    
    
    (53,482,374
    )Draws on (repayments
of) line of credit, net
    
    
    
    
    
    
    52,750,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,750,000Distributions to member
    
    
    (12,820,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,820,000
    )Distributions to minority
partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770,406
    )
    
    
    
    
    
    
    (770,406
    )Net cash provided by
(used in) financing
activities
    
    
    (12,820,000
    )
    
    
    52,750,000
    
    
    
    (41,973,798
    )
    
    
    (770,406
    )
    
    
    
    
    
    
    (2,814,204
    )Decrease in cash and cash
equivalents
    
    
    
    
    
    
    (31,540,918
    )
    
    
    (8,223,277
    )
    
    
    (1,721,948
    )
    
    
    
    
    
    
    (41,486,143
    )Cash and cash equivalents,
beginning of year
    
    
    
    
    
    
    32,429,244
    
    
    
    9,362,014
    
    
    
    2,540,609
    
    
    
    
    
    
    
    44,331,867Cash and
cash equivalents, end of year
    
    $
    
    
    
    $
    888,326
    
    
    $
    1,138,737
    
    
    $
    818,661
    
    
    $
    
    
    
    $
    2,845,724




---



##### 



60 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 Condensed Combining Statement of Cash Flows for the
Year Ended December 31, 2005
 Non-GuarantorGuarantor
    
    
    Homebuilding
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activities:Net income (loss)
    
    $
    855,381
    
    
    $
    91,974,222
    
    
    $
    (446,625
    )
    
    $
    2,547,951
    
    
    $
    (48,697,461
    )
    
    $
    46,233,468Equity in earnings of
affiliates
    
    
    (1,528,320
    )
    
    
    (46,499,348
    )
    
    
    
    
    
    
    
    
    
    
    48,027,668
    
    
    
    Changes in real estate
inventory
    
    
    
    
    
    
    19,386,261
    
    
    
    (40,975,973
    )
    
    
    
    
    
    
    247,908
    
    
    
    (21,341,804
    )Other operating activities
    
    
    (143,810,307
    )
    
    
    103,101,945
    
    
    
    54,449,327
    
    
    
    (81,628
    )
    
    
    421,885
    
    
    
    14,081,222Net cash provided by
(used in) operating
activities
    
    
    (144,483,246
    )
    
    
    167,963,080
    
    
    
    13,026,729
    
    
    
    2,466,323
    
    
    
    
    
    
    
    38,972,886Investing activities:Net cash used in investing
activities
    
    
    
    
    
    
    
    
    
    
    (1,142,669
    )
    
    
    (128,602
    )
    
    
    
    
    
    
    (1,271,271
    )Financing activities:Issuance of subordinated
senior notes
    
    
    150,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000,000Borrowings (repayments) of
loans payable, net
    
    
    
    
    
    
    (9,976,063
    )
    
    
    (2,315,904
    )
    
    
    
    
    
    
    
    
    
    
    (12,291,967
    )Draws on (repayments
of) line of credit
    
    
    
    
    
    
    (99,689,635
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,689,635
    )Financing costs
    
    
    (5,516,754
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,516,754
    )Distributions to members
and dividends to
stockholders
    
    
    
    
    
    
    (26,850,000
    )
    
    
    (218,510
    )
    
    
    
    
    
    
    
    
    
    
    (27,068,510
    )Distributions to minority
partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (847,000
    )
    
    
    
    
    
    
    (847,000
    )Net cash provided by
(used in) financing
activities
    
    
    144,483,246
    
    
    
    (136,515,698
    )
    
    
    (2,534,414
    )
    
    
    (847,000
    )
    
    
    
    
    
    
    4,586,134Increase in cash and cash
equivalents
    
    
    
    
    
    
    31,447,382
    
    
    
    9,349,646
    
    
    
    1,490,721
    
    
    
    
    
    
    
    42,287,749Cash and cash equivalents,
beginning of year
    
    
    
    
    
    
    981,862
    
    
    
    12,368
    
    
    
    1,049,888
    
    
    
    
    
    
    
    2,044,118Cash and cash
equivalents, end of year
    
    $
    
    
    
    $
    32,429,244
    
    
    $
    9,362,014
    
    
    $
    2,540,609
    
    
    $
    
    
    
    $
    44,331,867




---



##### 



61 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 Condensed Combining Statement of Cash Flows for the
Year Ended December 31, 2004
 OtherNon-Guarantor
    
    
    Non-Guarantor
    
    
    Homebuilding
    
    
    GuarantorSubsidiaries
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    CombinedOperating activities:Net income (loss)
    
    $
    21,196,359
    
    
    $
    (1,606,500
    )
    
    $
    1,494,061
    
    
    $
    21,083,920Changes in real estate inventory
    
    
    (58,992,978
    )
    
    
    (19,934,271
    )
    
    
    
    
    
    
    (78,927,249
    )Other operating activities
    
    
    (2,666,733
    )
    
    
    3,828,487
    
    
    
    534,988
    
    
    
    1,696,742Net cash provided by (used in) operating
activities
    
    
    (40,463,352
    )
    
    
    (17,712,284
    )
    
    
    2,029,049
    
    
    
    (56,146,587
    )Investing activities:Net cash used in investing activities
    
    
    
    
    
    
    (194,958
    )
    
    
    (298,865
    )
    
    
    (493,823
    )Financing activities:Borrowings (repayments) of loans payable,
net
    
    
    5,468,301
    
    
    
    17,434,702
    
    
    
    (261,000
    )
    
    
    22,642,003Draws on (repayments of) line of credit, net
    
    
    46,939,635
    
    
    
    
    
    
    
    
    
    
    
    46,939,635Contributions from members
    
    
    1,710,000
    
    
    
    480,000
    
    
    
    
    
    
    
    2,190,000Distributions to members and dividends to
stockholders
    
    
    (12,765,000
    )
    
    
    
    
    
    
    (1,600,000
    )
    
    
    (14,365,000
    )Distributions to minority partners
    
    
    
    
    
    
    
    
    
    
    (598,309
    )
    
    
    (598,309
    )Net cash provided by (used in) financing
activities
    
    
    41,352,936
    
    
    
    17,914,702
    
    
    
    (2,459,309
    )
    
    
    56,808,329Increase (decrease) in cash and cash equivalents
    
    
    889,584
    
    
    
    7,460
    
    
    
    (729,125
    )
    
    
    167,919Cash and cash equivalents, beginning of year
    
    
    92,278
    
    
    
    4,908
    
    
    
    1,779,013
    
    
    
    1,876,199Cash and cash equivalents, end of year
    
    $
    981,862
    
    
    $
    12,368
    
    
    $
    1,049,888
    
    
    $
    2,044,118
 (11) Related Party Transactions




---



##### 



62 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
 (12) Commitments and Contingencies
 (a) Legal Proceedings
  (b) Guarantees
     (c) Contract Land Deposits
   (13) New Accounting Pronouncements




---



##### 



63 STANLEY-MARTIN COMMUNITIES, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS  (Continued)
   (14) Quarterly Financial Information (unaudited)
  Quarter EndedDecember 31,
    
    September 30,
    
    June 30,
    
    March 31,2006
    
    2006
    
    2006
    
    2006Homebuilding sales (includes land sales)
    
    $
    65,486,292
    
    
    $
    58,811,362
    
    
    $
    71,004,733
    
    
    $
    43,070,805Total revenues
    
    $
    68,309,854
    
    
    $
    61,519,143
    
    
    $
    74,518,375
    
    
    $
    45,936,139Operating income
    
    $
    268,105
    
    
    $
    2,883,557
    
    
    $
    8,646,393
    
    
    $
    5,689,032Net income
    
    $
    758,707
    
    
    $
    2,409,807
    
    
    $
    9,103,025
    
    
    $
    6,324,532
 Quarter EndedDecember 31,
    
    September 30,
    
    June 30,
    
    March 31,2005
    
    2005
    
    2005
    
    2005Homebuilding sales
    
    $
    77,671,485
    
    
    $
    64,725,565
    
    
    $
    63,240,466
    
    
    $
    50,069,069Total revenues
    
    $
    81,512,775
    
    
    $
    69,121,577
    
    
    $
    67,558,247
    
    
    $
    53,067,438Operating income
    
    $
    12,054,549
    
    
    $
    11,331,807
    
    
    $
    10,728,552
    
    
    $
    11,609,284Net income
    
    $
    12,137,430
    
    
    $
    12,054,389
    
    
    $
    10,178,231
    
    
    $
    11,863,418




---



##### 



64 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  
 ITEM 9B. OTHER INFORMATION




---



##### 



65 
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors and Executive Officers
   Name
    
    Age
    
    Position(s)Martin K. Alloy
    
    
    67
    
    
    Chairman and ManagerSteven B. Alloy
    
    
    41
    
    
    Chief Executive Officer, President and ManagerMichael I. Roman
    
    
    51
    
    
    Chief Financial OfficerMichael E. Schnitzer
    
    
    46
    
    
    Chief Operating OfficerStuart M. Ginsberg
    
    
    51
    
    
    Vice President, Secretary and General Counsel
 Martin K. Alloy.
 Steven B. Alloy.
 Michael I. Roman.
 Michael E. Schnitzer.
 Stuart M. Ginsberg.
 Code of Conduct and Ethics
  
 ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
 Compensation Discussion and Analysis




---



##### 



66   Compensation Components
 Annual Compensation
  Annual Incentive Bonuses
  Long-Term Incentive Compensation
  Stock Options, Performance Shares or Other Stock Compensation Plans
  Retirement Savings Plan
  Change-in-Control Agreements
  Severance Plan Agreements




---



##### 



67 Compensation Tables
 Summary Compensation Table
  Fiscal
    
    Annual Compensation ($)
    
    Long-Term
    
    OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Compensation (3)
    
    Compensation (1)
    
    TotalMartin K. Alloy
    
    
    2006
    
    
    
    400,000
    
    
    
    
    
    
    
    
    
    
    
    3,200
    
    
    
    403,200ChairmanSteven B. Alloy
    
    
    2006
    
    
    
    500,000
    
    
    
    500,000
    
    
    
    
    
    
    
    3,200
    
    
    
    1,003,200Chief Executive Officer and PresidentMichael E. Schnitzer (2)
    
    
    2006
    
    
    
    269,077
    
    
    
    59,000
    
    
    
    88,809
    
    
    
    3,200
    
    
    
    420,086Chief Operating OfficerMichael I. Roman
    
    
    2006
    
    
    
    278,250
    
    
    
    100,000
    
    
    
    55,917
    
    
    
    3,200
    
    
    
    437,367Chief Financial OfficerStuart M. Ginsberg
    
    
    2006
    
    
    
    352,682
    
    
    
    
    
    
    
    32,892
    
    
    
    3,200
    
    
    
    388,774Vice President and General Counsel
 
 (1)
    
    Consists of company contributions to retirement savings plan and fringe
benefits.(2)
    
    Michael E. Schnitzer was appointed Chief Operating Officer in February 2005.
Mr. Schnitzer resigned as Chief Operating Officer and became President of Stanley
Martin Custom Homes, LLC in January, 2007. Mr. Schnitzer did not participate in the
Long Term Compensation Plan in 2007.(3)
    
    The plan provides for a five year vesting and a three year cliff payment
after which distributions are made annually. No payments have been made under the
plan and amounts represent amounts added to the Named Executives account. Plan-Based Awards
 Estimated Possible Payouts Under Non-EquityIncentive Plan Awards (1)Grant Date
    
    ThresholdName (a)
    
    (b)
    
    ($) (c)
    
    Target ($) (d)
    
    Maximum ($) (e)Michael I. Roman
    
    
    11/2/2006
    
    
    
    100,000
    
    
    
    150,000
    
    
    
    199,378Stuart M. Ginsberg
    
    
    11/2/2006
    
    
    
    100,000
    
    
    
    150,000
    
    
    
    179,046
 
 (1)
    
    These awards were made pursuant to our Long-Term Incentive Compensation Plan (LTICP)
and will be earned upon the achievement of certain performance goals established by the
managers for the plan year ended September 30, 2007. For a discussion of these performance
goals see above for our Compensation Discussion and Analysis included in this Form 10-K.
Our managers target payouts to be allocated to executive participants based upon the
Companys achievement of specified financial goals. For the plan year ended September 30,
2006, the amounts set forth as Long Term Compensation in the Summary Compensation Table
were allocated based on a variable percentage of Company pretax profit in excess of a
target return on equity. For the plan year ended September 30, 2007, executive
participants can receive an allocation equal to that set forth in Threshold if the
Company achieves a minimum pre-tax profit target. In addition, the executive participants
can receive the amount set forth under Target if the minimum pre-tax profit is met as
well as a minimum target pre-tax return on equity. Finally, the executive participants can
receive a specified percentage of pre-tax profits in excess of the target return on equity.
The amount set forth in Maximum above assumes the Company generates fiscal pre-tax net
profits which are 15% in excess of the target return on equity. Since a portion of the
executive participants long term compensation is dependent on profits in excess of average
equity, the distributions taken by the managers during the year can change the level of
account allocations. Based on prior performance of the Company, the current economic
environment , and performance through 2007, the performance threshold, target and maximum
will be challenging.(2)
    
    The company does not have any equity incentive plans therefore columns (f) through (m) have
been excluded.




---



##### 



68 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 Transactions with Related Parties
  Purchase Agreements




---



##### 



69   Heritage Contracting, LLC
    Duball, LLC
  Indemnity Agreements
  Home Purchase
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Fees paid to Principal Accountant
 Audit Fees
  Audit-Related Fees




---



##### 



70 Tax Fees
  All Other Fees
  Pre-approval Policies and Procedures
  Principal Accountant Independence




---



##### 



71 
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1) Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    42Consolidated and Combined Balance Sheets at December 31, 2006 and 2005
    
    
    43Consolidated and Combined Statements of Operations for the years ended December 31, 2006, 2005 and 2004
    
    
    44Consolidated and Combined Statements of Members Capital and ShareholdersDeficit for the years ended
December 31, 2006, 2005 and 2004
    
    
    45Consolidated and Combined Statements of Cash Flows for the yeas ended December 31, 2006, 2005 and 2004
    
    
    46Notes to the Consolidated and Combined Financial Statements
    
    
    47-63 (2) Financial Statement Schedule
  (3) Exhibits
  3.1*
    
    Certificate of Formation of Stanley Martin Communities3.2*
    
    Operating Agreement of Stanley-Martin Communities, LLC3.3*
    
    Certificate of Incorporation of Stanley-Martin Financing Corp.3.4*
    
    Certificate of Amendment of Certificate of Incorporation of Stanley-Martin Financing Corp.3.5*
    
    Bylaws of Stanley-Martin Financing Corp.3.6*
    
    Articles of Organization of Beech Grove Neighborhoods, LLC3.7*
    
    Limited Liability Company Operating Agreement of Beech Grove Neighborhoods, LLC3.8*
    
    Amendment to Operating Agreement of Beech Grove Neighborhoods, LLC3.9*
    
    Articles of Organization of Bram Neighborhoods, LLC3.10*
    
    Limited Liability Company Operating Agreement of Bram Neighborhoods, LLC3.11*
    
    Articles of Organization of Bram III Neighborhoods, LLC3.12*
    
    Limited Liability Company Operating Agreement of Bram III Neighborhoods, LLC3.13*
    
    Amendment to Operating Agreement of Bram III Neighborhoods, LLC3.14*
    
    Articles of Organization of Coles Run Neighborhoods, LLC3.15*
    
    Limited Liability Company Operating Agreement of Coles Run Neighborhoods, LLC3.16*
    
    Articles of Organization of Fair Oaks Neighborhoods, LLC3.17*
    
    Limited Liability Company Operating Agreement of Fair Oaks Neighborhoods, LLC3.18*
    
    Articles of Organization of Glenkirk Neighborhoods, LLC3.19*
    
    Limited Liability Company Operating Agreement of Glenkirk Neighborhoods, LLC3.20*
    
    Articles of Organization of Glynn Tarra Estates, LLC3.21*
    
    Amended and Restated Limited Liability Company Operating Agreement of Glynn Tarra Estates, LLC3.22*
    
    Articles of Organization of KF Neighborhoods, LLC




---



##### 



72 3.23*
    
    Limited Liability Company Operating Agreement of KF Neighborhoods, LLC3.24*
    
    Limited Liability Company Operating Agreement of KF Neighborhoods, LLC3.25*
    
    Articles of Organization of KF II Neighborhoods, LLC3.26*
    
    Limited Liability Company Operating Agreement of KF II Neighborhoods, LLC3.27*
    
    Articles of Organization of Landmark Neighborhoods, LLC3.28*
    
    Limited Liability Company Operating Agreement of Landmark Neighborhoods, LLC3.29*
    
    Articles of Organization of Marumsco Neighborhoods, LLC3.30*
    
    Limited Liability Company Operating Agreement of Marumsco Neighborhoods, LLC3.31*
    
    Articles of Organization of Neighborhoods Capital, LLC3.32*
    
    Limited Liability Company Operating Agreement of Neighborhoods Capital, LLC3.33*
    
    Articles of Organization of Neighborhoods I, LLC3.34*
    
    Articles of Amendment to Articles of Organization of Neighborhoods I, LLC3.35*
    
    Limited Liability Company Operating Agreement of Neighborhoods I, LLC3.36*
    
    Articles of Organization of Neighborhoods II, LLC3.37*
    
    Limited Liability Company Operating Agreement of Neighborhoods II, LLC3.38*
    
    Articles of Organization of Neighborhoods II, LLC3.39*
    
    Articles of Amendment to the Articles of Organization of Neighborhoods III, LLC3.40*
    
    Limited Liability Company Operating Agreement of Neighborhoods III, LLC3.41*
    
    Articles of Organization of Neighborhoods IV, LLC3.42*
    
    Limited Liability Company Operating Agreement of Neighborhoods IV, LLC3.43*
    
    Articles of Organization of Neighborhoods V, LLC3.44*
    
    Limited Liability Company Operating Agreement of Neighborhoods V, LLC3.45*
    
    Amendment to Operating Agreement of Neighborhoods V, LLC3.46*
    
    Articles of Organization of Neighborhoods VI, LLC3.47*
    
    Limited Liability Company Operating Agreement of Neighborhoods VI, LLC3.48*
    
    Articles of Organization of Old Dominion Neighborhoods, LLC




---



##### 



73 3.49*
    
    Limited Liability Company Operating Agreement of Old Dominion Neighborhoods, LLC3.50*
    
    Articles of Organization of Spring Park Neighborhoods, LLC3.51*
    
    Limited Liability Company Operating Agreement of Spring Park Neighborhoods, LLC3.52*
    
    Articles of Organization of Wall Neighborhoods, LLC3.53*
    
    Limited Liability Company Operating Agreement of Wall Neighborhoods, LLC3.54*
    
    Articles of Organization of Wildewood Neighborhoods, LLC3.55*
    
    Limited Liability Company Operating Agreement of Wildewood Neighborhoods, LLC3.56*
    
    Articles of Organization of Zion Neighborhoods, LLC3.57*
    
    Limited Liability Company Operating Agreement of Zion Neighborhoods, LLC3.58*
    
    Articles of Amendment to Articles of Organization to Brambleton Neighborhoods, LLC3.59*
    
    Articles of Organization of Shirlington Neighborhoods, LLC3.60*
    
    Limited Liability Company Operating Agreement of Shirlington Neighborhoods, LLC3.61
    
    Limited Liability Company Operating Agreement for Avalon West Neighborhoods, LLC (filed herewith)3.62
    
    Articles of Organization of Avalon West Neighborhoods, LLC (filed herewith)4.1*
    
    Indenture dated as of August 10, 2005 by and among Stanley-Martin Communities, LLC, Stanley- Martin
Financing Corp., each of the Guarantors named therein and The Bank of New York4.2*
    
    Form of Senior Subordinated Note4.3*
    
    Registration Rights Agreement dated as of August 10, 2005 by and among Stanley-Martin Communities,
LLC, Stanley-Martin Financing Corp, each of the Guarantors named therein and Wachovia Capital Markets,
LLC10.1*
    
    Purchase Agreement dated as of August 3, 2005 by and among Stanley-Martin Communities, LLC,
Stanley-Martin Financing Corp., each of the Guarantors named therein and Wachovia Capital Markets, LLC10.2*
    
    Lot Purchase Agreement by and between Wildewood Residential, LLC and Wildewood Neighborhoods, LLC10.3*
    
    First Amendment to Lot Purchase Agreement by and between Wildewood Residential, LLC and Wildewood
Neighborhoods, LLC10.6*
    
    Lot Purchase Agreement between Renaissance at Woodlands, LLC and Neighborhoods I, LLC10.7*
    
    First Amendment to Lot Purchase Agreement by and between Renaissance at Woodlands, LLC and
Neighborhoods I, LLC10.8*
    
    Assignment and Assumption of Lot Purchase Agreement by and between Renaissance at Woodlands, LLC and
Neighborhoods I, LLC10.9*
    
    Lot Purchase Agreement by and between Renaissance at Woodlands, LLC and Neighborhoods I, LLC




---



##### 



74 10.11*
    
    Second Amendment to Lot Purchase Agreement by and between Renaissance at Woodlands, LLC and
Neighborhoods I, LLC10.12*
    
    Assignment and Assumption of Lot Purchase Agreement by and between Renaissance at Woodlands, LLC and
Neighborhoods I, LLC10.13*
    
    First Modified and Restated Loan Agreement among Neighborhoods Capital, LLC, certain Lenders
identified therein, Wachovia Capital Markets, LLC, Wachovia Bank and Branch Banking and Trust Company,
Southtrust Bank and Key Bank National Association dated as of November 15, 2004.10.14*
    
    Real Estate Contract dated July 5, 2005 by and between The Shaeffer Family and West End Group of
Investors and Stanley Martin Companies, Inc.10.16*
    
    Long Term Incentive Compensation Plan and Agreement with Stuart M. Ginsberg dated November 23, 200510.19*
    
    Long Term Incentive Compensation Plan and Agreement with Michael I. Roman dated November 23, 200510.20*
    
    Long Term Incentive Compensation Plan and Agreement with Michael E. Schnitzer dated November 23, 200510.21*
    
    Second Amendment to Lot Purchase Agreement by and between Wildewood Residential, LLC and Wildewood
Neighborhoods, LLC10.22*
    
    First Modification Agreement by and among Neighborhoods Capital, LLC, certain Lenders identified
therein and Wachovia Bank, dated as of July 11, 200510.23*
    
    Second Modification Agreement by and among Neighborhoods Capital, LLC, certain Lenders identified
therein and Wachovia Bank, dated as of October 5, 200610.24
    
    Long Term Incentive Compensation Plan and Agreement with David W. Duggar dated November 2, 2006 (filed
herewith)10.25
    
    Long Term Incentive Compensation Plan and Agreement with Gordon B. Thomas dated November 2, 2006
(filed herewith)10.26
    
    The Third Modification Agreement by and among Neighborhoods Capital, LLC and Wachovia Bank, National
Association dated October 5, 2006 is hereby incorporated by reference to Exhibit 10.1 of the
Registrants Form 10-Q filed with the Securities and Exchange Commission on November 30, 200610.27
    
    The Fourth Modification Agreement by and among Neighborhoods Capital, LLC and Wachovia Bank, National
Association dated November 27, 2006 is hereby incorporated by reference to Exhibit 10.1 of the
Registrants Form 8-K filed with the Securities and Exchange Commission on November 30, 200610.28
    
    Neighborhood Holdings, LLC Assignment and Contribution Agreement dated September 20, 2006 (filed
herewith)




---



##### 



75 12.1
    
    Ratio of Earnings to Fixed Charges (filed herewith)21
    
    Subsidiaries of the Registrant (filed herewith)31  (a)
    
    Rule 13a-14(a) Certification by Steven B. Alloy, President and Chief Executive Officer (filed herewith)(b)
    
    Rule 13a-14(a) Certification by Michael I. Roman, Chief Financial Officer (filed herewith)32
    
    Certification Pursuant to 18 United States Code § 1350 and Rule 13a-14(b) of the
Securities Exchange Act of 1934 (filed herewith)
 
 *
    
    Incorporated by reference to the corresponding exhibit to the Registrants Registration Statement
of Form S-4 filed on December 17, 2005 with the Securities and Exchange Commission, as amended.




---



##### 



76 
 SIGNATURES
  
 March 27, 2007
    By:
    /s/ Michael I. RomanMichael I. RomanChief Financial Officer  Signature
    
    Title
    
    Date/s/ Steven B. Alloy
    
    Manager, President, Chief Executive
Officer
    
    March 27, 2007Steven B. Alloy/s/ Michael I. Roman
    
    Chief Financial Officer (Principal
Financial Officer)
    
    March 27, 2007Michael I. Roman




---



##### 



77 
 Exhibit Index
 ExhibitNumber
    
    Description10.24
    
    Long Term Incentive Compensation Plan and Agreement with David W. Duggar dated November
2, 2006 (filed herewith)10.25
    
    Long Term Incentive Compensation Plan and Agreement with Gordon B. Thomas dated November
2, 2006 (filed herewith)10.28
    
    Neighborhood Holdings, LLC Assignment and Contribution Agreement dated September 20, 2006
(filed herewith)12.1
    
    Ratio of Earnings to Fixed Charges (filed herewith)21
    
    Subsidiaries of the Registrant (filed herewith)31(a)
    
    Rule 13a-14 (a) Certification by Steven B. Alloy, Chief Executive Officer (filed herewith)31(b)
    
    Rule 13a-14(a) Certification by Michael I. Roman, Chief Financial Officer (filed herewith)32
    
    Certification Pursuant to 18 United States Code § 1350 and Rule 13a-14(b) of the
Securities Exchange Act of 1934 (filed herewith)