Question-and-Answer Session
Operator
And, thank you for the presentation. The company will now answer questions so that everyone has an opportunity to ask questions. (Operator Instructions). And your first question comes from the line of Margaret Whelan with UBS. Please proceed.
Dave Goldberg - UBS
It’s actually Dave Goldberg on for Margaret, how are you doing?
Ara Hovnanian
Very good, thanks.
Dave Goldberg - UBS
I was wondering if you could give us some more details on the communities that are going to open by the end of the year and where they are going to be and maybe the average tenure of how long you've controlled the land that's making up these communities?
Ara Hovnanian
We really don't have the new communities broken down by market at our fingertips. But, I can tell you and obviously the question regarding the tenure is trying to figure out what the margins or prices would look like. We've tried to incorporate our best guess and analysis as to what the margin and sales pace of those communities might be. And they are already baked into our projections.
Basically, as we reviewed all of our options, we made what we refer to as go/no-go decisions. Based on the financial returns on those properties on a go-forward basis, we treated the existing costs as some cost and said, okay, does the property make economic sense and satisfactory returns on a go-forward basis? Those that did not, we walked from and most of that occurred in the fourth quarter. And those that did, we are going forward with them.
However, while it may make sense on a go-forward basis, if you go back and do include the sub-costs, the margins are obviously not what we would like. And hence, that's part of the reason we are projecting a little more margin decline for this year.
Dave Goldberg - UBS
Were you able to change the product offering in those communities at all, maybe smaller homes?
Ara Hovnanian
In many of them, we did. And typically, we either reduced the specifications in our homes, reduced what we did at standard flooring, or cabinets or appliances. Or in other cases, we actually introduced new lower-priced, smaller or more cost-efficient homes.
In some cases, that was practical. In other cases, we are too far long. And by the time you built models and went through the additional expenses, it might not have made sense.
- To read the full transcript on Seeking Alpha, click here »
