Ryland takes $45 million charge against earnings Slow sales in S. California spur move

October 21, 1993|By Ross Hetrick | Ross Hetrick,Staff Writer

Ryland Group Inc., a Columbia-based homebuilder, has taken a $45 million charge against third-quarter earnings in anticipation of pricing concessions in Southern California as it reactivates its building effort and property sales in that region.

The move represents an apparent decision by Ryland to take a loss on land purchased during the housing boom of the late 1980s rather than wait out the downturn while paying interest on loans for the land.

Ryland, the nation's third-largest homebuilder, said it decided to take the $45 million reserve against its inventory of properties because it saw no near-term improvement in the Southern California economy.

The company had homes and land worth about $194 million in Southern California at the end of last year.

"These reserves will allow Ryland to accelerate completion of, or withdrawal from, housing communities which are negatively impacted by the high cost of land contracted in the late 1980s," Andre W. Brewster, Ryland's chief executive, said in a statement yesterday.

A small part of the reserve also includes anticipated price concessions for property in the mid-Atlantic region, the company said.

Ryland did not break down the amounts reserved for each region.

Despite the $45 million charge against earnings, the company said that it expected only a small loss for the year thanks to the strong performance of its mortgage operations.

During this year's first six months, the company reported income of $12.3 million, or 71 cents a share, on revenues of $672.8 million.

The company had previously put housing developments in Southern California on hold while it waited for the economy to improve.

But that turnaround has not materialized.

"The company modified its strategy, concluding that the outlook for the housing market in this area warrants a reduction in the current level of investment," Mr. Brewster said.

The level of Ryland's presence in the Southern California market in future years would depend on the area's economy, Larry P. Cates, a company spokesman, said.

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