SOURCE: Tarragon Corporation

August 11, 2008 17:34 ET

Tarragon Corporation Announces Second Quarter 2008 Financial Results

NEW YORK, NY--(Marketwire - August 11, 2008) - Tarragon Corporation (NASDAQ: TARR), a leading urban homebuilder specializing in the development and marketing of high- density residential communities, today announced its financial results for the second quarter ended June 30, 2008.

Second Quarter Financial Results

Consolidated revenue for the second quarter of 2008 was $64.4 million, compared to $69.9 million in the same period of 2007.

Homebuilding sales, including revenue from unconsolidated properties, were $48.3 million in the second quarter of 2008, compared to $84.5 million in the same period of 2007.

The loss from continuing operations was ($39.5 million) in the second quarter of 2008, compared to a loss of ($155.0 million) in the same period of 2007.

The net loss for the second quarter of 2008 was ($39.4 million), or ($1.37) per diluted share, compared to a net loss of ($181.0 million), or ($6.31) per diluted share, in the second quarter of 2007.

The loss in the second quarter of 2007 included impairment charges of $199.0 million, of which $39.1 million was presented in cost of sales and $38.7 million was presented in discontinued operations. Impairment charges of $19.5 million were recorded in the second quarter of 2008. Of this amount, $709,000 was presented in cost of sales.

Six-Month Financial Results

Consolidated revenue for the first six months of 2008 was $229.1 million, compared to $214.2 million for the same period of 2007. Homebuilding sales, including revenue from unconsolidated properties, were $202.3 million in the first six months of 2008 compared to $215.0 million in the same period of 2007.

The loss from continuing operations during the first six months of 2008 was ($55.7 million) compared to a loss of ($156.4 million) for the same period of 2007.

The net loss for the first six months of 2008 was ($48.2 million), or ($1.69) per diluted share, compared to a loss of ($185.3 million), or ($6.55) per diluted share, in the comparable period of 2007.

The 2008 and 2007 periods included impairment charges of $34.1 million and $203.4 million, respectively. Of these amounts, $1.7 million and $43.5 million, respectively, were presented in cost of sales. In addition, in the 2007 period, impairment charges of $38.7 million were presented in discontinued operations.

Sales, Orders and Backlog

In the second quarter of 2008, the Company recorded sales of 142 homes representing $48.3 million compared with 407 homes for $84.5 million in the second quarter of 2007.

In the second quarter of 2008 the Company wrote 41 net new orders totaling $5.0 million at an average sale price of $121,000, compared with 360 net new orders totaling $69.0 million for the same period in 2007 at an average sale price of $192,000.

At the end of the second quarter of 2008, the Company's backlog, excluding land development, was $31.4 million representing 82 homes compared with $194.2 million at the end of the second quarter of 2007 representing 482 homes. The average contract price was $383,000 at June 30, 2008 compared to $403,000 at June 30, 2007.

Active Projects

At June 30, 2008, Tarragon's active for-sale communities (including backlog) totaled 987 homes in 11 communities, representing about $328.3 million in projected revenue, compared to 3,147 homes representing $1 billion in projected revenue at June 30, 2007.

Development Pipeline

The Company's homebuilding pipeline at the end of the second quarter of 2008, which is comprised of sites owned or controlled by the Company not yet included in active developments, totaled nearly 1,600 homes in nine communities compared to 3,757 homes in 18 communities at the end of the second quarter last year.

Based on the number of units, 60 percent of the development pipeline comes from rental developments, 22 percent from high- and mid-rise developments, 5 percent from townhome communities and 13 percent from mixed residential and commercial communities. Tarragon has a 70 percent, weighted-average ownership interest in the development pipeline.

Investment Division

The Investment Division, comprising 7,696 apartments as of June 30, 2008, had net operating income for the second quarter of $9.1 million, compared with the previous year's net operating income of $12.5 million from 11,920 apartments. Same store apartment net operating income was $8.3 million for both the second quarter of 2008 and the second quarter of 2007.

For the first six months of 2008, the Investment Division had net operating income of $18.9 million, compared with income of $26.3 million for the first half of 2007. Same store net operating income was $17.1 million, compared to $17.4 million in the same period 2007. Average same store occupancy during the first six months of 2008 was 93.4 percent, compared to 92.9 percent a year ago.

Previously Announced Transaction with Northland

In March 2008, the Company entered into a contract to sell Bermuda Island, a rental apartment community located in Naples, Florida, to an affiliate of Northland Investment Corporation ("Northland"). On July 31, Northland failed to close this purchase, despite receiving several extensions and the consent of the lender to the assumption and extension of the existing financing. After the Company requested the $250,000 contract deposit from the escrow agent, Northland immediately commenced litigation over entitlement to the deposit. This dispute with Northland may negatively impact the Company's ability to obtain the consent of its principal lender to the previously announced transaction with Northland, which could delay closing or otherwise adversely affect the Company's ability to close the transaction.

About Tarragon Corporation

Tarragon Corporation is a leading developer of multifamily housing for rent and for sale. The Company's operations are concentrated in the Northeast, Florida, Texas and Tennessee. To learn more about Tarragon Corporation, visit: www.tarragoncorp.com

Forward-looking Statements

Information in this press release includes "forward-looking statements" made pursuant of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are based on management's expectations, estimates, projections and assumptions. Words such as "may," "expects," "anticipates," "intends," "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements, which include but are not limited to statements regarding the closing of the transaction with Northland. Actual results and the timing of certain events could differ materially from those projected or contemplated by these forward-looking statements due to a number of factors, including conditions in the homebuilding industry, the satisfaction of the conditions to formation of the joint ventures with Northland, the Company's ability to identify and enter into suitable developments or ventures with financially strong partners, the residential real estate and mortgage markets and the capital and financial markets generally, business opportunities that may be available to Tarragon, general economic conditions, interest rates and other risk factors outlined in Tarragon's SEC reports, including its Annual Report on Form 10-K for the year ended December 31, 2007 and any subsequently filed Quarterly Reports on Form 10-Q. Tarragon assumes no responsibility to update forward-looking information contained in this press release.

TARR-E


                           TARRAGON CORPORATION
                           FINANCIAL HIGHLIGHTS
        FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
              (Dollars in thousands, except per share data)
                                (Unaudited)


                             For the Three Months     For the Six Months
                                    Ended                   Ended
                                   June 30,                June 30,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------

Revenue                     $   64,353  $   69,888  $  229,132  $  214,186

Expenses                        83,364     241,298     241,678     378,190

Other income and expenses:
  Equity in income (loss)
   of partnerships and
   joint ventures                  529      (5,729)        415      (5,438)
  Minority interests in
   income of consolidated
   partnerships
   and joint ventures             (127)       (779)     (8,293)     (1,446)
  Interest income                  167         221         438         401
  Interest expense             (18,174)    (13,034)    (32,776)    (24,772)
  Gain on sale of real
   estate                            -           -           -         398
  Net loss on
   extinguishment of debt          (34)          -         (34)     (1,422)
  Net loss on debt
   restructuring                   (45)          -      (3,534)          -
  Gain on transfer of
   assets                        2,237           -       2,237           -
  Provision for litigation,
   settlements and other
   claims                       (5,080)     (1,864)     (5,696)     (1,864)
                            ----------  ----------  ----------  ----------
Loss from continuing
 operations before income
 taxes                         (39,538)   (192,595)    (59,789)   (198,147)
Income tax benefit                   9      37,612       4,091      41,757
                            ----------  ----------  ----------  ----------
Loss from continuing
 operations                    (39,529)   (154,983)    (55,698)   (156,390)
Discontinued operations,
 net of income tax
 (expense) benefit
  Income (loss) from
   operations                      122     (26,880)       (506)    (29,718)
  Gain on sale of real
   estate                            -         854       8,034         854
                            ----------  ----------  ----------  ----------
Net loss                       (39,407)   (181,009)    (48,170)   (185,254)
Accrued dividends on
 cumulative preferred stock       (390)       (388)       (781)       (764)
                            ----------  ----------  ----------  ----------

Net loss allocable to
 common stockholders        $  (39,797) $ (181,397) $  (48,951) $ (186,018)
                            ==========  ==========  ==========  ==========

Loss per common share -
 basic and diluted
Loss from continuing
 operations allocable
 to common stockholders     $    (1.37) $    (5.40) $    (1.95) $    (5.53)
Discontinued operations              -       (0.91)       0.26       (1.02)
                            ----------  ----------  ----------  ----------
Net loss allocable to
 common stockholders        $    (1.37) $    (6.31) $    (1.69) $    (6.55)
                            ==========  ==========  ==========  ==========






                                Development
                           Operating Statements


                                     For the Three Months Ended June 30,
                                    -------------------------------------
                                          2008                2007
                                    -----------------  ------------------

Sales revenue                       $   48,338    100% $   84,466     100%
Cost of sales                          (43,095)   (89%)  (120,391)   (143%)
                                    ----------  -----  ----------  ------
Gross profit (loss) on sales             5,243     11%    (35,925)    (43%)

Minority interests in sales of
 consolidated partnerships and joint
 ventures                                 (252)    (1%)      (779)     (1%)
Outside partners' interests in sales
 of unconsolidated partnerships and
 joint ventures                           (135)     -      (6,717)     (8%)
Overhead costs associated with
 investments in joint ventures               -      -        (221)     (1%)
Performance-based compensation
 related to projects of
 unconsolidated partnerships and
 joint ventures                              -      -           7       -
                                    ----------  -----  ----------  ------
                                         4,856     10%    (43,635)    (53%)
                                    ----------  -----  ----------  ------
Other income and expenses:
  Impairment charges                   (18,069)   (37%)   (75,871)    (90%)
  Interest expense                      (7,774)   (16%)    (2,613)     (3%)
  Depreciation expense                    (128)     -           -       -
  Net income (loss) from rental
   operations                             (678)    (1%)       150       -
  Taxes, insurance, and other
   carrying costs                       (1,540)    (3%)      (862)     (1%)
  General and administrative expenses   (8,023)   (17%)   (10,469)    (12%)
  Other corporate items                    552      1%        569       1%
  Provision for litigation,
   settlements and other claims         (5,081)   (11%)    (1,034)     (1%)
  Distributions from unconsolidated
   partnerships and joint
   ventures in excess of investment        109      -           -       -
  Loss on extinguishment of debt             -      -           -       -
  Loss on debt restructuring                 -      -           -       -
                                    ----------  -----  ----------  ------
Loss before income taxes               (35,776)   (74%)  (133,765)   (159%)

Income tax benefit                           -      -      33,055      39%
                                    ----------  -----  ----------  ------
Net loss                            $  (35,776)   (74%)$ (100,710)   (120%)
                                    ==========  =====  ==========  ======


Reconciliation of segment revenues
 to consolidated revenue:

Total Development Division revenue  $   48,338         $   84,466
Less: sales revenue of
 unconsolidated partnerships
 and joint ventures                     (3,062)           (35,776)

                                    ----------         ----------
Consolidated Development Division
 sales revenue                      $   45,276         $   48,690
                                    ==========         ==========



                                      For the Six Months Ended June 30,
                                    -------------------------------------
                                          2008                2007
                                    -----------------  ------------------

Sales revenue                       $  202,291    100% $  214,993     100%
Cost of sales                         (171,381)   (85%)  (242,983)   (113%)
                                    ----------  -----  ----------  ------
Gross profit (loss) on sales            30,910     15%    (27,990)    (13%)

Minority interests in sales of
 consolidated partnerships and joint
 ventures                               (9,080)    (4%)    (1,446)     (1%)
Outside partners' interests in sales
 of unconsolidated partnerships and
 joint ventures                            117      -      (6,944)     (3%)
Overhead costs associated with
 investments in joint ventures               -      -        (285)      -
Performance-based compensation
 related to projects of
 unconsolidated partnerships and
 joint ventures                              -      -          (7)      -
                                    ----------  -----  ----------  ------
                                        21,947     11%    (36,672)    (17%)
                                    ----------  -----  ----------  ------
Other income and expenses:
  Impairment charges                   (31,552)   (16%)   (75,871)    (35%)
  Interest expense                     (13,153)    (7%)    (4,738)     (2%)
  Depreciation expense                    (128)     -           -       -
  Net income (loss) from rental
   operations                             (613)     -         461       -
  Taxes, insurance, and other
   carrying costs                       (2,836)    (1%)    (1,129)     (1%)
  General and administrative expenses  (15,556)    (8%)   (15,704)     (7%)
  Other corporate items                    558      -         686       -
  Provision for litigation,
   settlements and other claims         (5,568)    (3%)    (1,034)      -
  Distributions from unconsolidated
   partnerships and joint
   ventures in excess of investment        109      -           -       -
  Loss on extinguishment of debt             -      -      (1,414)     (1%)
  Loss on debt restructuring            (4,445)    (2%)         -       -
                                    ----------  -----  ----------  ------
Loss before income taxes               (51,237)   (26%)  (135,415)    (63%)

Income tax benefit                           -      -      33,055      15%
                                    ----------  -----  ----------  ------
Net loss                            $  (51,237)   (26%)$ (102,360)    (48%)
                                    ==========  =====  ==========  ======


Reconciliation of segment revenues
 to consolidated revenue:

Total Development Division revenue  $  202,291         $  214,993
Less: sales revenue of
 unconsolidated partnerships
 and joint ventures                    (11,157)           (42,477)

                                    ----------         ----------
Consolidated Development Division
 sales revenue                      $  191,134         $  172,516
                                    ==========         ==========






                                Investment
                           Operating Statements


             For the Three Months Ended       For the Six Months Ended
                       June 30,                        June 30,
           -------------------------------  ------------------------------
             2008            2007             2008            2007
           --------        ---------        --------        --------

Rental
 revenue   $ 19,330   100% $  26,810   100% $ 39,093   100% $ 53,405   100%
Property
 operating
 expenses   (10,185) (53%)   (14,309) (53%)  (20,190) (52%)  (27,127) (51%)
           -------- -----  --------- -----  -------- -----  -------- -----
Net
 operating
 income       9,145    47%    12,501    47%   18,903    48%   26,278    49%
Net gain
 on sale
 of real
 estate           -            1,362          12,813           1,760
Minority
 interests
 in loss of
 consolidated
 partnerships
 and joint
 ventures       126                -             787               -
Mortgage
 banking
 income          15              164              34             298
General
 and
 administrative
 expenses    (1,744)          (3,212)         (4,110)         (5,083)
Other
 corporate
 items          319              564             813             778
Impairment
 recoveries
 (charges)      115          (89,887)             84         (89,887)
Net loss on
 extinguishment
 of debt        (34)               -          (1,112)             (8)
Net gain
 (loss)
 on debt
 restructuring  (44)               -             912               -
Gain on
 transfer
 of assets    2,237                -           2,237               -
Provision
 for
 litigation,
 settlements
 and other
 claims           -             (955)           (128)           (955)
Interest
 expense    (10,790)         (16,199)        (20,617)        (31,105)
Depreciation
 expense     (2,917)          (5,388)         (7,162)        (10,844)
           --------        ---------        --------        --------
Income
 (loss)
 before
 income
 taxes       (3,572)        (101,050)          3,454        (108,768)
Income
 tax
 (expense)
 benefit        (59)          20,751            (387)         25,874
           --------        ---------        --------        --------
Net
 income
 (loss)    $ (3,631)       $ (80,299)       $  3,067        $(82,894)
           ========        =========        ========        ========


Reconciliation
 of segment
 revenues to
 consolidated
 revenue:

Total
 Investment
 Division
 revenue   $ 19,330        $  26,810        $ 39,093        $ 53,405

Less
 Investment
 Division
 rental
 revenue
 presented in
 discontinued
 operations  (1,237)          (7,032)         (2,571)        (14,047)
Add
 management
 fee and
 other
 revenue
 included
 in other
 corporate
 items          704              913             932           1,065
Add rental
 revenues
 from
 development
 properties
 presented
 in net
 loss from
 property
 operations     280              507             544           1,247

           --------        ---------        --------        --------
Consolidated
 Investment
 Division
 sales
 revenue   $ 19,077        $  21,198        $ 37,998        $ 41,670
           ========        =========        ========        ========


Contact Information

  • Contacts:

    Broadgate Consultants, LLC
    Alan H. Oshiki
    (212) 232-2222
    Email Contact

    Tarragon Corporation
    William S. Friedman
    (212) 949-5000
    Email Contact