Lennar Homes will be pushing land closings and scaling back its development activities, new home starts and speculative building in response to the novel coronavirus, Executive Chairman Stuart Miller said Thursday.
The national homebuilder used its First Quarter earnings call as an opportunity to outline the steps it has taken companywide to protect employees, customers and trades. The call started off on a somber note, as Miller shared that a Lennar employee in Seattle was among the nation’s first COVID-19-related deaths on March 2.
The company, which has 71 communities in Central Florida, has hired a chief medical officer who is participating in daily calls with all division presidents to assess the situation in each market and establish protocols that allow the business to operate with a safety-first mandate. Miller said the company is conducting “daily wellness checks” on all employees, and those who can are encouraged to work from home.
While sales centers remain open, the company has moved to an appointment-only environment. Showings and home tours are restricted to one family at a time, Miller said. Meanwhile, the company is finding ways to use technology to conduct business while observing social distancing standards. That has led to an increase in digital closings and the opening of express drive-thru closing centers in some markets.
“We are also implementing a virtual new home orientation process so our homebuyers can walk, and review their completed home via FaceTime," Miller said. "In a changing environment we are accelerating our digital platform to accommodate our customers desire to close on their home, but to close without risk or contact.”
Miller said that with a few limited exceptions, Lennar is continuing to build homes without interruption. “Our construction sites, continue to be active and fully functional today,” he said. “We have not yet seen an impact on our trades or on our supply chain, we’re very focused on the health and safety of our trades and have established clear protocols with this in mind.”
As a result of economic uncertainty, Lennar is pausing new land acquisition. CEO Rick Beckwitt said the company is not walking away from pending deals but is in discussions with sellers to extend closing dates.
In the last quarter, Lennar has closed several high-dollar land deals locally. Those include the $26.25 million purchase on Orlando’s I-Drive corridor for a new resort community, a $15.8 million takedown in Lake County’s Trinity Lakes community and the $10 million acquisition of Phase 2 in St. Cloud’s Tohoqua.
A project that could be impacted is Wellness Way. Lennar is under contract for 1,850 homesites in the Clermont master planned community. Seller Jim Karr told GrowthSpotter he hasn’t been contacted by Lennar, but noted that his first closing isn’t scheduled until later in the year.
Miller said construction start dates are also being adjusted. “We’ve also slowed down the amount of cash we are investing in land development and re-phasing our developments to reduce the number of home sites developed at one time. Finally, we’re also adjusting our start pace and further limiting the amount of spec inventory production in order to closely match, new starts with new sales.”
Miller said those steps would be taken to maintain positive cash flow in a recession. The last thing the company would consider as a cost-cutting measure would be reduction in its workforce.
"We are dedicated to supporting our people. We’ve made this very clear through the organization. And so, we think that you know that that’s our most valuable asset right now,” Miller said. “But I think that we can balance the inflows and outflows of capital by managing carefully land, land development and production and maintain our organization in a constructive and healthy way.”
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