Welcome to Lennar Corp.’s first quarter earnings conference call. At this time all participants are in a listen-only mode. After the presentation we will conduct a question-and-answer session. Today’s conference is being recorded. If you have any objections you may disconnect at this time. I will now turn the call over to Mr. Scott Shipley, Director of Investor Relations, for the reading of the forward looking statement.

Thank you and good morning. Today’s conference call may include forward looking statements that are subject to risks and uncertainties relating to Lennar’s future business and financial performance. These forward-looking statements may include statements regarding Lennar’s business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements represent only Lennar’s estimate on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause Lennar’s actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors” contained in Lennar’s annual report on form 10K for the most recently completed fiscal year which is on file with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements except as required by Federal Securities Law.

I would like to now turn the call over to your conference host, Mr. Stuart Miller, President and CEO. Sir, you may begin.

Good morning and thank you for joining us for our first quarter 2008 update. In the context of market conditions they continue to be difficult and frankly continue to deteriorate. We would like to update you both on the status of the home building industry market conditions and on the strategy and progress of Lennar in particular. I’m joined this morning by Bruce Gross, our Chief Financial Officer, and Diane Bessette, our Vice President and now our newly appointed treasurer – Congratulations Diane, and David Collins who is now our Controller – Congratulations David. David has been a member of the Lennar accounting team for 10 years as our Director of Financial Reporting and has taken on the role of Controller as Diane has moved into our Treasurer position. Bruce Gross will provide additional detail on our numbers after my opening remarks and David will participate with an update on our asset review and impairment, a report we have given now for the past two years, and Diane will be available to participate in our question-and-answer. This is a housekeeping item before I begin…I would like to request that in our question-and-answer period that will follow my opening remarks, or our opening remarks, that you please limit to just one question and one follow-up so that we can be as fair as possible to all participants. We welcome you to join or rejoin the queue if you have additional questions and will accept or attempt to answer as many questions as possible in the hour, more or less, that we have allotted to the call. As noted in our press release that we issued this morning, the housing market has remained challenged in the first quarter of 2008. What is also beginning to become clear is that the rest of…

Thank you Stuart. Good morning every body. Over the past several quarters we have mapped out a strategy relative to our balance sheet and our joint ventures and I’d like to give you an update on the progress that we’ve made towards that strategy. Additionally, I will provide some more color on our first quarter results. Starting with the results on our balance sheet strategy, we have continued to remain focused on strong cash generation through aggressive asset management and maintaining ample liquidity. We have continued to carefully manage our inventory levels as they have decreased from $8.3 billion in the prior year’s first quarter to $4.6 billion during the current quarter. The finish tones and construction in progress inventory was reduced 46% from $4.2 billion to $2.3 billion year-over-year. Land under development was also reduced 57% from $3.6 billion to $1.5 billion in the current quarter. We have continued to manage starts to today’s realistic volume levels and as a result we have reduced starts 49% in the first quarter compared to the prior year’s first quarter and that is without unconsolidated joint ventures. Homes under construction declined 61% from 13,900 in the first quarter of last year to 5,400 in the first quarter of 2008. Unsold inventory under construction was reduced by approximately 58% year-over-year and we were also able to reduce our completed unsold homes count to 814 at the end of the first quarter of this year, which is a reduction from 1,659 in the first quarter of last year. Our home sites owned and controlled also reduced significantly and there is a decline of approximately 200,000 home sites from the peak in the first quarter of 2006 from 346,000 to now 145,000. Included in that count are 72,000 home sites owned, 21,000 home sites controlled…

Thank you Bruce and good morning everyone. In conjunction with our balance sheet focus we continue to evaluate and re-evaluate our assets each quarter. Although we believe that most of the significant impairments are behind us, we continue to remain actively engaged in our comprehensive and rigorous process of division by division asset reviews to ensure that our assets are properly stated. In this morning’s release we outlined our first quarter valuation adjustments by segment. However, let me quickly review the categories once again. The first category we have the home building side of our business. We apply the standards of FAS 144 to land that we intend to build homes on and recorded a valuation adjustment of $26 million. The segment detail is as follows: East segment $8 million, central segment $2 million, west region $10 million and our “other” section $6 million. The second category is land that we sold or intend to sell to third parties. Consistent with our strategy of converting inventory into cash, we identified land that we sold during the first quarter or intend to sell subsequent to the first quarter. We applied the standards of FAS 144 to that land and recorded a valuation adjustment of $15 million. The segment detail is as follows: East $1 million, central $9 million, west $4 million and “other” $1 million. The next category related to land is option deposits and pre-acquisition costs. We continue to evaluate, re-evaluate and renegotiate deposits on land under option as markets remain challenged. For those option contracts where we were not able to adjust or readjust the terms to a level that would lead to an acceptable return based on current market conditions we made the decision to walk away from the contract as we have done in past quarters. As a result, we wrote off $17 million of option deposit and pre-acquisition costs which represented approximately 2,600 home sites. The segment detail is as follows: The east segment $7 million, central $4 million, west $4 million and “other” $2 million. The last category is joint ventures. We continue to evaluate and re-evaluate our investments in joint ventures. We focused on the recoverability of our investment relative to the market conditions that exist today. We applied the standards of 144 to the assets in our joint ventures including the evaluation of discounted future cash flows. Additionally, we applied the standards of APB 18 to our investment balance related to those ventures. As a result we recorded a valuation adjustment of $49 million. The segment detail is as follows: East segment $5 million, west segment $43 million and “other” $1 million. So after that overview we would like to open it up to questions.

We will now begin the formal question-and-answer session. If you would like to ask your question please press *1 on your touchtone phone. You will be announced prior to asking your question. If you would like to withdraw your question at any time please press *2. Once again, to ask your question please press *1 on your touchtone phone. It looks like our first question is coming from David Goldberg of UBS.

Thanks. Good morning. Stuart I was hoping we could revisit something you mentioned in your opening comments about the JV renegotiations and re-approaching JV partners. Can you give us some kind of estimate, maybe a ballpark, what percent of the 180 JV’s do you have left as you have re-approached partners, started the renegotiation process and how are you finding I guess both the lenders and your partners are willing to renegotiate at this point?

Interesting question, David. You know our joint ventures are certainly the topic of a lot of discussion and speculation. There is some myths that simply have to be dispelled. First of all, many of our joint ventures are really in very good standing. Some of the assets, or many of the assets in a number of our ventures are really very well positioned and we really don’t have an issue with our partners or with our lender. In many of our ventures we have adequate collateral to support the venture for now and for the future. It is important to understand that there is a base number of ventures that are just in good standing. So the question really is of the ventures how many or what percent of them where there is some kind of dysfunction have we approached that we tackled and have we undertaken? I can’t quantify that specifically but I can say it is the vast majority. There is a subset of trouble ventures where we had partners that didn’t step up, that didn’t support, that became difficult or what not and we have resolved most of those ventures. There are a few of them that are lingering. There are other ventures where we might have come to a debt maturity or to a moment in time where action needs to be taken where there is a funding requirement or something where there is just a negotiation. In all of those ventures we have worked with our partners. Where we have had difficult partners we have taken the tough position that our equity holders would expect us to be taking. Sometimes that has meant we had to walk at the edge of the line of default or more difficult positions. But in all instances we have negotiated and positioned ourselves to be able to manage the venture and end up with a good execution. So I’d have to say as kind of an answer to your question for the subset of ventures that are showing signs of trouble the vast majority of them have been reworked and there is a small subset that are still being reworked.

Thank you for the color on that. I guess the other question I would have would be it seems like your own land position went up sequentially by about 10,000 if I have the numbers right. I’m just wondering what margins you have on the land that you’re taking down now? If they are similar to what we are seeing come through the income statement now and how those pro forma when you take a look at them?

I can’t think of an exception to this and I’m always reluctant to say in all cases, but certainly in the vast majority of cases our margins are recalibrated to what I would call a responsible margin. Is that 17%? 20%? 22%? It is in that kind of a range on land that we’re taking down. We’ve either impaired the land or we have renegotiated the deal on land that we are taking down. Virtually anything that we are taking down is recalibrated to an acceptable margin for the future. Part of the problem with answering the question is in a market where you are continuing to see decline and decline of pricing it is hard to really represent a margin.

I guess that’s why I asked because it seemed like in your opening statements you were talking about possibly being able to build on the margin from where it is today and based upon the pace of sales and the deterioration of the market it would seem like that would be tough on new land as it flows through.

You know in most instances we are taking down land as needed. To the extent that we are doing that we are basically putting homes in construction where the margin is being carefully crafted and capped at the time that we are taking down the land. There is no question that you will have some pull outs and cancellations and some situations where a home doesn’t get sold or started immediately and the market will continue to deteriorate. I noticed today listening to you on CNBC your forecast is that home prices will continue to go down. In that scenario some of the margins will not be as high as projected but we continue to renegotiate land take down and renegotiate any of the land contracts that we have under contract to match up with a margin potential given market conditions as they exist at this time.

Thanks.

Our next question is coming from Carl Reichardt of Wachovia.

Good morning guys. How are you? Bruce can you talk a little bit about your store count relative to last year roughly and what your sense is for what it might be in 2008 as you look out here?

In terms of store count that you are referring to communities. We haven’t really given any community data. But to answer your question overall I’d say that it is down approximately maybe a couple hundred communities compared to the same time last year.

We’ve always felt that store count data is more confusing than it actually adds value and I know that you would say that we should leave that to you guys to decide. But we’ve always been reluctant to talk much about store count but there is no question that the number of communities we have under development is declining and we would expect that as we look ahead it will continue to decline.

Following up on David’s question, Stuart, as far as the gross margins…as we look at the 150 basis points in gross margin improvement year-over-year, how would you divide that out as far as a reduction in the [durax] versus building on land that you had previously impaired and you’ve lowered the basis on?

Good question. It’s really a hard question to disentangle. We have really tried to put pencil to paper on some of that. I would have to say that our construction costs probably year-over-year have come down somewhere north of 10%. The question of impairment and how they are flowing through our actual numbers these days…the answer under the best of circumstances is convoluted. In all instances we are working off of impaired land. What I mean by that is we have either impaired it on our books or we have renegotiated the land contract or we are buying new land at today’s market value or we are renegotiating an options price. So when you get down to it, Carl, the price of land is now recalibrated across the board. You could almost argue that all of our margin comes from the recapturing of pricing of land across the board.

Okay. I’ll get back in the queue. Thanks.

Our next question is coming from Mr. Dennis McGill with Zellman and Associates.

Good morning guys. How are you? First question just has to do with and I want to talk about absolute communities. I assume you do look at absorptions. Thinking about where those are today I would imagine they must be well south of where you want them to be, maybe even below 0.5 a community per week. When you think about where they are and you look out over the next year, how are you guys approaching the pricing decision? What are you assumptions when you think about buying land today at market price about where home prices go for the industry over the next year or two years?

Well, first of all yes absorptions are down but I think that one of the things that is becoming better known and better documented is that there is a clearing site in the market. It just happens to be particularly low. In all instances where we’re buying new property we are recognizing that we are going to have to find our absorption levels that are acceptable at that clearly site, which is a low clearing site. Therefore, we have adjusted our view of the market so that we are expecting absorption to be modest. We are taking down home sites only as we need them where it is possible. We’re pricing to market, recognizing that this is not a market where pricing can be pushed. So that’s kind of the thinking that is injected in all the negotiations surrounding any new land acquisitions or renegotiated option positions.

Sorry to cut you off, but just to kind of push you on that. Are you assuming that absorption can maintain their pace where they are at and you are comfortable at running well below one per community per week and pricing you think can stay where it is and it is just a function of time and confidence, like you talked about, in the community which will allow you to get absorptions back where they are? Or are prices going to clear lower to generate absorptions that are going to generate returns for you?

We are assuming that pricing is a moving target and one that we can’t peg down. Pricing is going to be the determinant of absorption. So in instances wherever we can where we’re not dealing with a fast contract wherever we can we are injecting flexibility to task our take downs, our absorptions, our pricing to whatever the market brings to us. It is one of the toughest adjustments that is happening or is going to happen in the land market right now. That is land holders are going to have to be flexible if they are going to move their properties because this market is not going to be pushed. It is a market where we’re going to have to take the pricing that is available, both land seller and home builder.

Okay. I guess that’s where I am trying to understand the divergences because it seems like it would be hard to price that land today and a lot of your comments you made on the larger Morgan Stanley deal are coming to fruition with some of the bigger deals you are seeing out there being priced below. So it just seems like a dichotomy for land prices to continue to be under pressure but home prices not to be.

Oh, no I think home prices to be under pressure and I think I said that in my opening remarks as well, but I think that land prices are under greater pressure. I think that home prices especially in the new home world have recalibrated themselves more dramatically than land prices have. Land prices still have a ways to go.

Okay, I think that’s fair. Just on that note and then I’ll jump off, in a lot of your markets where are you guys seeing into the price relative to the existing home sales?

I think the anomaly that we see in the market place generally, not just for us but for the new home market, is that new home prices are generally below existing home prices. The existing home market has not corrected as much as the new home market. That is a relative position that is going to right itself over time as the existing home market continues to adapt to market reality.

Thanks as always guys.

Our next question is coming from Tom [Martego with Martego Capital.] Tom [Martego]: Hi. I was just wondering if you can comment on the recent actions within FHA and also Fanny Mae and Freddie Mac expanding the borrowing limits as to the impact that you have seen it have on activity and traffic. I know these have been recent changes so any color you can give on that would be interesting.

Unfortunately, look these are very, very important changes and I wish there was more color to give. These are recent changes and the filtering through to the field; we really don’t have data points yet to be able to give information. But I would just highlight, Tom, that as we go forward the starting points that we have relative to FHA and GSE’s is an important starting point. I think there is more work to be done and these will be important parts of what helps us get out of the supply/demand imbalance. Tom [Martego]: Stuart have you put together marketing plans associated around the various prices that you can now charge in those markets to be within these GSE and FHA plans so you might build a smaller house to fit under the cap whereas before that might not have been something that you anticipated?

No I think in every one of our communities today we are acutely aware of what those caps are and we have recalibrated our product to fit within the limit that either exists today or where those limits are going. And realistically the deals that are getting done today are conforming type products. There is not a lot of jumbo business out there. There is certainly not an AltA kind of product or market out there or anything sub-prime. So you’ve got to be conforming and product across the country really has to be very aligned with where FHA and the GSE’s are positioned.

Our average sales price today, Tom, we’re positioned very well within the new limits and although it is early FHA limits just went into place, the lower down payment of 3% is certainly something that we are hopeful will help sales in our market place. Tom [Martego]: In a reasonable time frame to see if they are being helpful, is it a month and a half, two months? Have you reached out to your marketing associates to make certain they understand what the plans are? Here in Denver just canvassing a few of the guys that I’ve talked to there is still some uncertainty as to what qualifies and what doesn’t.

Knowing your…going to have to go out and do some homework I am reluctant to make a bold statement, so I am going to say that I would be hopeful that throughout the field our people are very much aware of the programs as they are coming down. Given your question we are going to re-intensify our making sure that our division people are really on top of that. It has been a very big focus at the corporate level going down to the field that the programs that are available, which I think are the lifeblood of our business right now, are known down to every person in the field and I would hope that is the case throughout our company. Tom [Martego]: I wasn’t insinuating or anything. I was just interested in as far as what you are doing. Thank you very much.

Our next question is coming from Mr. Stephen East with Pali Research.

Good morning. If I could ask you just first on land spend. Ignoring JV’s, I know it is going to be down in 2008, what do you think between acquisition and development you will spend this year?

We haven’t given an actual number out, Stephen, but we do expect it will be significantly less and as Stuart mentioned it will be matching what we’re seeing in the market and taking down home sites as needed for our business. So it is somewhat dependent on market conditions but it will be significantly below where we were last year.

Okay. I understand. If you just look at JV spend and the quarter, when you wrap up all the different things, you reduced the number of JV’s some I assume you consolidated and some you walked away, etc. If you look at everything involved, consolidation, infusion of cash, land buy and development, etc. what do you think you roughly spent on JV’s for the quarter from a cash perspective?

A couple of components on that, Stephen. We did have re-margining payments of approximately $24 million during the quarter and we had land purchases from JV’s that were somewhere over $100 million and a few joint venture consolidations which wasn’t actually a spend, it would just show up on the books. So somewhere between $100 and $200 million relating to land purchases, re-margining payments would be the number. When we put out our cash flow statement we’ll see final numbers relative to joint venture contributions as well.

Okay. Just one last question. I appreciate that most of your JV’s are in good shape. Two of your larger ones you all have been going through the process. Are those renegotiation processes, etc. done or are they ongoing? Just sort of the status of those without getting into the nitty gritty detail that you all don’t want to talk about.

It’s not that we don’t want to talk. It’s that we really can’t. Those have their own public debt and statements that we’re just restricted on. The negotiations on those are ongoing but they fit the mold of exactly the discussion I laid out in my opening remarks relative to JV’s.

Okay. Thanks.

Our next question is coming from Ken Zener with Merrill Lynch.

Hello. I appreciate you addressing some of the cash contributions of the JV. If I add $850 million to where you were in the fourth quarter it looks like your cash went down a little over $400 million. Where else did the cash go? It looks like your units under construction was basically the same as well as your described inventory balance.

Yeah, our cash…what you’re doing Ken is you’re taking the $600 million of cash we had at year end and add in the $850 and we ended up at about $1.1 billion. Our land purchases during the quarter, which includes what we purchased from the joint ventures was approximately $350 million during the quarter. That would be the lion’s share. That is down considerably from the first quarter of last year and that is where the bulk of that would be and it was a little more heavily loaded in the first quarter as we have seen in past years putting in place the home sites that we are looking at for where we need them for the current year.

Okay. And I guess related to your land spending, your units under construction sequentially they went down but your completed unsold looks like it went up modestly. Can you talk about the desire to put new vertical? I believe several months ago Stuart you were talking about your lack of desire to put up vertical because it just wasn’t profitable. Has that basically changed because of your land position and you think your competitors aren’t putting as much pricing pressure given the absence of their year end?

No, our appetite for putting inventory in the ground is still very, very low. I think that we have in all instances adjusted our starts very carefully in each market to our sales pace. We don’t want to kid ourselves and say each home that we put under construction gets sold in advance because we recognize the cancellation rate can easily frustrate what one thinks in the sold homes under construction and make it an unsold home. But I think that our desire to build inventory or to start new homes is very carefully matched to what we think the market demand is at the current moment.

Okay thank you. If you could just make one comment about the FHA, which to me I understand it provides a lot of liquidity for the industry in general but it doesn’t seem to address kind of the structural issue or the problem that we are in now. Meaning, giving people liquidity, i.e. 3% down, but in the deflationary environment which I think we are in and it sounds like you would agree with that they are going to be under water very soon. Isn’t that the issue that we face? They can get a house but then they can be unmotivated to keep the house given their slow down payment? So I think it helps liquidity, but I’m not sure it is going to help the structural element. Can you address that conflict? Thank you.

I think that in today’s current market the lion’s share of the downward pressure, especially for new homes, is behind us. The U.S. housing market has always been dependent on a sizeable part of our market looking for the lion’s share of its purchase price coming from the debt market. We’ve had a housing market that has supported itself very well through the years by being a fairly highly levered market with fairly high loan to value ratios. I think that the sub-prime market was a market that got away from us. Underwriting did not start with underwriting the ability of the customer to repay. I think in a market today where adequate underwriting controls are in place to make sure that we are financing homes to people who can afford to actually repay the mortgage and who are invested in the home – even though the investment might be relatively small, I think ensures you have a market that starts to stabilize and in a stabilized market I think you end up with homes or loans that do get repaid and a housing market that is in good condition.

Thank you.

Our next question is coming from Michael Rehaut of JP Morgan.

Thanks. Good morning. My first question I think just goes back to the impairment charges and working off…certainly I understand that you do an exhaustive review each quarter but you also mentioned that you primarily in terms of the land that you own you primarily do it on the homes that you intend to build on. You also mentioned that certainly you are starting to moth ball and put some land aside. I was wondering if you could give an idea of how much of that land you are sort of deferring in terms of putting it aside for maybe construction in 2009 or 2010. Has that portion increased?

Michael I’m not sure. You might have a mix up with one of the other conference calls. We’ve been pretty clear as we have gone through our quarterly reviews to say we have reviewed every asset in our backlogs. It is not just the home sites that we are preparing to build on; it is each and every asset that is in the portfolio.

Okay. Because I thought Stuart that I heard that before when you had the more detailed break down the first category was reviewing land that you intend to build homes on is how it was described. I was just wondering in terms of the other assets if those are just being put aside for a later date or not?

Diane has given a report each quarter on our impairment process. If you could speak to that Diane?

You know what I’m thinking. Maybe there is just some confusion in how we categorize it. As we described, the reviews that we have gone through certainly we start with the assets that we are going to build homes on, then we go to the assets that we are looking to sell in the short term, but then we also mentioned that we look at the assets that currently there is no plan to sell. I think Stuart’s point is right that it really is each and every asset and maybe there’s just some confusion in the way we broke that discussion up. There is no limitation as to what we look at. We have not spent a lot of time deciding which assets were more full; in fact I think it is probably the opposite direction in that we have been very aggressive of looking at everything. Even the assets that perhaps do go out into the future a little bit more than some of the current assets we are expelling. We have really been very clear that we look at every single asset regardless of whether it is a current asset or longer term asset, including all the assets that exist in our joint ventures, which is where the bulk of the longer term assets would be.

Okay. I appreciate that. Second question I guess along these lines. I’m just trying to ascertain the relationship to order price versus paces and impairments. If you look at the prior quarter, the fourth quarter, you took specifically on the land charges obviously a much, much larger number. A lot of that had to do with the Morgan Stanley sale, but still you had $225 million in the gross margins, another $230 in the land sales. Your order ASP fell about $22 in Q4 from Q3. This quarter the pricing was more flat and I think at the same time you mentioned things have continued to be pretty tough and there has been some further price deflation in the market. So my question really gets to the extent there is further negative home price deflation over the next quarter, do you still expect that to have an impact or a result in your impairment analysis?

As we sought to go through impairments and come to the end of 2007 as you described, I think that it was our decided strategy to try to get ahead of the situation instead of lagging behind it. I think that even with order trends looking like pricing could continue downward, as I said in the opening remarks, I think we are going to see a materially lesser impact because of the heavy lifting that we have already undertaken. I think that as we have looked at assets, as we have gone through our impairment review through time and redacted those numbers that frankly I’m not sure I want to look back on so much, we did that with an eye towards understanding that the market would likely continue to deteriorate and if the market does continue to deteriorate there might be some additional impairment it will be not near the magnitude that we have seen in the past.

Keep in mind, Mike that our land under development dollars now the first quarter are down to $1.5 billion. There has been a significant decline of what is remaining on the balance sheet on the inventory category.

Last question. I appreciate the response so far. It is very helpful. Just on the JV’s. I think last quarter the JV’s themselves has a set to cap at about 65% and just wanted to get a sense for whether that was sustainable or I know you have done some re-margin payments but they have been relatively small up to this point, if that is something that as you have mentioned in a number of JV’s there are ongoing discussions. How are we to think about that going forward? Is that an acceptable debt to capital level? Give us some sense of how that might play out.

I think that is going to continue to be a moving target and hard to kind of peg. Debt to capital in JV’s you know you kind of have to question at this point is it debt to capital? Debt to value? What the right kind of question is that has to be pointed out. Every joint venture in reality stands on its own. Very much an important question within each joint venture whether it is a recourse, non-recourse, debt facility and what the responsible parties has their respective obligations. So it is kind of a generically pegged what a right debt to capital percentage is for joint ventures as a group. I think it is something that we are probably not going to be able to peg for you. As I noted in our last quarter conference call, all of our joint ventures were conservatively capitalized at the outset. The market movement downward has rocked that capitalization into the negative in pretty much all instances. But the reason they were capitalized conservatively in the beginning was to be able to withstand negative impact and that is what most of them are doing and those that are not they are being renegotiated into that position. Bruce?

One thing to add, Mike, as you look at the overall joint venture debt to total capital, if you strip out land source because we didn’t step up the basis last year when we admitted a new partner in the first quarter of last year, land source has close to 100% debt to total capital as a result of not stepping up the asset, which is included in your numbers. In the current quarter, the debt to total capital excluding land source is about 57%.

That’s helpful. Sorry, let me just sneak in one more. Kyle Canyon has been out there that it lists interest payments. Can you give us an idea if possible of the total debt that is out there from the JV’s that you are involved with? Maybe what percent is in that category?

Unfortunately, Mike, I am going to have to reprimand both you and Bruce. I said we wouldn’t talk about specific joint ventures. Bruce started it out by talking about land source and you’re following it up with Kyle.

Bruce, I’ll take the blame on that.

We’re going to have to go to the next one.

Our next question is coming from Mr. Jim Wilson with JMP Securities.

Thanks. Good morning guys. I won’t ask about JV’s then. I wanted to talk about; I guess two questions would be on cost. The first one, as you reduced headcount dramatically and I was just wondering if you have thoughts or anything you can say on any further it might go. On the one hand you reduced it a lot, but obviously your SG&A ratio is still 18% of revenue, obviously on depressed revenue. But if you have any further thoughts on where that might go? The second one is how much benefit if there is a way to quantify that or coloring that, the lower construction costs in general have helped margins or even could help margins in the future? What have you seen and what might you see further?

Jim, it’s going to be all of these pieces happening together and in tandem. Our SG&A will go down as we go through the year. Each of our divisions has a plan that for the year their SG&A in relation to revenues should be close to 10%. That is a far cry from where are today at 18% but a large part of that is that revenues in this first quarter are clearly slow. We are continuing to move SG&A down. The re-negotiation of construction costs continues to be a positive factor that will improve margins. It might be in smaller percentage amounts as we go forward, but we are continuing to hammer at construction costs and inject reality into the market place in general. So it really is all components, the land component as well. Everything chipping away at driving higher margins.

Okay. Great. Thanks that’s all I have.

We’ll take one last question.

Our last question is coming from Nishu Sood with Deutsche Bank North America.

Thanks. I also wanted to ask about the gross margins. Now I know you have said you don’t track this in the past but you did mention in your commentary about how the gross margin benefited from the prior impairments marking the land assets down to kind of a current value. I was just wondering, given the magnitude of the jump if you could just help us to frame some kind of quantification of how much gross margins benefited from the amount that they were marked down to current values?

You know, Nishu, Bruce and I spend a lot of time anticipating your question today and in trying to come up with something that made sense to us given the magnitude of the impairment we have taken over the past couple of years you could almost argue that all of it has come from adjustment in pricing and land. The bottom line is within this industry the reality is you just don’t make margins on land prices that are wrong or that are too high. That is kind of an axiom of the industry. So in this market where we’ve seen such degradation in pricing over the last couple of years anything that had been negotiated or bought, put on the books in 2005 or 2006 was land that was going to be producing a negative margin in 2007 and 2008. So the only way that new homes would be built would be on re-priced land. Now that is in combination re-priced either through impairments that have been taken or by renegotiation of contracts that were in the pipeline or purchase of new land at new prices or renegotiation of options pricing. But it is really all the same. That is it is the re-pricing of land assets to a level where a home could be built on a positive margin.

Got it. Now that is helpful. The second question I had was on the financial services. Obviously the profitability has diminished a lot. You mentioned market conditions out there just lower originations of loans. We have also noticed in some of your communities you have been offering below market rate financing. I was just wondering if in the past few quarters you have stepped up the use of the below market pricing or anything to your financial subsidiary as a means of driving sales?

We have, Nishu. We have offered some programs that we have seen some success with and there has been a bit of a step up in offering lower rates to help with the affordability of attracting buyers into our communities.

I think financing for the time being is going to be at the heart of where sales are made. We are going to continue to see that be part of the pricing mechanism and the attraction mechanism for home buyers coming into the market. I think if you look historically over past cycles coming out of a downward trend has always been defined by a combination of purchase pricing and financing packages.

I see. So you have been shifting away from simple price cuts, or lets say option price reductions more towards the financing side of things?

I would say that is the case. We have less of an options program across the board anyway so we don’t really use that tool to attract buyers. But we definitely think it is the financing side of the program that is going to draw buyers back to the market.

Got it. Thank you very much.

Okay. Thank you every body for joining us. We look forward to reconvening at the end of our second quarter.

This will conclude today’s conference. Thank you for participating. All parties may disconnect at this time.