KB Home, Toll Bros. among builders that may be on hook for desert land

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Some of the country’s largest home builders might have to buy hundreds of acres of desert near a failed development at boom-era prices. The legal battle between builders such as KB Home and Toll Brothers and a group of banks led by J.P. Morgan Chase stems from Inspirada, a failed development near Las Vegas.

January 09, 2011
KB Homes, Toll Bros. among builders that may be on hook for desert land

KB Homes, Toll Bros. among builders that may be on hook for desert land

Some of the country’s largest home builders might have to buy hundreds of acres of desert near a failed development at boom-era prices, The Wall Street Journal reported.

The legal battle between builders such as KB Home and Toll Brothers and a group of banks led by J.P. Morgan Chase stems from Inspirada, a failed development near Las Vegas. The builders used a popular, but controversial, form of off-balance-sheet accounting when buying the land that insulates them from debt and other obligations.

The banks lent $585 million for the venture, which sold only 635 out of the planned 14,500 homes. The builders thought they were only liable for $370 million, but now the banks say they must buy hundreds of millions of dollars worth of land and develop it.

During the housing boom, off-balance-sheet deals were common because they let companies buy large tracts of land without putting large amounts of debt on their balance sheets.

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