Leisure Technology Will Skip Payouts on Preferred Shares
In another sign of California’s slowing real estate market, Los Angeles-based Leisure Technology announced Tuesday that it will not pay the upcoming quarterly dividend on its preferred stock, a move that should save the struggling home builder more than $500,000.
Officials of Leisure Technology, a leading developer of retirement housing nationwide, blamed their problems on the residential real estate slowdown that began more than two years ago in the Northeast and has recently spread to states such as California and Florida.
Leisure Technology has been modestly profitable in recent months, but has shown a slight loss after preferred-stock dividends have been paid.
“In California, we started to feel the slowdown last fall,” said Michael L. Tenzer, Leisure Technology’s chief executive and major shareholder. “It’s not been as critical or serious as it has been in the Northeast, but it has been significant.”
The slowdown in the California housing market, which began about a year ago, has picked up momentum in recent months, propelled by a sharp rise in the cost of fixed-rate mortgage loans that began in December and slowed down only recently. Interest rates on fixed-rate mortgages in California now stand at about 11%.
Real estate brokers and economists now expect that sales of existing single-family homes statewide in 1990 will be more than 10% below last year’s levels, while housing prices have barely appreciated in the past 12 months.
The slowdown in sales of existing homes hurts Leisure Technology because some of its customers, mainly retirees, can no longer get the prices they want for their homes in Los Angeles and Orange counties.
That, in turn, means they cannot afford a retirement home in Leisure Technology’s affluent retirement communities, such as the one in Oceanside--known as Leisure Village Ocean Hills--where prices start at more than $275,000.
In a growing number of cases, buyers agree to acquire the homes, but the deals never close escrow, company officials say. Tenzer declined to say how many sales have actually fallen through, but he did say that the ratio of successful sales had “deteriorated moderately” as it had elsewhere in the housing market.
Though the short-term outlook is cloudy, Tenzer predicted that housing is generally in such short supply in Southern California that the current slump will end within 12 months.
“The housing is just not available” because of the region’s numerous environmental and regulatory restrictions, Tenzer said.
Leisure Technology’s disclosure about the payment halt sent the value of its preferred shares plunging. They closed at $5.625 per share on the New York Stock Exchange, down $1.375.
The suspension affects the company’s 915,000 shares of Class C cumulative preferred and is expected to temporarily save the company about $515,000. Tenzer declined to say when the payments would resume.
In the nine months ended Dec. 31, the firm earned $82,000 on revenue of $128 million, compared to earnings of $613,000 on revenue of $81.7 million in the year-earlier period. But after preferred dividends were paid, the firm lost 27 cents per share in the latest nine-month period (the firm did not disclose an absolute dollar figure).
LEISURE TECHNOLOGY AT A GLANCE
Los Angeles-based Leisure Technology develops adult and retirement communities with current developments in California, New Jersey, New York, Florida and Illinois.
9 mos. Year ended Mar. 31 Dec. 31 1989 1988 1987 Revenue (millions) $127.9 $127 $151 $137 Net income (millions) 0.08 1.47 8.17 2.20
Assets: (March 31, ‘89) $291 million
Employees: 400
Common shares outstanding: 5.43 million
Tuesday close (preferred): $5.625, down $1.375
52-week price range: $7.00 - $25.75
Tuesday close (common): $1.625, unchanged
52-week price range: $1.50 - $6.50
Sources: Annual report; Standard & Poor’s
