HOMEFED CORPORATION
1903 Wright Place
Suite 220
Carlsbad, California 92006
June 4, 2009
BY EDGAR
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Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-7010
Attention: Kevin Woody
Accounting Branch Chief
Re: HomeFed Corporation
Form 10-K for the fiscal year ended December 31, 2008
Filed February 24, 2009
File #1-10153
Dear Mr. Woody:
Reference is made to your letter of June 1, 2009 addressed to me (the "June 1,
2009 Letter"). On behalf of HomeFed Corporation ("HomeFed" or the "Company"),
set forth below is each numbered paragraph of the June 1, 2009 Letter followed
by the response of HomeFed to each comment contained in the June 1, 2009 Letter.
The number of each response corresponds to the number of the comment in your
letter.
Item 1. Business
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Current Development Projects, page 2
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General
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1. For each of your material projects identified under this subheading,
please tell us the nature of your title to, or other interest in, such
properties and the nature and amount of any material liens or
encumbrances against such properties. Provide this disclosure in
future filings.
Subsidiaries of the Company own title to the real estate in fee
simple. All of the subsidiaries that own real estate are wholly
owned, except for subsidiaries that own the San Elijo Hills
project. The Company has an effective 68% ownership interest in
that project, which is disclosed in the San Elijo Hills portion
of this section. The only material liens or encumbrances against
the Company's real estate projects are notes payable to trust
deed holders that are collateralized by the San Elijo Hills
project land. This encumbrance is disclosed in Liquidity and
Capital Resources of Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations and in Note 5 to
the financial statements. In future filings the Company will
disclose the amount of encumbrance against the San Elijo Hills
project or any material new encumbrances against the Company's
real estate projects in this section.
Kevin Woody
Page 2
Otay Ranch, page 5
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2. As currently written, it is unclear what amount of the approximately
2,100 total acres of non-developable land is unusable because the land
is designated for government purposes. Please clarify. Additionally,
please tell us why the remaining land is classified as
"non-developable," considering that such amount represents a
significant percentage of the total land held by the Otay Land
Company.
All of the 2,100 acres of land was zoned as non-developable
mitigation land when it was acquired by the Company, pursuant to
the General Development Plan for the larger Otay Ranch planning
area approved by the City of Chula Vista and the County of San
Diego. Although the Company can not use the land for development
the land is not "unusable." As disclosed in this section, 1.188
acres of open space mitigation land from within the Otay Ranch
project must be dedicated to the government for each 1.0 acre of
land that is developed. Some owners of development land have
adequate or excess mitigation land, while other owners lack
sufficient acreage of mitigation land to cover their inventory of
development land. In prior years Otay Land Company completed two
transactions to sell an aggregate of 554 acres of non-developable
land for aggregate cash proceeds of $7.2 million. Otay Land
Company currently has substantially more mitigation land than it
needs to be able to develop its developable property at this
project. This land could have value to other developers within
the larger Otay Ranch development area as their development
progresses. The Company may also be able to sell mitigation land
to buyers outside the Otay Ranch development area. However,
whether any additional sales of Otay Land Company open space
mitigation land will occur is dependent, among other things, upon
whether third parties who are interested in developing their land
have adequate open space mitigation land to satisfy the local
requirements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Liquidity and Capital Resources, page 16
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3. We note that you identify certain design and processing expenditures
on page 6 that you deem necessary to the development of your Otay
Ranch project. To the extent that such expenditures are considered
material, please tell us the amount needed to fully entitle the
property for development and sale and provide similar disclosure in
future filings.
Kevin Woody
Page 3
During the next three years, the Company expects to spend
approximately $7.5 million at the Otay Ranch project to fully
entitle the property for development. The Company does not
believe that this amount is material to warrant disclosure in
future filings. If circumstances change and such expenditures
become material, the Company would include an appropriate
discussion in Liquidity and Capital Resources. The disclosure on
page 6 was intended to inform the reader of the significant
design and processing efforts, rather than expenditures, that
will be required by Company personnel, that such efforts will
take a number of years and that the ultimate development and
timing of any sales is subject to market conditions and
governmental requirements, which are outside of the Company's
control.
Item 8. Financial Statements and Supplementary Data
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Consolidated Balance Sheets, page F-2
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4. We note that you repurchased common stock to be held in treasury stock
during the fiscal year ended December 31, 2008. In future filings,
please disclose on the face of your balance sheets as a separate
deduction from shareholders' equity the amount of shares and dollar
value attributed to treasury stock as of the reporting date.
The Company discloses the number of treasury shares held on the
face of the balance sheet and discloses the amount paid to
acquire the shares in its consolidated statements of changes in
stockholders' equity. The Company does not consider the amount of
treasury shares held to be material, and although the treasury
shares are not formally retired we applied the accounting
treatment appropriate for retired stock, which is permitted by
APB 6. The Company believes its accounting treatment is
appropriate.
7. Stock Incentive Plans, page F-11
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5. We note that in October 2008 you repurchased 394,931 shares of your
common stock in a private transaction. After considering such
transaction, you can repurchase up to an additional 105,069 shares to
reach the 500,000 shares approved by your Board of Directors in July
2004. Please reconcile this disclosure with your tabular disclosure of
Issuer Purchases of Equity Securities with Item 5 of Form 10-K, where
you disclose an amount for Total Number of Shares Purchased as Part of
Publicly Announced Plans or Programs as zero.
The information contained in the paragraph immediately following
the chart provides the required information as to the Company's
repurchase program, the date of adoption by the Board of
Directors of the program, the number of shares purchased under
the program during the fourth quarter of 2008 and the shares
remaining available for repurchase under the program. The failure
to complete the tabular disclosure was an oversight, which the
Company believes is mitigated by the inclusion of the required
disclosure in the textual paragraph immediately following the
issuer purchases of equity securities table.
Kevin Woody
Page 4
Item 11. Executive Compensation
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Base Salary, page 28
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6. We note that individual base salaries are intended to be appropriate
in light of the executive's respective roles and levels of
responsibility. Please tell us the specific individual factors that
the compensation committee considered in determining annual salary
decisions and explain how such factors lead to each named officers
base salary. Please refer to Item 402(b)(2)(vii) of Regulation S-K.
Please provide this disclosure in future filings and tell us how you
plan to comply.
The named executive officers are long-term employees of the
Company whose roles and responsibilities have not changed during
the period covered by the Summary Compensation Table. Annual
salary changes are cost of living adjustments that are based on
changes in the Consumer Price Index over the preceding twelve
months. There were no other factors considered by the
compensation committee in determining salary changes;
accordingly, the Company believes that its disclosure is
appropriate.
Short Term Incentives - Annual Bonus Compensation, page 28
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7. Please provide for us a more in-depth discussion of the committee's
"subjective assessment" of each executive's performance that you
disclose and how those individual factors impacted the amounts
awarded. For instance, tell us how you subjective assessment and the
financial measures considered lead the amount awarded. Refer to Item
402(b)(2)(v) and Instruction 4 to Item 402(b) and Item 402(b)(2)(vii)
of Regulation S-K. Please provide this disclosure in future filings.
The compensation committee reviews actual and estimated results
of operations for the current year, operating results and short
term incentive payments for prior years, an annual performance
review form completed by each executive and recommendations from
the President when determining short term incentive awards for
other named executive officers. The annual performance review
form reports on the degree to which the executive achieved
his/her accountabilities and objectives that were established in
the beginning of the year; however, these accountabilities and
objectives are not based on financial measures. The short term
incentive award is not based on any formula or the application of
specific mathematical criteria. The determination by the
compensation committee is highly subjective. Although the Company
believes that its disclosure is appropriate, in future filings
the Company will include the additional disclosures contained in
this paragraph.
Kevin Woody
Page 5
Item 15. Exhibits and Financial Statement Schedules
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8. We note that the financial statement schedules have been omitted. In
future filings please include Schedule III per Rule 5-04 of Regulation
S-X or tell us why such disclosure is not required.
The Company is primarily engaged in the business of the
development of residential real estate projects in California.
Its real estate projects were acquired with the intent to develop
the projects and to sell improved lots to homebuilders. Schedule
III is required to be filed by certain real estate companies
whose business is the acquisition of real estate for investment
purposes (e.g. companies that own depreciable assets such as
office buildings or industrial properties); accordingly, the
Company does not believe that it is required to file this
schedule. Nevertheless, the Company notes that it has disclosed
the carrying amounts of its real estate projects in Note 4 to the
financial statements, real estate encumbrances in Note 5 to the
financial statements and does not have any depreciable assets of
the type that are required on Schedule III. Although the Company
does not believe Schedule III is applicable, the Company has
included the material disclosures required by this schedule in
the Notes to the financial statements.
* * * *
In connection with our filings and in response to the June 1, 2009 Letter, the
Company acknowledges and agrees that:
o The Company is responsible for the adequacy and accuracy of the
disclosure in its filings;
o Staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filings; and
o The Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
If you have any further questions or desire any additional information please
contact the undersigned at 760-602-3776.
Very truly yours,
/s/ Erin N. Ruhe
Erin N. Ruhe
Vice President, Treasurer and
Controller
cc: Mark Rakip, Staff Accountant
Jerard Gibson, Attorney-Advisor
Duc Dang, Attorney-Advisor