Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
For a description of the Company’s business, refer to Item 1 of Part I of this annual report on Form 10-K. As indicated in Item 1, the Company is primarily engaged in two business segments: land development and homebuilding. The following provides information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and accompanying notes.
CRITICAL ACCOUNTING ESTIMATES
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. The Company discloses its significant accounting policies in the notes to its audited consolidated financial statements.
The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of those financial statements as well as the amounts reported in the financial statements and accompanying notes. Areas that require significant judgments and estimates to be made include: (1) land sale cost of revenues, net calculations, which are based on land development budgets and estimates of costs to complete; (2) cash flows, asset groupings and valuation assumptions in performing asset impairment tests of long-lived assets and assets held for sale; (3) risk assessment of uncertain tax positions; and (4) the determination of the recoverability of net deferred tax assets. Actual results could differ from those estimates.
There are numerous critical assumptions that may influence accounting estimates in these and other areas. Management bases its critical assumptions on historical experience, third-party data and various other estimates that it believes to be reasonable under the circumstances. The most critical assumptions made in arriving at these accounting estimates include the following:
land sale cost of revenues, net are incurred throughout the life of a project, and the costs of initial sales from a project frequently must include a portion of costs that have been budgeted based on engineering estimates or other studies, but not yet incurred;
when events or changes in circumstances indicate the carrying value of an asset may not be recoverable, a test for asset impairment may be required. Asset impairment determinations are based upon the intended use of assets, the grouping of those assets, the expected future cash flows and estimates of fair value of assets. For real estate projects under development, an estimate of future cash flows on an undiscounted basis is determined using estimated future expenditures necessary to complete such projects and using management’s best estimates about sales prices and holding periods. Testing of long-lived assets includes an estimate of future cash flows on an undiscounted basis using estimated revenue streams, operating margins, administrative expenses and terminal values. The estimation process involved in determining if assets have been impaired and in the determination of estimated future cash flows is inherently uncertain because it requires estimates of future revenues and costs, as well as future events and conditions. If the excess of undiscounted cash flows over the carrying value of a particular asset group is small, there is a greater risk of future impairment and any resulting impairment charges could be material;
the Company assesses risk for uncertain tax positions and recognizes the financial statement effects of a tax position when it is more likely than not that the position will be sustained upon examination by tax authorities; and
the Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized. In making this determination, the Company projects its future earnings (including currently unrealized gains on real estate inventory) for the future recoverability of net deferred tax assets.
RESULTS OF OPERATIONS
Year Ended April 30, 2025 Compared to Year Ended April 30, 2024
For 2025, the Company had net income of $12,716,000, or $2.37 per diluted share, compared to net income of $6,690,000, or $1.25 per diluted share, in 2024.
During 2025 and 2024, the Company experienced material delays in municipal entitlements, infrastructure availability, approvals and inspections and utility response times in both the land development business segment and homebuilding business segment, which caused delays in construction and the realization of revenues and increases in cost of revenues. While construction and land costs remain elevated, the Company has been able to partially offset these cost increases through land and home price increases in 2025 and 2024 due to a strong pricing environment, which may not continue. The rising cost of housing due to increases in average sales prices in recent years and the level of mortgage interest rates, coupled with general inflation in the U.S. economy and other macroeconomic factors, have placed pressure on overall housing affordability, negatively affecting demand and have caused many potential homebuyers to pause and reconsider their housing choices. In addition, any tariffs on goods used as inputs in both the land development business segment and homebuilding business segment may result in further increases in the cost of housing and average sales prices. Given the affordability challenges and the resulting impact on demand, the Company has provided sales incentives on certain homes, reduced the size of lots and homes, leased completed homes and the pace of housing starts and land development projects. During 2025 and 2024, the Company reduced the number and scope of its active land development projects and proceeding with certain new land development projects due to market headwinds and uncertainty and an increase in entitlement and infrastructure as compared to prior years. This is expected to result in a reduction of revenues from the sale of developed residential land during the fiscal year ending April 30, 2026 as compared to 2024 and 2025. Future economic conditions and the demand for land and homes are subject to continued uncertainty due to many factors, including changes in mortgage interest rates, inflation, tariffs, supplies of new and existing home inventory available for sale, labor and other factors. The Company’s past performance may not be indicative of future results.
Revenues . The following presents information on revenues (dollars in thousands):
Year Ended April 30,
Increase (decrease)
Land sale revenues
Home sale revenues
Other revenues
Total
The change in land sale revenues for 2025 compared to 2024 was primarily due to a decrease in revenues from the sale of undeveloped land offset in part by an increase in revenues from the sale of developed land. The Company’s land sale revenues consist of (dollars in thousands):
Year Ended April 30, 2025
Acres Sold
Revenue
Revenue Per Acre 4
Developed
Residential
Commercial
Total Developed
Undeveloped
Total
Year Ended April 30, 2024
Acres Sold
Revenue
Revenue Per Acre 1
Developed
Residential
Commercial
Total Developed
Undeveloped
Total
The changes in the revenue per acre of developed residential land, developed commercial land and undeveloped land for 2025 compared to 2024 were primarily due to the location and mix of land sold. Revenues from the sale of undeveloped land included the sale in 2025 of 549 acres of contiguous undeveloped land in Sandoval County, New Mexico, representing $2,502,000 of revenue, to one purchaser and the sale in 2024 of 147 acres in Brighton, Colorado, representing $7,200,000 of revenue, to one purchaser. The Company does not expect the sale of the properties in the prior sentence to be indicative of future undeveloped land sale revenues.
The change in home sale revenues for 2025 compared to 2024 was primarily due to an increase in the number of homes sold offset in part by a decrease in average selling prices. The Company’s home sale revenues consist of (dollars in thousands):
Year Ended April 30,
Homes sold
Average selling price
As of April 30, 2025, the Company had 88 homes in production, including 28 homes under contract, which homes under contract represented $12,787,000 of expected home sale revenues when closed, subject to customer cancellations and change orders. As of April 30, 2024, the Company had 64 homes in production, including 20 homes under contract, which homes under contract represented $8,719,000 of expected home sale revenues when closed, subject to customer cancellations and change orders.
1 Revenue per acre may not calculate precisely due to the rounding of revenue to the nearest thousand dollars.
Other revenues consist of (in thousands):
Year Ended April 30,
Sale of investment assets
Landscaping revenues
Miscellaneous other revenues
Total
Sale of investment assets for 2024 consists of the sale of two buildings leased to commercial tenants. The Company does not expect the sale of the properties in the prior sentence to be indicative of future sales of investments assets.
Landscaping revenues consist of landscaping services provided by the Company primarily to homebuilders.
Miscellaneous other revenues for 2025 primarily consist of extension fees for purchase contracts, management fees for homeowners’ associations and residential rental revenues. Miscellaneous other revenues for 2024 primarily consist of extension fees for purchase contracts and residential rental revenues.
Cost of Revenues . The following presents information on cost of revenues (dollars in thousands):
Year Ended April 30,
Increase (decrease)
Land sale cost of revenues, net
Home sale cost of revenues
Other cost of revenues
Total
Land sale cost of revenues, net consist of (in thousands):
Year Ended April 30,
Land sale cost of revenues
Less:
Public improvement district reimbursements
Private infrastructure covenant reimbursements
Payments for impact fee credits
Land sale cost of revenues, net
Land sale gross margins were 52% for 2025 compared to 36% for 2024. The change in gross margin was primarily due to changes in public improvement district reimbursements, private infrastructure covenant reimbursements and payments for impact fee credits and the location, size and mix of property sold (including the sale of 690.4 acres for 2025 as compared to 222.9 acres for 2024 of undeveloped land with a low associated land sale cost of revenues).
The change in home sale cost of revenues for 2025 compared to 2024 was primarily due to the number, location, size and mix of homes sold and increases in the prices of building materials and skilled labor. Home sale gross margins were 21% for 2025 compared to 25% for 2024. The change in gross margin was primarily due to the location, size and mix of homes sold, increases in the amount of sales incentives to homebuyers and increases in the prices of building materials and skilled labor.
Other cost of revenues for 2025 consist of the cost of goods sold for landscaping services. Other cost of revenues for 2024 consist of the costs associated with the sale of investment assets and cost of goods sold for landscaping services. The costs associated with the sale of investment assets in 2024 primarily represented the costs to construct two buildings leased to commercial tenants.
As a result of many factors, including the nature and timing of specific transactions and the type and location of land or homes being sold, revenues, average selling prices and related gross margins from land sales or home sales can vary significantly from period to period and prior results are not necessarily a good indication of what may occur in future periods.
General and Administrative Expenses . The following presents information on general and administrative expenses (dollars in thousands):
Year Ended April 30,
Increase (decrease)
Land development
Homebuilding
Corporate
Total
The change in land development general and administrative expenses for 2025 compared to 2024 was primarily due to an increase in payroll costs for landscaping services and a decrease in property taxes as a result of refunds of previously paid amounts.
The change in homebuilding general and administrative expenses for 2025 compared to 2024 was primarily due to expansion of the Company’s homebuilding operations and information technology expenses.
The change in corporate general and administrative expenses for 2025 compared to 2024 was primarily due to a decrease in professional services and pension benefit expenses as a result of the termination of the Company’s pension plan and an increase in bank charges.
The Company did not record any non-cash impairment charges on real estate inventory or investment assets in 2025 or 2024. Due to volatility in market conditions and development costs, the Company may experience future impairment charges.
Interest Income, net . Interest income, net was $1,622,000 for 2025 and $823,000 for 2024. There were no interest or loan costs capitalized in real estate inventory in 2025. Interest and loan costs of $2,000 were capitalized in real estate inventory in 2024.
Income Taxes . The Company had a provision for income taxes of $1,009,000 for 2025 and $1,735,000 for 2024. The provision for income taxes for 2025 related to the amount of income before income taxes during the year and to the reclassification of the balance of accumulated other comprehensive income (loss) to a benefit for income taxes. In connection with the termination of the Company’s defined benefit pension plan, $1,230,000 of income tax effects that remained in accumulated other comprehensive income (loss) were reclassified to a benefit for income taxes during 2025. Refer to Note 12 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding accumulated other comprehensive income (loss). The provision for income taxes for 2024 correlated to the amount of income before income taxes during the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and restricted cash as follows (dollars in thousands):
Year Ended April 30,
Increase (decrease)
Cash
U.S. Government Securities
Restricted Cash
Total
Refer to Note 11 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding restricted cash.
AMREP Corporation is a holding company that conducts substantially all of its operations through subsidiaries. As a holding company, AMREP Corporation is dependent on its available cash and cash equivalents and on cash and cash equivalents from subsidiaries to pay expenses and fund operations. The Company’s liquidity is affected by many factors, including some that are based on normal operations and some that are related to the real estate industry and the economy generally.
The Company’s primary sources of funding for working capital requirements are cash flows from operations, a revolving line of credit, bank financing for specific real estate projects, interest income and existing balances of cash and cash equivalents. Land and homebuilding properties generally cannot be sold quickly, and the ability of the Company to sell properties has been and will continue to be affected by market conditions. The ability of the Company to generate cash flow from operations is primarily dependent upon its ability to sell the properties it has selected for disposition at the prices and within the timeframes the Company has established for each property. The development of additional lots for sale, construction of homes or commercial buildings for sale or lease or pursuing other real estate projects may require financing or other sources of funding, which may not be available on acceptable terms (or at all). If the Company is unable to obtain such financing, the Company’s results of operations could be adversely affected.
The Company expects the primary demand for funds in the future will be for the development and acquisition of land, construction of home and commercial projects and general and administrative expenses. In many instances, the development of land and construction of home and commercial projects are required to satisfy delivery obligations to customers. Further, the Company regularly evaluates property available for purchase from third parties for possible acquisition by the Company. To the extent the sources of capital described above are insufficient to meet its needs, the Company may conduct public or private offerings of securities, dispose of certain assets or draw on existing or new debt facilities. The Company believes that it has adequate cash and cash equivalents, bank financing and cash flows from operations to provide for its anticipated spending in its fiscal year ending April 30, 2026.
Any epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it (including quarantines, shelter-in-place orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations), could significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period, including disruptions to the Company’s supply chain and shortages in labor and certain building components and materials. As a result, the impact of such public health issues and the related governmental actions could materially impact the Company’s financial position, results of operations and cash flows.
Pension Plan . The Company’s defined benefit pension plan was terminated in 2024. The Company did not make any contributions to the pension plan during 2024. During 2024, the Company transferred $547,000, which was the amount of residual assets (after satisfying any pension plan liabilities) following termination of the defined benefit pension plan, from the defined benefit pension plan to the Company’s 401(k) retirement plan available for future awards to eligible employees. This amount that was transferred to the Company’s 401(k) retirement plan is recognized as restricted cash on the Company’s balance sheet. During 2025, the Company utilized $92,000 of this restricted cash to fund its 401(k) employer contribution for the calendar year ended December 31, 2024. Refer to Note 11 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding the Company’s 401(k) plan.
Cash Flow . The following presents information on cash flows (in thousands):
Year Ended April 30,
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Increase in cash and cash equivalents
The net cash provided by operating activities for 2025 was primarily due to cash generated from business operations and a reduction in real estate inventory and investment assets, net and other assets offset in part by an increase in other assets and a reduction in accounts payable and accrued expenses. The net cash provided by operating activities for 2024 was primarily due to cash generated from business operations, a net decrease in real estate inventory and investment assets and a decrease in other assets.
Notes payable decreased from $35,000 as of April 30, 2024 to $26,000 as of April 30, 2025 due to principal debt repayments. Refer to Note 6 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding the Company’s notes payable.
Asset and Liability Levels . The following presents information on certain assets and liabilities (dollars in thousands):
April 30,
Increase
(decrease)
Real estate inventory
Investment assets, net
Other assets
Deferred income taxes, net
Accounts payable and accrued expenses
Income taxes receivable, net
Real estate inventory consists of (dollars in thousands):
April 30,
Increase
(decrease)
Land inventory
Homebuilding model and completed inventory
Homebuilding construction in process
Total
Refer to Note 2 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding real estate inventory. From April 30, 2024 to April 30, 2025, the change in land inventory was primarily due to the sale of land offset in part by land development activity, the change in homebuilding model and completed inventory was primarily due to the completion of homes not yet sold offset in part by the sale of homes and the change in homebuilding construction in process was primarily due to a decrease in the number of homes that started construction.
Investment assets, net consist of (dollars in thousands):
April 30,
Increase
(decrease)
Land held for long-term investment
Owned real estate leased or intended to be leased
Less accumulated depreciation
Owned real estate leased or intended to be leased, net
Total
Refer to Note 3 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding investment assets. As of April 30, 2025, the Company leased 21 homes to residential tenants. As of April 30, 2024, the Company leased 10 homes to residential tenants. Given the impact on demand as a result of affordability challenges, the Company has opportunistically leased completed homes. Depreciation associated with owned real estate leased or intended to be leased was $115,000 for 2025 and $82,000 for 2024.
From April 30, 2024 to April 30, 2025:
The change in other assets was primarily due to an increase in the number of residential rental homes offset in part by a decrease in prepaid expenses related to the termination of a land development cash collateralized performance guaranty.
The change in deferred income taxes, net was primarily due to the income tax effect of the amount of income before income taxes during the year.
The change in accounts payable and accrued expenses was primarily due to a decrease in accounts payable, accrued expenses and customer deposits.
The change in income taxes receivable, net was primarily due to the payment of estimated taxes and the accrual of state income taxes receivable.
Off-Balance Sheet Arrangements . As of April 30, 2025 and April 30, 2024, the Company did not have any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).
Recent Accounting Pronouncements . Refer to Note 1 to the consolidated financial statements contained in this annual report on Form 10-K for a discussion of recently issued accounting pronouncements.
IMPACT OF INFLATION
The Company’s operations can be impacted by inflation. Inflation can cause increases in interest rates and the cost of land, materials, services and labor. Unless such increased costs are recovered through increased sales prices or improved operating efficiencies, operating margins will decrease. The Company’s homebuilding segment as well as homebuilders that are customers of the Company’s land development business segment face inflationary concerns that rising housing costs, including interest costs, may substantially outpace increases in the incomes of potential purchasers and make it difficult for them to purchase a new home or sell an owned home. If this situation were to exist, the demand for homes produced by the Company’s homebuilding segment could decrease and the demand for the Company’s land by homebuilder customers could decrease. As a result of inflationary pressures, the Company has experienced increases in the prices of labor and certain materials in 2025 and 2024. Inflation may also increase the Company’s financing costs. While the Company attempts to pass on to its customers increases in costs through increased sales prices, market forces may limit the Company’s ability to do so. If the Company is unable to raise sales prices enough to compensate for higher costs, or if mortgage interest rates increase significantly, the Company’s revenues, gross margins and net income could be affected.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking”, including statements contained in this annual report on Form 10-K and other filings with the Securities and Exchange Commission, reports to the Company’s shareholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and contingencies that are difficult to predict. All forward-looking statements speak only as of the date of this annual report on Form 10-K or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are qualified by the cautionary statements in this section. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements.
The forward-looking statements contained in this annual report on Form 10-K include, but are not limited to, statements regarding (1) the Company’s ability to finance its future working capital, land development, acquisition of land, homebuilding, commercial projects, general and administrative expenses and capital expenditure needs, (2) the Company’s expected liquidity sources, including the availability of bank financing for projects and the utilization of existing bank financing, (3) anticipated development of the Company’s real estate holdings, (4) the development and construction of possible future commercial properties to be marketed to tenants, (5) the designs, pricing and levels of options and amenities with respect to the Company’s homebuilding operations, (6) the amount and timing of reimbursements under, and the general effectiveness of, the Company’s public improvement districts and private infrastructure reimbursement covenants, (7) the number of planned residential lots in the Company’s subdivisions, (8) estimates of the Company’s exposure to warranty claims and liabilities for litigation and legal claims, estimates of the cost to complete of common land development costs and the estimated relative sales values of individual parcels of land in connection with the allocation of common land development costs, (9) the adequacy of warranty reserves, subcontractor indemnities and third-party insurance to cover the ultimate resolution of any potential liabilities associated with known and anticipated warranty and construction related and , (10) the conditions resulting in homebuyer affordability , (11) estimates and assumptions used in determining future cash flows of real estate projects, (12) the amount of revenues from the sale of developed residential land during the fiscal year ending April 30, 2026, (13) the backlog of homes under contract and in production and the dollar amount of expected sale revenues when such homes are , (14) the effect of seasonality on the Company’s operations, (15) the categorization of homes and buildings leased or intended to be leased to third parties, (16) the effect of recent accounting pronouncements, (17) the timing of recognizing unrecognized compensation expense related to shares of common stock issued under the AMREP Corporation 2016 Equity Compensation Plan, (18) the Company’s belief that its compensation package and benefits offered to employees are competitive with others in the industry, (19) the future issuance of deferred stock units to directors of the Company, (20) the future business conditions that may be experienced by the Company, including the pace of the Company’s housing starts and land development projects, (21) the dilution to earnings per share that outstanding options to purchase shares of common stock of the Company may cause in the future, (22) the adequacy of the
Company’s facilities, (23) the materiality of claims and legal actions, (24) projections of future earnings for the future recoverability of deferred tax assets and state net operating losses that are not expected to be realizable and (25) the Company’s belief that its insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations and the listing standards of the New York Stock Exchange. The Company undertakes no obligation to update or publicly release any revisions to any forward-looking statement to reflect events, circumstances or changes in expectations after the date of such forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
