Richard Costello: Yes, we’ve had a fairly inconsequential change in the incentives from March to April, from Q1 to April. We have been successful in raising prices in approximately two-thirds of our communities at the same time that we saw the incentives come down in Q1. So we like what we see. The buyer is back in our markets. So we’re feeling good.
Jay McCanless: And then the other question I had, just going back to the gross margin question, what historically has been the mix of infill business versus, I know Trophy Signature’s new, but newer, but I guess what’s that historical mix of business? And are you guys expecting infill to maybe be a heavier percentage this year? Is that one of the reasons that the gross margin was so strong in 1Q? And I know you all don’t like to give guidance, but if infill is going to be a heavier percentage of the mix this year, does it follow that we should maybe be a little more optimistic around what our gross margin assumption should be?
Richard Costello: Hey Jay, this is Rick again. We have been consistent for the last several years, actually, with a little more than 80% being infill-infill adjacent. So we expect our ASP this year to continue to range. It’s always a function of mix. The $539,000 in Q1 was not a surprise to us. And similarly, we expect between $540,000 and $560,000 the rest of the year. So that kind of indicates that the mix really isn’t changing a whole lot from where we’re at right now which, and all those metrics, our revenues closing, our lot inventory, the lots that we’re buying, the lots that we’re finishing continue to be in that same mix.
Jed Dolson: Jay, this is Jed. I would just add, we’re not running Trophy as a low-margin business. We’re running Trophy as a high-margin business. And, we do have to compete with other public builders more in that space. But the differential, it’s not a night and day differential and gross margin from infill to Trophy.
James Brickman: Yes, this is Jim. The other thing that’s interesting is Trophy’s, even in our lower entry-level price point, our cancellations are under 10%. I think we have a better backlog at Trophy. Not as much as we said we’re selling most of these homes, in the shorter window when they close. But in terms of margin and risk, we can’t eliminate all risk. But I think Trophy’s doing a really great job of maintaining margin, not having cancellations. And we’re just real excited about some of the new communities that are getting ready to open in markets that we’ve already had great success in.
Jay McCanless: Got it. The last question I have for you guys, could you talk about what your lot cost inflation has been so far this year? And also, as part of that also, we’ve heard from some of your competitors that land development costs are also going up in addition to just the lot price itself. So maybe could you talk about what type of inflation you’re seeing on both those metrics?
Richard Costello: Yes, Jim can chime in on this. He works on it, you know, all the time with Bobby Samuel, our National Head of Vice President of Land Development.
James Brickman: But we are not seeing major lot land development cost increases anymore. We’re not seeing decreases either. We don’t have a crystal ball where we can forecast this, but we’re putting budgets together on a number of large land deals that we’re keying up and getting ready to start. And they’re right in line with our projections. And we’re not seeing nearly the cost pressures or the supply pressures of not having transformers and all the other stuff that we were experiencing a year or two ago. Jed?
Jed Dolson: Yes, we mentioned that half of our lots owned and controlled are in long-term master plan communities where we bought at wholesale prices, sub $12,000 a paper lot. And, we feel good about those long-term buys. Most of those are in reimbursable type communities where over time we’ll get reimbursed for development costs. And our in-fit, we’re not seeing land development horizontal costs go up. They’re pretty stable to maybe trending down a percent or two.
James Brickman: And then one last point on that, one of the big reasons for our year-over-year decline in ASP was the transition from more infill to infill adjacent communities. And that was probably the most profound Trophy. But on a year-over-year basis, their ASP, I think, went down by about $100,000. But the lot cost, the finished lot cost, I’m not going to say what the percentage was, but it was all within the same percentage point, X point something percent to X point something percent. So it’s remarkable that we’ve been able to maintain that cost structure and therefore our gross margins.
Jay McCanless: Yes. Pretty impressive. Thanks, guys.
Operator: [Operator Instructions] Your next question is from the line of Alex Barron with Birch [ph] Center.
Unidentified Analyst: Yes. Hi, guys. Good morning. I wanted to ask about your land development, which you’ve emphasized and clearly it’s yielding great results. What percentage of your overall lots that you guys are involved with are self-development and is that percentage likely to trend up from here?
Richard Costello: We show that calculation actually inside both the earnings release and the 10-Q each quarter. We take the lots owned and controlled and we back out of the controlled lots the land parcels that we’re about to close on, which are actually going to be self-developed. And we come up with that percentage and it runs around 86% to 88%, give or take. And that’s where we’re at, at the end of Q1 as well. So it’s a preponderance.
James Brickman: Alex, we’re seeing in certain instances, well, to answer your question, we’re not going to be landline. We are seeing the spread and because some builders are trying to stay landline no matter what because of what they told Wall Street, they’re paying prices for lots we would never consider on an option basis because the spread between that retail option lot price and what we think you can put a developed lot that we wholly own in a larger master plan community, we just aren’t interested in even considering going landline. The cost is too great.
Unidentified Analyst: And how do you guys answer to the, I guess, flip side of the argument that it’s less capital and therefore higher return?
James Brickman: Well, let me answer this because I do it every time. For some reason, which I have never been able to figure out, everybody thinks you can magically transfer land risk and yield risk to a lot banker. Lot bankers are some of the smartest guys in the real estate business. A lot banker’s goal was to make the highest returns for the lot bankers, investors. Their goal was to charge a builder the highest implied interest rate to the lot bank and get the greatest earnest money deposit they can. It’s a totally misaligned structure that has just been, I think, oversold to Wall Street.
