[Villages Kahuna]

Some have expressed concern that as TV proceeds towards build-out that the Morse family is leaving. The family has said they have no such plans, but such rumors continue.

As far as their sale of Southern Lifestyles, I think it makes sense from their perspective. They are commercial and residential real estate developers, businesses which they perform exceedingly well. Selling furniture or running restaurants or clubs or the newspaper or radio station or the bank or the schools are on the periphery of their business focus. Those businesses are supportive of the primary business focus, important only in that sense. If those things enhance the sale of homes or the leasing of commercial space, they'll continue. But once such enterprises can be adequately provided by other retailers or restaurants, they will quietly exit those businesses.

Southern Lifestyles was originally created when TV used the "street of dreams" concept for selling houses. The street of dreams was in the long building next to Panera Bread in Lake Sumter. Back then, buyers would select their lot then go to the street of dreams to spec and furnish their new house. The "street" had "stores" for everything from construction add-ons to wall coverings, floor coverings, plumbing fixtures, appliances, lighting, patio equipment and Southern Lifestyles for the selection of furniture. Buyers spent five days going thru the street of dreams and they left with their new house completely spec'd and furnished and priced. Then they'd visit Citizens First Mortgage and 45-days later they were scheduled to return and close on their new Villages residence, finished, furnished and ready for move-in. Southern Lifestyles was there as a part of the process of selling homes.

Later, about 7-8 years ago, TV stopped using the street of dreams concept and began building and selling spec houses. Pretty much 'take it or leave it' for new buyers. Of course by then they had built more than 30,000 homes in TV, so they pretty much knew from experience what people wanted. But they kept Southern Lifestyles open for people to furnish their homes, actually expanding the store to fill the space which had been the street of dreams. Like most things the developer does, it was a superbly well-managed business selling quality furniture and design advice very appropriate to TV demographics and lifestyle. But it continued to be an adjunct to the developer's primary business--real estate development.

At times during the history of the development of TV, credits at Southern Lifestyles were used as a means to attract buyers. Houses were sold including a $2,000 to $15,000 credit at Southern Lifestyles for the buyer to furnish his new residence, all rolled up in his mortgage loan. If you assume the markup on furniture is about 50%, that was a brilliant move by the developer. The buyer got furniture valued at 100%, which cost the developer only 50% of the credited amount. Brilliant...but given today's market, no longer necessary.

Now that The Villages is in sight of build-out, the developer is exiting those businesses peripheral to the main objective. Southern Lifestyles is only one of those businesses that obviously is not central to the developer's longer term business objectives. All the remaining homes being sold are largely spec, and the need for a furniture operation is no longer.

Personally, I don't think the sale of Southern Lifestyles is evidence that the Morse's are leaving at all. I do see it as a focusing of their capital and business model on things they do well and which will maximize profits.

The question remains however of whether City Furniture will be as well managed and responsive to this market as was Southern Lifestyles. Time will tell. They're not getting a good start.