The Baldwin Insurance Group, Inc.

Good morning, ladies and gentlemen, and thank you for joining us today for Brookfield Homes’ Fourth Quarter Conference Call. Before we continue, please note that in talking about our financial performance and responding to questions, we may make forward-looking statements.

Forward-looking statements are subject to known and unknown risks and results may differ materially. For further information on such factors or risks, I’d encourage you to see Brookfield Homes’ SEC filings of the full text related to forward-looking statements in our Form 10K and 10Q, which are posted in our website.

We have also posted a supplementary information packet at the website, under the Investor Relations section under Reports and Presentations. It provides details of operations and other key measures of support.

Joining me for the call today are Paul Kerrigan, our Chief Financial Officer, and Linda Northwood, our Director of Investor Relations. I will start today’s agenda and then turn the call over to Paul, who will review our performance for the fourth quarter.

With regards to operations, 2007 was one of the most challenging years for the housing industry on record. The good news is we are two years into this downturn and the longer term demand for new homes will return based on the fundamentals of population growth and need for replacement housing.

Also, the current change by homebuilders to a manufacturing platform is resulting in a fundamental shift in ownership of land which provides the opportunity to realize substantial gains when stability returns to the market. Currently, the supply of resale and new homes far exceeds demand and even though new home production has dropped to 1.1 million units a year, we do not anticipate that an equilibrium between the supply and demand for housing will be reached before 2009.

This continuing imbalance, as well as, the disruption in credit markets has led to continued weak consumer confidence, a critical factor for home sales. Challenging market conditions in 2007 negatively impacted our operations with lower home sales per community, price reductions, high home sale cancellation rates, and consequently higher inventories than planned.

These factors resulted in a 28% decrease in home closings for the year 2007 to 839 units, well below our targeted home closings of 1,150 to 1,250 homes. Lower volume and sales price declines resulted in a significant decrease in net income and for the first year in our history, we did not have positive operating cash flow.

Despite the challenging market conditions of the past two years, we have differentiated ourselves in the industry having achieved the following: We have continued to build our stockholder’s equity in 2007, recording net income of $16 million. Since going public in 2003, the company has returned, through dividend and share buybacks, $580 million to shareholders, or in excess of $20 per share.

While our share price has decreased substantially over the last two years, we believe this return of capital was the right financial decision and even at our current share price, the compounded return of stockholders’ equity for the periods 2003 to 2007 has exceeded 30%. Our operations have not been focused on growing our home deliveries and revenues but rather on controlling land access with limited capital at risk in creating value to entitling the land.

In the severity of the heightened downturn, we have had to address a number of short-term operational challenges. Despite this, we have continued our longer term strategic focus on optioning land projects and taking it through the entitlement process.

During 2007, we entitled 1,945 lots. Additionally, in 2007, we acquired 732 lots and the control of approximately 2,000 lots from joint venture partners.

Each of these acquisitions has a future strategic importance for our company. At the beginning of 2007, we’ve set ourselves a goal to expand strategic partner relationships and in the summer, we formed the first of these relationships with California State Teachers Retirement System to entitle and develop land for residential uses in strategic market areas.

One of these markets is a new development area in Ontario, California which we expect will eventually consist of over 35,000 lots. In the fourth quarter of 2007, we contributed our interest in this area to the venture and we are well positioned to increase the lots controlled in coming years.

While our leverage ratios are currently higher than our established targets, we plan in 2008 to substantially pay down project specific debt. Our strategy of financing mainly on a project specific basis has ensured we remain focused on the outstanding debt on each project relative to the underlying asset value.

We have been proactive in maintaining open communication with each of our project specific lenders and since the market downturn began in 2005, we have and continue to meet all of our debt covenants. In 2007, we decided to no longer pursue any un-entitled land options for 4,031 lots.

We believe the decision to no longer pursue these land options will free up capital to be reallocated to other opportunities in the current marketing for land transactions. I would now like to turn the call over to Paul, who will discuss our financial performance for the year ended December 31, 2007.

Thank you, Ian, and good morning. For the year ended December 31, 2007, our net income totaled $60 million or $0.68 per share, a decrease of $132 million when compared to 2006.

A decrease in net income for 2007 was primarily due to impairment charges and write-offs on housing land assets and reduced gross margins on housing to 17% from 26% in 2006. A decline in net income in 2007 was offset by a reversal of $51 million of income tax liabilities.

Impairment and other charges were $103 million before minority interest and taxes, consisting of $74 million relating to 1,896 lots located mainly in the inland empire California and Washington, D.C. areas, as well as, write-off’s $29 million related to the 4,031 un-entitled lots under option which we decided to no longer pursue.

In summary, our earnings can be broken down as follows: Net income from operations of $23 million or $0.84 per share; net loss from impairments and other charges of $58 million or a loss of $2.17 per share; and net income from reversals of income tax liabilities of $51 million or $1.91 per share. In total, $16 million or $0.58 per share.

Turning to our unit activity, in 2007 we closed 839 homes at 1,328 lots for a total of 2,167 home and lot closings. And this compared to a total of 2, 015 home and lot closings in 2006.

Housing revenues totaled $541 million compared to $784 million in 2006. The decrease in housing revenues is primarily due to 342 fewer home closings during 2007 when compared to 2006.

And the 2007 challenging market conditions negatively impacted the company’s operations with lower home sales per community, high home sales cancellation rates, and consequently, higher inventories than we planned. The gross margin on housing revenues for 2007 was $92 million or 17%, compared with $206 million or 26% for the year of 2006.

In 2007, the average selling price of our homes was $662,000 compared to $679,000 last year. Our full year ended December 31, 2007.

Land revenues were $42 million and include the sale of 79 own lots and 1,249 option lots. The gross margin related to these lot sales was $10 million.

In terms of our balance sheet, our housing land inventory and our investments in housing land joint ventures comprise the majority of our assets. These assets increased by $43 million in 2007 when compared to last year.

And when non-cash impairments and other charges of $103 million are excluded, the actual increase is $146 million. This increase is due to the acquisition of land previously out under option of 747 lots for $12 million.

The acquisition of 732 lots from joint venture partners for $52 million costs $52 million of debt now consolidated and excess levels of housing inventory. In terms of our cash flow in 2007, our cash flow from operations was an investment of $44 million, and for 2008, we are targeting at least $100 million of operating cash flow as we monetize our excess housing inventory.

Our net debt to capitalization ratio was 61% at December 31, 2007, compared to 53% at the same time last year. The debt taken on to our balance sheet when our joint venture partners were bought out totaled $102 million.

And in conclusion, we have also now set our Board of Directors to declare a regular semi-annual dividend of $0.20 per common share, payable on June 30, 2008, to shareholders on record on June 13, 2008. And with that, I’ll turn it back to Ian.

Thank you, Paul. Looking ahead, our balance sheet is strong with our assets largely located in geographic areas with the constraints supply at large and which are demonstrated strongly economic characteristics over the longer term.

Looking forward to 2008, we are targeting to achieve the following goals: We plan to further station our balance sheet as we continue to monitor our inventory of 3,400 fully developed lots. This includes over 530 homes and the construction work completed.

Additionally, given our inventory levels, we do not expect to invest significantly in development of land until we immediately reduce current inventories. We plan to utilize the capital of reduced debt or capitalize on opportunities that may arise from the current stretched market environment.

We will continue to entitle or advance entitlement other option lots with minimal capital at risk. The target is to entitle 3,000 lots during 2008 and 2009.

We are also targeting to increase the lots we control in certain strategic market areas where we have developed a strong reputation and relationships with the community and the community officials. In closing, I would like to thank our long-term investors and lenders for their support and all our employees for their continued dedication to creating value during these challenging times.

I will now turn the call back to the operator who will moderate any questions.

Hi, guys, just wanted to see how much of JV debt you have actually against the $130 million of JV equity? It does change a lot materially from the third quarter.

Yes, Joel, third quarter, our proportion in share in that debt, in terms of recourse debt, was approximately $133 million and at the end of the year was $85 million.

The actual leverage on the JV is—

Yes, leverage came down as we dropped some joint ventures onto our books.

Right, and I guess the other thing was just the $100 million in cash flow projected—is that mostly from the home building operations or are there significant lot sales planned in that?

I think we’re very comfortable generating the $100 million from our housing operations at this stage.

So just from housing and anything from land would be bonus on top of that?

Yes. Right.

All right. I’ll just jump back in the queue.

Yes, hi Paul. Good morning.

I wanted to ask you how much line up credit you guys have from them at the end of the quarter?

The facility’s $150 million and it was gone $90 million.

The other thing I wanted to see people talk about in a little bit more detail was some of these joint venture that, I guess, came back on your balance sheet that you have seen from partners. I think you guys had one that was announced from Lanar and wasn’t there another one in California from Standard Pacific?

That, in fact, is the majority of the lots that we brought onto our books. Yes.

Okay, and can you talk about how much equity you had to pay out for these things and liabilities that you assumed?

The excess that we took over to $52 million, and as they were 50/50 joint venture partners, we assume liabilities of $52 million.

Oh, okay. So you just assume $52 million for these JV’s and the land came on your books as well?

Right.

I wanted to also ask about the gross margins. I guess it seems like you guys included the write-offs inside your cost of goods sold.

I was just trying to understand how much of the impairment charge, the $53 million, how much was that was actual community impairment versus—were there any land option write-offs included in that number?

The total write-offs for the year, Alex, are $103 million of which $15 relate to joint ventures, so they’re sold for a direct cost of sales, and approximately $21 million relate to options that we directly had control. Then we have $66 million going to our direct cost of sales related to housing sales.

So from a big picture perspective, our margins from house sales was 17% for the year and that excludes any impairments.

How about for the quarter? What was the gross margin on home sales for the quarter?

The gross margin on home sales for the quarter was 14% and I think that’s the nature of the impairments coming in the fourth quarter was a lower margin than what we had expected.

Okay, and one last one. In your balance sheet, it seems like the investment and JV’s has gone up to $130 million.

Is that just new money going into new projects or is that just additional money for land development going into old projects?

It’s a combination, Alex, and it’s also investments through a joint venture that we have with CalStar.

Oh, you guys already started funding that one?

In fact, we contributed our interest in one of our strategic market areas into that venture during the quarter, as I mentioned in my notes.

Okay, all right. Thanks.

I’ll get back in the queue.

Hey, guys. I’m just curious about the impairment charge.

I would like to understand the impairment charge. The impairment charge of $103 million appears to be roughly 8 or 9% reduction in the value of your carrying inventory and property on the books.

Is that a fair assessment?

I suppose.

Okay. It seems like now would be the opportunity to really clean it out and let’s look to the future kind of thing and from other companies we own, I’ve seen impairment charges as high as 25% of what’s on the books.

It seems to me like we’re—I don’t mean to prophesize here—but maybe we’re missing an opportunity. Why an impairment charge of just 8-9% when relative to the industry, we’ve seen much higher numbers?

I guess that’s my question. Thank you.

I guess first of all, our goal would never be to clean out our books, etc. We want to do the right thing and the impairment process is pretty much spelled out in our public filings and that is we have to look at the future capital in each one of our assets, compare that to our book value and the future capital’s based on our business plan assumptions or greater.

Generally speaking, you don’t write the asset down. Now housing sales, we have taken— what I’ll say—a tremendous deterioration in our values as we come along and you’ve seen our gross margins get reduced from—in some business groups—35-40% but in our 15%.

So, we have obviously cut prices and seen value deteriorate but at these levels, I think that’s why you see our write-offs are only 8 or 9% of our book value because the nature of our land holdings are, I would say, generally older than the people that you’re comparing ourselves to at this stage when you say 25%.

Thank you. That’s a good point.

I had to take it in.

I think it’s the same in we have added value to economists and the instance in the third quarter or second quarter, in the joint ventures that they added. However, with regards to our investment in that joint venture, we were looking at fair values.

Just not result in a damage.

And I understand this in an accounting process here but clearly, if you guys were—do you feel if you were to go out and acquire these assets today that 8-9% below where they’re on the books is where they would trade in the marketplace?

Each asset is looked at independently. On our book value, we’ve assessed each asset on the basis of what is their value in the market today.

Okay. Fair enough.

Thank you, guys. Good luck.

Yes, in previous calls, you talked about gross margin in the backlog. I was just wondering, obviously, with this quarter’s drop, I was just wondering what those 155 units are carrying for what you think is the gross margin?

Yes, that’s a good way to make it. Our backlog is only 150 units so I don’t know how much you take from what’s necessary but the margin of that backlog today is 15% gross margin.

And then you talked about in the release the $100 million you hoped to realize in cash flow next year. What’s the assumption you’re making there?

Is there a per lot? How are you getting to that $100 million?

Yes, if we look at each one of our assets and the plan is here for our assets and if we were to target 800 home closings, similar to what we did this year, we would think that with our—what I’ll say our excess inventory levels today—our stock inventory count’s higher than what it had to be in the past. We will very comfortable to achieve $100 million, as I said, just from our housing operations.

Okay, so the $100 million is really 800 closings of SPEC or standing inventory? Is that where the number comes from?

Or does it actually raw land sales?

No, there’s no assumptions there for raw land sales.

Okay. So, just 800 homes whether it’s a flat lot with no improvements but it’ll be in the 33 current developments.

That’s where the 800 sales are coming from.

Pretty much so.

And how much SPEC is up a t this point right now? I think on the previous call, would you consider SPEC as something that’s closed up windows?

I mean, you just don’t have finishes in it, correct? Is what you considered SPEC or do I have that wrong?

Let me tell you this. Including the homes that we have in backlog, we have firstly completed homes today, totally almost 400 homes.

Okay, so 400 homes completed. Mine is 150, CF is 250 in SPEC.

Perhaps yes.

Okay, thank you all. I’ll just jump back in the queue.

Hi, guys. How are you?

Very well. Thanks.

Just two quick questions. I may have missed the deed.

$33 million in land are from this quarter. What was that sum again?

It was a sale of 1, 249 option lots respectively.

Where was that and what region?

It was in the Inland Empire of California.

And then in addition, just so I get my numbers all correctly, on the casual statement—the decrease in housing landed inventory that $83 million line there, you sort of backed me into that number?

Wait…where are you?

On the cash flow statement through third month of cash flow from ops decrease in housing and land inventory was a positive $83 million to the cash flow statement. I was wondering if you could back me into that number really quickly.

It’d be great.

I think it just from monetizing inventory is what it’s from, right? It just means that we pull more money out of our housing inventory than we put into it and that was $83 million and if you look at our—I guess historically is because we close most of our homes in the fourth quarter of any year—you’ll see our inventory, generally speaking, enter recovery if you will.

Usually, it’s a dab bit in a sense so I just was wondering if there’s anything big in there that I could point to. I guess in 2006 it look like it was a negative $187 million, so it’s completely flipped.

So, I was just sort of curious if there’s any big chunks in there that I could back into.

No, it’s all cash and from various projects. If you move your way up the cash flow statement, you can see the impairments are non-cash and you see we broken them out being $60 million in the quarter.

Right. Okay, I guess I just have to walk for the K.

Thanks.

Yes, thanks. I guess I was taking a look at your supplemental and just wanted to see if you can help me with something.

The bottom of page 7, it says that you assumed $104 million in land inventory and $101 million of liabilities. So, what is the difference of those numbers versus $52 million you gave earlier?

To quickly explain—you hit it right on, Alex—is the $104 million in the quarter is because we have increased our hugging land inventory by $104 million and we brought dead on to our balance sheet some joint ventures of $101. So, we had equity in those JV’s of only $2.6 million.

So the $52 relates to—if they’re 50/50 joint ventures—we acquired the 732 lots for $52 million, right? That was from the joint venture partners.

And additionally, we had brought $52 million of debt onto our balance sheet from these joint ventures. Now, we can consolidate these assets.

Oh, okay. Maybe I misread it then because the way I was reading it, I thought your JV investments had gone up by these numbers.

No, not at all.

Okay, so it’s these numbers are the ones that came back on your balance sheet then?

Exactly.

Okay, got it. Okay, thanks.

Thanks. I was just wondering…San Diego fires that were several quarters ago.

Just wondering how that’s helping in terms of traffic or lot sales in those regions.

I’ve engaged the experience previously a number of years back and the short term replacement of homes, however, what really does transpire is it’s still more a market. The consumer confidence question is to buy in at this point in time.

It’s not as though we’ve seen a capital within the San Diego area as a result of the fire. And I guess that’s started San Diego cross into Los Angeles area, Santa Teresa Valley.

And just maybe you could tell us for the next six months or maybe if you can do the whole year, what do you think the total active communities will be, like say, December 2008?

I think you’ll find our active communities are relatively constant and that’s 30-35 level community count.

Okay, 33-35? Okay, and in terms of in-house financing.

Obviously, CountryWide has had some issues. Are you still using CountryWide as your Brookfield Homes preferred lender when someone walks in the door?

We’re looking at various programs and they are a number of institutions stepping in with new programs at this point in time.

Any names? Is there anybody new?

Have you replaced CountyWide?

We work with Wells Fargo. We have a very good relationship with Bank of America.

Don’t know what they are anticipating their next steps will be with CountryWide.

Okay, and last one. The SG&A levels was somewhere around $19 million or so.

Is that a good number going forward in terms of on a quarterly basis of roughly $80 million per SG&A for the year?

Yes, I think $80 million might be a little high but if you look at our quarters over the last number of years, it’s between that $15 and $20 million.

Yes, there’s just always something like there’s compensation, there’s little ins and outs.

I think the $15-20 million should be a good number to the model.

Thank you very much.

The $641,000 average home selling price—that’s for closings, correct?

Yes.

Do you have that number for the new orders in the quarter?

In fact, I don’t but I don’t suspect a dramatical difference.

Okay, so you’re not seeing a larger decline in home prices in your new orders versus your closings.

You’ve got to also remember what drives it. A lot of it is because products are very different and we have different product mix and each one of the reasons.

So, different products also and you’ll find that it has swayed but not significantly in the last number of years.

Okay, thank you.

Hi, what is your debt maturity schedule look like in 2008 compared to the $100 million cash flow number and if there’s a gap, how do you plan to address that?

Yes, our debt maturity— I don’t have it right in front me here—but it’s approximately $200 million. So, in terms of how our projects work, I reclose homes, we pay down our debts, and then draw up a new phase as we start to develop new phases.

The $200 million is not a troubling ticker to us at all.

When you say as you sell homes, you pay down the debt. But doesn’t’ the sale of the home already baked in a bit $100 million number or am I missing something?

I’m sorry. Say that one more time.

When you said you pay down that debt with the specific projects as you sell homes, isn’t the sale homes that you’re talking about already baked in to the $100 million cash flow number?

Yes, very much so but if you assume with your $800k homes and that is an average selling price of $600k or $700,000, our revenue should be $500 or $600 million. That should take care of the $200 million of that maturities and as we build new homes, we would draw new lines for new faces.

Okay, thanks.

I was just still trying to reconcile these figures. So, if you added roughly a $104 million from what was previously JV assets and liabilities, it seems like your inventory number went down this quarter and your liabilities don’t seem to have gone up by that same amount.

So, I’m just still trying to understand what accounts for the difference.

I’m not quite sure I’m picking up on the details you’re talking about but you want, feel free to give me a call after the call to reconcile some figures.

All right, I’ll do that. My other question was: Do you have some kind of a break down of your gross margin by region?

I do. For the year?

For the quarter is probably is more helpful.

Okay. Like I said overall, it was around 14% and starting with the Bay Area, it was low because we did sell the stock inventory was 10%, Southland was 13%, San Diego still high at 28%, and the D.C.

area 13%.

Would you say these figures are somewhat representative of margins and backlogs as well? If nothing else changes, would these figures be somewhat reflective, you think, for next year?

Like I said, backlog today is 155 units, 15% today. I could tell you that.

Okay. All right, great.

Thanks.

Hi, guys. It’s just on the—you mentioned 400 completed homes, which means 155 in backlog and 250 completed specs.

How many homes are in progress that aren’t sold, that aren’t completed?

Let’s say another 100 to 150.

Another 100 to 150. All right.

Thanks a lot.

Thank you, Operator. As there are no further questions, I thank you all for your time this morning and look forward to your participation on our future conference calls.

Thank you.