10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________ 

FORM 10-Q

______________________________________ 

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-31625

______________________________________ 

WILLIAM LYON HOMES

(Exact name of registrant as specified in its charter)

______________________________________ 

Delaware	33-0864902
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
4695 MacArthur Court, 8th Floor Newport Beach, California	92660
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 833-3600

______________________________________ 

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ý    NO  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ý    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class of Common Stock	Outstanding at November 10, 2014
Common stock, Class A, par value $0.01	27,431,347
Common stock, Class B, par value $0.01	3,813,884

WILLIAM LYON HOMES

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements: as of September 30, 2014, and for the three and nine months ended September 30, 2014 and 2013
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statement of Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	56
PART II. OTHER INFORMATION		57
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	60
Item 6.	Exhibits	61
SIGNATURES		63
EXHIBIT INDEX		64

NOTE ABOUT FORWARD-LOOKING STATEMENTS

Investors are cautioned that certain statements contained in this Quarterly Report on Form 10-Q, as well as some statements by the Company in periodic press releases and information included in oral statements or other written statements by the Company are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 of the Securities Exchange Act of 1934, as amended. Statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, “hopes”, and similar expressions constitute forward-looking statements. Such statements may include, but are not limited to, information related to: anticipated operating results; home deliveries; financial resources and condition; changes in revenues; anticipated benefits to be realized from the acquisition of Polygon Northwest Homes; market and industry trends; changes in profitability; changes in margins; changes in accounting treatment; cost of revenues; selling, general and administrative expenses; interest expense; inventory write-downs; unrecognized tax benefits; anticipated tax refunds; sales paces and prices; effects of home buyer cancellations; growth and expansion; community count; joint ventures in which we are involved; the ability to acquire land and pursue real estate opportunities; the ability to gain approvals and open new communities; the ability to sell homes and properties; the ability to deliver homes from backlog; the ability to secure materials and subcontractors; the ability to produce the liquidity and capital necessary to expand and take advantage of opportunities; and legal proceedings and claims. Forward-looking statements are based upon expectations and projections about future events and are subject to assumptions, risks and uncertainties about, among other things, the Company, economic and market factors and the homebuilding industry.

Actual events and results may differ materially from those expressed or forecasted in the forward-looking statements due to a number of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to: our ability to realize the anticipated benefits from the acquisition of the residential homebuilding business of Polygon Northwest Homes; our ability to integrate successfully the Polygon Northwest Homes operations with our existing operations; any adverse effect on our business operations, or those of Polygon Northwest Homes, following consummation of the acquisition; worsening in general economic conditions either nationally or in regions in which we operate; worsening in markets for residential housing; decline in real estate values resulting in further impairment of our real estate assets; volatility in the banking industry and credit markets; terrorism or other hostilities involving the United States; whether an ownership change occurred that could, under certain circumstances, have resulted in the limitation of our ability to offset prior years’ taxable income with net operating losses; changes in mortgage and other interest rates; conditions in the capital, credit and financial markets, including mortgage lending standards and the availability of mortgage financing; changes in generally accepted accounting principles or interpretations of those principles; changes in prices of homebuilding materials; the availability of labor and homebuilding materials; adverse weather conditions; competition for home sales from other sellers of new and resale homes; cancellations and our ability to realize our backlog; the occurrence of events such as landslides, soil subsidence and earthquakes that are uninsurable, not economically insurable or not subject to effective indemnification agreements; changes in governmental laws and regulations; inability to comply with financial and other covenants under our debt instruments; whether we are able to refinance the outstanding balances of our debt obligations at their maturity; anticipated tax refunds; limitations on our ability to utilize our tax attributes; limitations on our ability to reverse any remaining portion of our valuation allowance with respect to our deferred tax assets; the timing of receipt of regulatory approvals and the opening of projects; the impact of construction defect, product liability and home warranty claims, including the adequacy of self-insurance accruals, and the applicability and sufficiency of our insurance coverage; and the availability and cost of land for future development. These and other risks and uncertainties are more fully described in Item 1A. "Risk Factors" in this report, in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as well as those factors or conditions described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our past performance or past or present economic conditions in our housing markets are not indicative of future performance or conditions. Investors are urged not to place undue reliance on forward-looking statements. In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to projections over time unless required by federal securities laws.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WILLIAM LYON HOMES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except number of shares and par value per share)

	September 30, 2014		December 31, 2013
	(unaudited)
ASSETS
Cash and cash equivalents — Note 1	$	35,119	$	171,672
Restricted cash — Note 1	504		854
Receivables	19,840		16,459
Escrow proceeds receivable	14,606		4,380
Real estate inventories — Note 5
Owned	1,378,432		671,790
Not owned	—		12,960
Deferred loan costs, net	25,975		9,575
Goodwill	63,128		14,209
Intangibles, net of accumulated amortization of $8,900 as of September 30, 2014 and $7,611 as of December 31, 2013	7,377		2,766
Deferred income taxes, net valuation allowance of $3,211 as of September 30, 2014 and $3,959 as of December 31, 2013	91,055		95,580
Other assets, net	17,613		10,166
Total assets	$	1,653,649	$	1,010,411
LIABILITIES AND EQUITY
Accounts payable	$	47,898	$	17,099
Accrued expenses	93,642		60,203
Liabilities from inventories not owned — Note 12	—		12,960
Notes payable — Note 6	41,264		38,060
Senior unsecured facility - Note 6	120,000		—
5 3/4% Senior Notes due April 15, 2019 — Note 6	150,000		—
8 1/2% Senior Notes due November 15, 2020 — Note 6	430,443		431,295
7% Senior Notes due August 15, 2022 — Note 6	300,000		—
	1,183,247		559,617
Commitments and contingencies — Note 12
Equity:
William Lyon Homes stockholders’ equity
Preferred stock, par value $0.01 per share, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively	—		—
Common stock, Class A, par value $0.01 per share; 150,000,000 shares authorized; 28,078,301 and 27,622,283 shares issued, 27,430,927 and 27,216,813 outstanding at September 30, 2014 and December 31, 2013, respectively	281		276
Common stock, Class B, par value $0.01 per share; 30,000,000 shares authorized; 3,813,884 shares issued and outstanding at September 30, 2014 and December 31, 2013	38		38
Additional paid-in capital	313,356		311,863
Retained earnings	142,622		116,002
Total William Lyon Homes stockholders’ equity	456,297		428,179
Noncontrolling interests — Note 3	14,105		22,615
Total equity	470,402		450,794
Total liabilities and equity	$	1,653,649	$	1,010,411

See accompanying notes to condensed consolidated financial statements

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WILLIAM LYON HOMES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except number of shares and per share data)

(unaudited)

	Three   Months   Ended    September 30,   2014			Three   Months   Ended   September 30,   2013			Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Operating revenue
Home sales	$	196,090		$	141,352		$	504,546		$	338,434
Lots, land and other sales	215			—			1,926			3,248
Construction services — Note 1	10,593			9,478			30,186			21,439
	206,898			150,830			536,658			363,121
Operating costs
Cost of sales — homes	(157,565		)	(107,957		)	(392,083		)	(267,932		)
Cost of sales — lots, land and other	(209		)	—			(1,529		)	(2,838		)
Construction services — Note 1	(8,262		)	(8,135		)	(24,735		)	(17,472		)
Sales and marketing	(12,476		)	(6,679		)	(27,958		)	(17,482		)
General and administrative	(12,726		)	(10,200		)	(35,881		)	(28,016		)
Transaction expenses	(5,768		)	—			(5,768		)	—
Amortization of intangible assets	(174		)	(191		)	(1,294		)	(1,173		)
Other	(454		)	(695		)	(1,745		)	(1,746		)
	(197,634		)	(133,857		)	(490,993		)	(336,659		)
Operating income	9,264			16,973			45,665			26,462
Interest expense, net of amounts capitalized — Note 1	—			(51		)	—			(2,602		)
Other income, net	357			114			830			257
Income before reorganization items	9,621			17,036			46,495			24,117
Reorganization items, net	—			—			—			(464		)
Income before provision for income taxes	9,621			17,036			46,495			23,653
Provision for income taxes — Note 9	(1,999		)	(6,356		)	(12,779		)	(6,366		)
Net income	7,622			10,680			33,716			17,287
Less: Net income attributable to noncontrolling interests	(1,984		)	(3,118		)	(7,096		)	(4,879		)
Net income attributable to William Lyon Homes	5,638			7,562			26,620			12,408
Preferred stock dividends	—			—			—			(1,528		)
Net income available to common stockholders	$	5,638		$	7,562		$	26,620		$	10,880
Income per common share:
Basic	$	0.18		$	0.24		$	0.85		$	0.48
Diluted	$	0.17		$	0.24		$	0.81		$	0.46
Weighted average common shares outstanding:
Basic	31,232,655			30,975,160			31,184,101			22,569,810
Diluted	32,760,746			31,895,814			32,725,164			23,446,954

See accompanying notes to condensed consolidated financial statements

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WILLIAM LYON HOMES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in thousands)

(unaudited)

	William Lyon Homes Stockholders
	Common Stock				Additional Paid-In					Non- Controlling
	Shares		Amount		Capital			Retained Earnings		Interests			Total
Balance - December 31, 2013	31,436		$	314	$	311,863		$	116,002	$	22,615		$	450,794
Net income	—		—		—			26,620		7,096			33,716
Noncontrolling interests contributions	—		—		—			—		9,641			9,641
Noncontrolling interests distributions	—		—		—			—		(25,247		)	(25,247		)
Exercise of stock options	158		1		284			—		—			285
Shares remitted to Company (1)	(94	)	—		(1,454		)	—		—			(1,454		)
Offering costs related to secondary sale of common stock	—		—		(105		)	—		—			(105		)
Stock based compensation	392		4		2,768			—		—			2,772
Balance - September 30, 2014	31,892		$	319	$	313,356		$	142,622	$	14,105		$	470,402

See accompanying notes to condensed consolidated financial statements

(1) Represents shares remitted to the Company by employees to satisfy personal income tax liabilities resulting from share based compensation plans.

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WILLIAM LYON HOMES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Operating activities
Net income	$	33,716		$	17,287
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	5,240			2,184
Provision for deferred income taxes	4,525			—
Stock based compensation expense	2,772			2,207
Equity in earnings of unconsolidated joint ventures	(146		)	—
Loss on sale of property and equipment	—			4
Net changes in operating assets and liabilities, net of the effects from Acquisition:
Restricted cash	350			—
Receivables	(3,346		)	(4,033		)
Escrow proceeds receivable	(10,226		)	(2,833		)
Real estate inventories — owned	(265,453		)	(202,294		)
Real estate inventories — not owned	12,960			18,291
Other assets	(3,995		)	3,110
Accounts payable	29,409			665
Accrued expenses	25,964			18,784
Liabilities from real estate inventories not owned	(12,960		)	(18,291		)
Net cash used in operating activities	(181,190		)	(164,919		)
Investing activities
Distributions from unconsolidated joint ventures	146			—
Cash paid for acquisitions, net	(488,785		)	—
Purchases of property and equipment	(1,727		)	(3,359		)
Net cash used in investing activities	(490,366		)	(3,359		)
Financing activities
Proceeds from borrowings on notes payable	57,947			51,444
Principal payments on notes payable	(57,155		)	(45,459		)
Proceeds from issuance of 5 3/4% senior notes	150,000			—
Proceeds from issuance of 7% senior notes	300,000			—
Borrowings on senior unsecured facility	120,000			—
Payment of deferred loan costs	(18,909		)	(1,792		)
Proceeds from stock options exercised	285			—
Proceeds from issuance of common stock	—			179,438
Shares remitted to Company for employee tax withholding	(1,454		)	—
Offering costs related to sale of common stock	(105		)	(15,655		)
Payment of preferred stock dividends	—			(2,550		)
Noncontrolling interests contributions	9,641			35,399
Noncontrolling interests distributions	(25,247		)	(21,700		)
Net cash provided by financing activities	535,003			179,125
Net (decrease)/increase in cash and cash equivalents	(136,553		)	10,847
Cash and cash equivalents — beginning of period	171,672			71,075
Cash and cash equivalents — end of period	$	35,119		$	81,922
Supplemental disclosures of non-cash investing and financing activities:
Conversion of convertible preferred stock to common stock	$	—		$	70,386
Issuance of note payable related to land acquisition	$	2,413		$	16,238
Accrued purchases of property, plant and equipment	$	—		$	142
Accrued acquisition costs	$	3,633		$	—

See accompanying notes to condensed consolidated financial statements

5

WILLIAM LYON HOMES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1—Basis of Presentation and Significant Accounting Policies

Operations

William Lyon Homes, a Delaware corporation (“Parent” and together with its subsidiaries, the “Company”), is primarily engaged in designing, constructing, marketing and selling single-family detached and attached homes in California, Arizona, Nevada, Colorado (under the Village Homes brand), Washington and Oregon (each under the Polygon Northwest Homes brand).

Basis of Presentation

The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities as of September 30, 2014 and December 31, 2013 and revenues and expenses for the three and nine month periods ended September 30, 2014 and 2013. Accordingly, actual results could differ from those estimates. The significant accounting policies using estimates include real estate inventories and cost of sales, impairment of real estate inventories, warranty reserves, loss contingencies, sales and profit recognition, accounting for variable interest entities, business combinations, and valuation of deferred tax assets. The current economic environment increases the uncertainty inherent in these estimates and assumptions.

The condensed consolidated financial statements include the accounts of the Company and all majority-owned and controlled subsidiaries and joint ventures, and certain joint ventures and other entities which have been determined to be variable interest entities ("VIEs") in which the Company is considered the primary beneficiary (see Note 3). The accounting policies of the joint ventures are substantially the same as those of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated financial statements were prepared from our books and records without audit and include all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented. Readers of this quarterly report should refer to our audited consolidated financial statements as of and for the year ended December 31, 2013, which are included in our 2013 Annual Report on Form 10-K, as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

Real Estate Inventories

Real estate inventories are carried at cost net of impairment losses, if any. Real estate inventories consist primarily of land deposits, land and land under development, homes completed and under construction, and model homes. All direct and indirect land costs, offsite and onsite improvements and applicable interest and other carrying charges are capitalized to real estate projects during periods when the project is under development. Land, offsite costs and all other common costs are allocated to land parcels benefited based upon relative fair values before construction. Onsite construction costs and related carrying charges (principally interest and property taxes) are allocated to the individual homes within a phase based upon the relative sales value of the homes. The Company relieves its real estate inventories through cost of sales for the estimated cost of homes sold. Selling expenses and other marketing costs are expensed in the period incurred.

A provision for warranty costs relating to the Company’s limited warranty plans is included in cost of sales and accrued expenses at the time the sale of a home is recorded. The Company generally reserves either approximately one to one and one quarter percent of the sales price of its homes, or a set amount per home closed depending on operating division, against the possibility of future charges relating to its one-year limited warranty and similar potential claims. Factors that affect the Company’s warranty liability include the number of homes under warranty, historical and anticipated rates of warranty claims, and cost per claim. The Company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary. Changes in the Company’s warranty liability for the nine months ended September 30, 2014 and 2013, are as follows (in thousands):

6

	Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Warranty liability, beginning of period	$	14,935		$	14,317
Warranty provision during period	5,343			3,131
Warranty payments during period	(4,997		)	(3,900		)
Warranty charges related to pre-existing warranties during period	341			354
Warranty charges related to construction services projects	591			267
Warranty liability, end of period	$	16,213		$	14,169

The Company began accruing for warranty costs for units closed in the Washington and Oregon segments in conjunction with their acquisition (see Note 2) at a set rate per home, however the Company did not assume any warranty liability for units closed prior to the Acquisition date.

Interest incurred under the Company’s debt obligations, as more fully discussed in Note 6, is capitalized to qualifying real estate projects under development. Any additional interest charges related to real estate projects not under development are expensed in the period incurred. Interest activity for the three months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Interest incurred	$	17,504	$	7,511	$	38,818	$	22,511
Less: Interest capitalized	17,504		7,460		38,818		19,909
Interest expense, net of amounts capitalized	$	—	$	51	$	—	$	2,602
Cash paid for interest	$	2,925	$	283	$	22,596	$	14,854

Construction Services

The Company accounts for construction management agreements using the Percentage of Completion Method in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605 Revenue Recognition (“ASC 605”). Under ASC 605, the Company records revenues and expenses as a contracted project progresses, and based on the percentage of costs incurred to date compared to the total estimated costs of the contract.

The Company entered into construction management agreements to build, sell and market homes in certain communities. For such services, the Company will receive fees (generally 3 to 5 percent of the sales price, as defined) and may, under certain circumstances, receive additional compensation if certain financial thresholds are achieved.

Financial Instruments

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, restricted cash, receivables, and deposits. The Company typically places its cash and cash equivalents in investment grade short-term instruments. Deposits, included in other assets, are due from municipalities or utility companies and are generally collected from such entities through fees assessed to other developers. The Company is an issuer of, or subject to, financial instruments with off-balance sheet risk in the normal course of business which exposes it to credit risks. These financial instruments include letters of credit and obligations in connection with assessment district bonds. These off-balance sheet financial instruments are described in more detail in Note 12.

Cash and Cash Equivalents

Short-term investments with a maturity of three months or less when purchased are considered cash equivalents. The Company’s cash and cash equivalents balance exceeds federally insurable limits as of September 30, 2014 and December 31, 2013. The Company monitors the cash balances in its operating accounts and adjusts the cash balances between accounts based on operational needs; however, these cash balances could be negatively impacted if the underlying financial institutions fail or

7

are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.

Restricted Cash

Restricted cash consists of deposits made by the Company to a bank account as collateral for the use of letters of credit to guarantee the Company’s financial obligations under certain other contractual arrangements in the normal course of business.

Deferred Loan Costs

Deferred loan costs represent debt issuance costs and are primarily amortized to interest incurred using the straight line method which approximates the effective interest method.

Goodwill

In accordance with the provisions of ASC 350, Intangibles, Goodwill and Other, goodwill amounts are not amortized, but rather are analyzed for impairment at the reporting segment level. Goodwill is analyzed on an annual basis, or when indicators of impairment exist. We have determined that we have seven reporting segments, as discussed in Note 4, and we perform an annual goodwill impairment analysis during the fourth quarter of each fiscal year.

Intangible Assets

Recorded intangible assets primarily relate to brand names of acquired entities, construction management contracts, homes in backlog, and joint venture management fee contracts recorded in conjunction with FASB ASC Topic 852, Reorganizations ("ASC 852"), or FASB ASC Topic 805, Business Combinations ("ASC 805"). All Intangible assets with the exception of those relating to brand names were valued based on expected cash flows related to home closings, and the asset is amortized on a per unit basis, as homes under the contracts close. Our brand name intangible assets are deemed to have an indefinite useful life.

Income (loss) per common share

The Company computes income (loss) per common share in accordance with FASB ASC Topic 260, Earnings per Share, which requires income (loss) per common share for each class of stock to be calculated using the two-class method. The two-class method is an allocation of income (loss) between the holders of common stock and a company’s participating security holders.

Basic income (loss) per common share is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of determining diluted income (loss) per common share, basic income (loss) per common share is further adjusted to include the effect of potential dilutive common shares.

Income Taxes

Income taxes are accounted for under the provisions of Financial Accounting Standards Board ASC 740, Income Taxes, using an asset and liability approach. Deferred income taxes reflect the net effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards measured by applying currently enacted tax laws. A valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized. ASC 740 prescribes a recognition threshold and a measurement criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered “more-likely-than-not” to be sustained upon examination by taxing authorities. In addition, the Company has elected to recognize interest and penalties related to uncertain tax positions in the income tax provision.

Impact of Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which clarifies existing accounting literature relating to how and when revenue is recognized by an entity. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in

8

exchange for those goods or services. In doing so, an entity will need to exercise a greater degree of judgment and make more estimates than under the current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. ASU 2014-09 also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. ASU 2014-09 is effective for public companies for interim and annual reporting periods beginning after December 15, 2016, and is to be applied either retrospectively or using the cumulative effect transition method, with early adoption not permitted. The Company has not yet selected a transition method, and is currently evaluating the impact the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and related disclosures.

Note 2—Acquisition of Polygon Northwest Homes

On August 12, 2014, the Company completed its acquisition of the residential homebuilding business of PNW Home Builders, L.L.C. (“PNW Parent”) pursuant to the Purchase and Sale Agreement (the “Purchase Agreement”) dated June 22, 2014 among William Lyon Homes, Inc., a California corporation and wholly-owned subsidiary of Parent ("California Lyon"), PNW Parent, PNW Home Builders North, L.L.C., PNW Home Builders South, L.L.C. and Crescent Ventures, L.L.C. Prior to such completion, California Lyon assigned its interests in the Purchase Agreement to Polygon WLH LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of California Lyon (“Polygon WLH”). Pursuant to the Purchase Agreement, Polygon WLH acquired, for cash, all of the membership interests of the underlying limited liability companies and certain service companies and other assets that comprised the residential homebuilding operations of PNW Parent (such operations being referred herein as "Polygon Northwest Homes") and which conducts business as Polygon Northwest Company (“Polygon”), for an aggregate cash purchase price of $520.0 million, an additional approximately $28.0 million at closing pursuant to initial working capital adjustments, plus an additional $4.3 million of consideration, a portion of which remains subject to final adjustment in accordance with the terms of the Purchase Agreement (the “Acquisition”). The acquired entities now operate as two new divisions of the Company under the Polygon name, one in Washington, with a core market of Seattle, and the other in Oregon, with a core market of Portland.

The Company financed the Acquisition with a combination of proceeds from its issuance of $300 million in aggregate principal amount of 7.00% senior notes due 2022, cash on hand including approximately $100 million of aggregate proceeds from several separate land banking arrangements with respect to land parcels located in California, Washington and Oregon, each of which is entitled but undeveloped, and including parcels acquired in the Acquisition, and $120 million of borrowings under a new one-year senior unsecured loan facility.

As a result of the Acquisition, the entities comprising the business of Polygon Northwest Homes became wholly-owned direct or indirect subsidiaries of the Company, and its results are included in our condensed consolidated financial statements and related disclosures from the date of the Acquisition. For the period from August 12, 2014 through September 30, 2014, operating revenue and income before provision for income taxes from Polygon operations, were $38.9 million and $4.0 million, respectively.

The Acquisition was accounted for as a business combination in accordance with ASC 805. Under ASC 805, the Company recorded the acquired assets and assumed liabilities of Polygon Northwest Homes at their estimated fair values, with the excess allocated to Goodwill, as shown below. Goodwill represents the value the Company expects to achieve through the operational synergies and the expansion of the Company into new markets. The Company estimates that the entire $48.9 million of goodwill resulting from the Acquisition will be tax deductible. Goodwill will be allocated to the Washington and Oregon operating segments (see Note 4). A reconciliation of the consideration transferred as of the acquisition date is as follows:

Purchase consideration	$	552,252
Net proceeds received from Polygon inventory involved in land banking transactions	(59,834		)
	$	492,418

As of September 30, 2014 the Company had not completed its final estimate of the fair value of the net assets of Polygon Northwest Homes, due to the Acquisition's close proximity to quarter end. As such, the estimates used as of

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September 30, 2014 are subject to change. The following table summarizes the preliminary amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):

Assets Acquired
	Real estate inventories	$	439,628
	Goodwill	48,919
	Intangible asset - brand name	5,900
	Joint venture in mortgage business	2,000
	Other	545
	Total Assets	$	496,992
Liabilities Assumed
	Accounts payable	$	603
	Accrued expenses	3,971
	Total liabilities	4,574
	Net assets acquired	$	492,418

The Company determined the fair value of real estate inventories on a project level basis using a combination of discounted cash flow models, and market comparable land transactions, where available. These methods are significantly impacted by estimates relating to i) expected selling prices, ii) anticipated sales pace, iii) cost to complete estimates, iv) highest and best use of projects prior to acquisition, and v) comparable land values. These estimates were developed and used at the individual project level, and may vary significantly between projects.

The acquisition date fair value of the Intangible asset relating to brand name was estimated using comparable values ascribed in other recent market transactions, as well as taking into account Polygon Northwest Homes market position as a leading builder in the Seattle, WA, and Portland, OR, residential markets. This asset is deemed to have an indefinite life. Additionally, the Company acquired a non-controlling interest in a joint venture mortgage business. The fair value of this investment was estimated using the discounted cash flow method, which was significantly impacted by estimated cash flow streams and income of the joint venture.

Other assets, accounts payable, and accrued expenses were generally stated at historical value due to the short-term nature of these liabilities.

The Company recorded $5.8 million in acquisition related costs for the three and nine months ended September 30, 2014, respectively, which are included in the Condensed Consolidated Statement of Operations in Transaction expenses. Such costs were expensed as incurred in accordance with ASC 805. There were no acquisition related costs incurred during 2013.

Supplemental Pro Forma Information

The following table presents unaudited pro forma amounts for the three and nine months ended September 30, 2014 and September 30, 2013 as if the Acquisition had been completed as of January 1, 2013 (amounts in thousands, except per share data):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Operating revenues	$	241,726	$	222,475	$	688,543	$	563,365
Net income available to common stockholders	$	6,441	$	8,582	$	31,631	$	17,299
Income per share - basic	$	0.21	$	0.28	$	1.01	$	0.77
Income per share - diluted	$	0.20	$	0.27	$	0.97	$	0.74

The unaudited pro forma operating results have been determined after adjusting the unaudited operating results of Polygon Northwest Homes to reflect the estimated purchase accounting and other acquisition adjustments including interest

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expense associated with the debt used to fund a portion of the acquisition. The unaudited pro forma results presented above do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Acquisition, the costs to combine the operations of the Company and Polygon Northwest Homes or the costs necessary to achieve any of the foregoing cost savings, operating synergies or revenue enhancements. As such, the unaudited pro forma amounts are for comparative purposes only and may not necessarily reflect the results of operations which would have resulted had the acquisition been completed at the beginning of the applicable period or indicative of the results that will be attained in the future.

Note 3—Variable Interest Entities and Noncontrolling Interests

During the nine months ended September 30, 2014, the Company formed one joint venture for the purpose of land development and homebuilding activities which we have determined to be a VIE. The Company, as the managing member, has the power to direct the activities of the VIE since it manages the daily operations and has exposure to the risks and rewards of the VIE, which is based on the allocation of income and loss per the joint venture agreement. Therefore, the Company is the primary beneficiary of the joint venture, and the VIE was consolidated as of September 30, 2014. The Company is also party to an additional three joint ventures that were formed in prior periods, for which the Company has also determined that it is the primary beneficiary, and thus has also included them in its consolidated results as of September 30, 2014, and December 31, 2013.

As of September 30, 2014, the assets of the consolidated VIEs totaled $74.5 million, of which $8.7 million was cash and cash equivalents and $62.8 million was real estate inventories. The liabilities of the consolidated VIEs totaled $44.6 million, primarily comprised of notes payable, accounts payable and accrued liabilities.

As of December 31, 2013, the assets of the consolidated VIEs totaled $66.4 million, of which $4.7 million was cash and cash equivalents and $56.8 million was real estate inventories. The liabilities of the consolidated VIEs totaled $27.1 million, primarily comprised of notes payable, accounts payable and accrued liabilities.

Note 4—Segment Information

The Company operates one principal homebuilding business. In accordance with FASB ASC Topic 280, Segment Reporting ("ASC 280"), the Company has determined that each of its operating divisions is an operating segment.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company’s Executive Chairman, Chief Executive Officer and Chief Operating Officer have been identified as the chief operating decision makers. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability and cash flows of each respective segment.

The Company’s homebuilding operations design, construct and sell a wide range of homes designed to meet the specific needs in each of its markets. In accordance with ASC 280, prior to the acquisition of Polygon Northwest Homes (see Note 2), the Company's homebuilding operations had been grouped into five operating segments: Southern California, consisting of an operating division with operations in Orange, Los Angeles, Riverside, San Bernardino and San Diego counties; Northern California, consisting of an operating division with operations in Alameda, Contra Costa, San Joaquin, and Santa Clara counties; Arizona, consisting of operations in the Phoenix, Arizona metropolitan area; Nevada, consisting of operations in the Las Vegas, Nevada metropolitan area; and Colorado, consisting of operations in the Fort Collins and Granby, Colorado markets. During the three months ended September 30, 2014, the Company added two additional operating segments as a result of the Polygon Northwest Homes Acquisition: Oregon, with operations in the Portland, Oregon metropolitan area; and Washington, consisting of operations in the Seattle, Washington metropolitan area.

Corporate develops and implements strategic initiatives and supports the Company’s operating divisions by centralizing key administrative functions such as finance and treasury, information technology, risk management and litigation and human resources.

Segment financial information relating to the Company’s operations was as follows (in thousands):

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	Three   Months   Ended    September 30,   2014			Three   Months   Ended   September 30,   2013			Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Operating revenue:
Southern California	$	76,628		$	49,681		$	307,090		$	105,231
Northern California	29,073			27,790			48,683			56,115
Arizona	16,750			31,253			46,459			86,431
Nevada	36,540			23,920			72,081			56,421
Colorado	9,005			18,186			23,443			58,923
Washington	19,994			—			19,994			—
Oregon	18,908			—			18,908			—
Total operating revenue	$	206,898		$	150,830		$	536,658		$	363,121
	Three   Months   Ended    September 30,   2014			Three   Months   Ended   September 30,   2013			Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Income before provision for income taxes
Southern California	$	9,901		$	10,027		$	46,923		$	15,453
Northern California	3,395			4,706			10,204			8,740
Arizona	1,590			4,224			5,262			9,032
Nevada	2,709			3,355			5,738			5,881
Colorado	(386		)	209			(1,498		)	1,654
Washington	2,256			—			2,256			—
Oregon	1,701			—			1,701			—
Corporate	(11,545		)	(5,485		)	(24,091		)	(17,107		)
Income before provision for income taxes	$	9,621		$	17,036		$	46,495		$	23,653

	September 30, 2014		December 31, 2013
Homebuilding assets:
Southern California	$	340,317	$	275,975
Northern California	228,156		143,693
Arizona	175,950		157,892
Nevada	130,758		85,695
Colorado	126,959		60,233
Washington	281,675		—
Oregon	204,349		—
Corporate (1)	165,485		286,923
Total homebuilding assets	$	1,653,649	$	1,010,411

(1) Comprised primarily of cash and cash equivalents, deferred income taxes, receivables, deferred loan costs, and other assets.

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Note 5—Real Estate Inventories

Real estate inventories consist of the following (in thousands):

	September 30, 2014		December 31, 2013
Real estate inventories owned:
Land deposits	$	70,961	$	46,632
Land and land under development	963,964		458,437
Homes completed and under construction	291,083		144,736
Model homes	52,424		21,985
Total	$	1,378,432	$	671,790
Real estate inventories not owned: (1)
Other land options contracts — land banking arrangement	$	—	$	12,960

(1) Represents the consolidation of a land banking arrangement, net of deposits. The final lots attributable to this amount were purchased in April 2014.

Note 6—Senior Notes, Secured, and Unsecured Indebtedness

	September 30, 2014		December 31, 2013
Notes payable:
Construction notes payable	$	37,540	$	24,198
Seller financing	3,724		13,862
Revolving lines of credit	—		—
Total notes payable	$	41,264	$	38,060
Senior unsecured facility	$	120,000	$	—
Senior notes:
5 3/4% Senior Notes due April 15, 2019	$	150,000	$	—
8 1/2% Senior Notes due November 15, 2020	430,443		431,295
7% Senior Notes due August 15, 2022	$	300,000	$	—
Total senior notes	$	880,443	$	431,295
Total notes payable and senior notes	$	1,041,707	$	469,355

As of September 30, 2014, the maturities of the Notes payable, Senior unsecured facility, 7% Senior Notes, 5 3/4% Senior Notes, and 8 1/2% Senior Notes are as follows (in thousands):

Year Ending December 31,
2014	$	126
2015	123,598
2016	37,540
2017	—
2018	—
Thereafter	875,000
	$	1,036,264

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Maturities above exclude premium of $5.4 million as of September 30, 2014.

Senior Notes

5 3/4% Senior Notes Due 2019

On March 31, 2014, California Lyon completed its private placement with registration rights of 5.75% Senior Notes due 2019 (the "5.75% Notes"), in an aggregate principal amount of $150 million. The 5.75% Notes were issued at 100% of their aggregate principal amount.

As of September 30, 2014, the outstanding amount of the 5.75% Notes was $150 million. The 5.75% Notes bear interest at a rate of 5.75% per annum, payable semiannually in arrears on April 15 and October 15, and mature on April 15, 2019. The 5.75% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future direct and indirect wholly-owned subsidiaries. The 5.75% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $425 million in aggregate principal amount of 8.5% Senior Notes due 2020, as described below, and $300 million in aggregate principal amount of 7.00% Notes, as described above. The 5.75% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 5.75% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

On or after April 15, 2016, California Lyon may redeem all or a portion of the 5.75% Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the period beginning on each of the dates indicated below:

Year	Percentage
April 15, 2016	104.313	%
October 15, 2016	102.875	%
April 15, 2017	101.438	%
April 15, 2018 and thereafter	100.000	%

Prior to April 15, 2016, the 5.75% Notes may be redeemed in whole or in part at a redemption price equal to 100% of the principal amount plus a “make-whole” premium, and accrued and unpaid interest to, the redemption date.

In addition, any time prior to April 15, 2016, California Lyon may, at its option on one or more occasions, redeem the 5.75% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 5.75% Notes issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 105.75%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings by Parent.

The indenture governing the 5.75% Notes contains covenants that limit the ability of Parent, California Lyon, and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends, distributions, or repurchase equity or make payments in respect of subordinated indebtedness; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

8 1/2% Senior Notes Due 2020

On November 8, 2012, California Lyon completed its offering of 8 1/2% Senior Notes due 2020, (the "initial 8.5% notes"), in an aggregate principal amount of $325 million. The initial 8.5% Notes were issued at 100% of their aggregate principal amount.

On October 24, 2013, California Lyon completed the sale of an additional $100.0 million in aggregate principal amount of its 8.5% Senior Notes due 2020 (the “additional 8.5 % Notes”, and together with the initial 8.5% notes, the "8.5% Notes" ) at an issue price of 106.5% of their aggregate principal amount, plus accrued interest from and including May 15, 2013, resulting in net proceeds of approximately $104.6 million.

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As of both September 30, 2014 and December 31, 2013, the outstanding amount of the 8.5% Notes was $430 million, and $431 million, respectively. The 8.5% Notes bear interest at a rate of 8.5% per annum, payable semiannually in arrears on May 15 and November 15, and mature on November 15, 2020. The 8.5% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and by certain of its existing and future direct and indirect wholly-owned subsidiaries. The 8.5% Notes are California Lyon's and the guarantors' senior unsecured obligations. The 8.5% Notes and the guarantees rank senior to all of California Lyon’s and the guarantors’ existing and future subordinated debt, and rank equally in right of payment with all of California Lyon's and the guarantors' existing and future unsecured senior debt, including the 5.75% Notes and the 7.00% Notes as described above. The 8.5% Notes and the guarantees are and will be effectively junior to any of California Lyon’s and the guarantors’ existing and future secured debt.

The indenture governing the 8.5% Notes contains covenants that limit the ability of Parent, California Lyon and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends or make other distributions or repurchase stock; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

7% Senior Notes Due 2022

On August 11, 2014, WLH PNW Finance Corp. (“Escrow Issuer”), completed its private placement with registration rights of 7.00% Senior Notes due 2022 (the “7.00% Notes”), in an aggregate principal amount of $300 million. The 2022 Notes were issued at 100% of their aggregate principal amount. On August 12, 2014, in connection with the consummation of the Acquisition, Escrow Issuer merged with and into California Lyon, and California Lyon assumed the obligations of the Escrow Issuer under the 2022 Notes and the related indenture by operation of law (the “Escrow Merger”). Following the Escrow Merger, California Lyon is the obligor under the 2022 Notes.

As of September 30, 2014, the outstanding amount of the notes was $300 million. The notes bear interest at a rate of 7.00% per annum, payable semiannually in arrears on February 15 and August 15, and mature on August 15, 2022. The 7.00% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future direct and indirect wholly-owned subsidiaries. The 7.00% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $150 million in aggregate principal amount of 5.75% Senior Notes due 2019 and $425 million in aggregate principal amount of 8.5% Senior Notes due 2020, as described below. The 7.00% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 7.00% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

On or after August 15, 2017, California Lyon may redeem all or a portion of the 7.00% Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the period beginning on each of the dates indicated below:

Year	Percentage
August 15, 2017	103.500	%
August 15, 2018	101.750	%
August 15, 2019 and thereafter	100.000	%

Prior to August 15, 2017, the 7.00% Notes may be redeemed in whole or in part at a redemption price equal to 100% of the principal amount plus a “make-whole” premium, and accrued and unpaid interest to, the redemption date.

In addition, any time prior to August 15, 2017, California Lyon may, at its option on one or more occasions, redeem the 7.00% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 7.00% Notes issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 107.00%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings by Parent.

The indenture governing the 7.00% Notes contains covenants that limit the ability of Parent, California Lyon, and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends, distributions, or repurchase equity or make payments in respect of subordinated indebtedness; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay

15

dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

Senior Unsecured Facility

On August 12, 2014, the Company entered into a senior unsecured loan facility (the “Senior Unsecured Loan Facility”), pursuant to which the Company borrowed $120 million in order to pay a portion of the purchase price for the Acquisition (the “Senior Unsecured Loan”). The Senior Unsecured Loan bears interest at an annual rate equal to a Eurodollar rate (subject to a minimum “floor” of 1.00%), plus an initial margin, which margin will increase by 0.50% every three months after August 12, 2014 that the Senior Unsecured Loan remains outstanding, subject to an interest rate cap, which at September 30, 2014 was 7.25%. The Senior Unsecured Facility will initially mature on the one-year anniversary of August 12, 2014, and may be prepaid in whole or in part prior to maturity without penalty. Any Senior Unsecured Loan that has not been previously repaid in full on or prior to the initial maturity date will be automatically converted into a senior term loan facility, which could be exchanged at the option of the lenders thereunder in whole or in part for senior exchange notes. The obligations of California Lyon under the Senior Unsecured Facility are guaranteed by the same entities that are guarantors under the Revolver, as described below, and the Senior Unsecured Facility ranks pari passu with California Lyon’s existing and future unsecured indebtedness.

In addition to other covenants, the Senior Unsecured Loan Facility places limits on the Parent, California Lyon and its subsidiaries’ ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, declare dividends or redeem or repurchase capital stock, alter the business conducted by the Parent, California Lyon and its subsidiaries, or transact with affiliates. The Senior Unsecured Loan Facility contains customary events of default, subject to cure periods in certain circumstances, that would permit the lenders of the Senior Unsecured Loan to accelerate payment, including: nonpayment of principal, interest and fees or other amounts; violation of covenants; cross default to certain other indebtedness; unpaid judgments; and certain bankruptcy and other insolvency events. The Company was in compliance with all such covenants as of September 30, 2014.

Notes Payable

Construction Notes Payable

Certain of the Company's consolidated joint ventures have entered into construction notes payable agreements. The issuance date, total availability under each facility outstanding, maturity date and interest rate are listed in the table below as of September 30, 2014 (in millions):

Issuance Date	Facility Size		Outstanding		Maturity	Current Rate
March, 2014	$	26.0	$	4.2	October, 2016	3.15	%	(1)
December, 2013	18.6		14.1		January, 2016	4.25	%	(1)
June, 2013	28.0		19.2		June, 2016	4.00	%	(2)
	$	72.6	$	37.5

(1) Loan bears interest at the Company's option of either LIBOR +3.0% or the prime rate +1.0%.

(2) Loan bears interest at the prime rate +0.5%, with a rate floor of 4.0% .

Seller Financing

At September 30, 2014, the Company had $3.7 million of notes payable outstanding related to two land acquisitions for which seller financing was provided. The first note had a balance of $3.1 million as of September 30, 2014, bears interest at 7% per annum, is secured by the underlying land, and matures in May 2015. The second land acquisition consists of two separate notes, the first having a balance of $0.1 million as of September 30, 2014 and maturing in October 2014, and the second having a balance of $0.5 million as of September 30, 2014 and maturing in January 2015. Both notes bear interest at 4% per annum.

Revolving Lines of Credit

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On August 7, 2013, California Lyon and Parent entered into a credit agreement providing for a revolving credit facility of up to $100 million (the “Revolver”). The Revolver will mature on August 5, 2016, unless terminated earlier pursuant to the terms of the Revolver. The Revolver contains an uncommitted accordion feature under which its aggregate principal amount can be increased to up to $125 million under certain circumstances, as well as a sublimit of $50 million for letters of credit. The Revolver contains various covenants, including financial covenants relating to tangible net worth, leverage, liquidity and interest coverage, as well as a limitation on investments in joint ventures and non-guarantor subsidiaries. The total amount available under the Revolver is subject to a borrowing base calculation. On July 3, 2014, California Lyon and the lender parties thereto entered into an amendment to the Revolver, which incorporated a minimum borrowing base availability of $50.0 million and increased the maximum leverage ratio from 60% to 75% for the first four quarters following the Acquisition, among other changes.

The Revolver contains customary events of default, subject to cure periods in certain circumstances, that would result in the termination of the commitment and permit the lenders to accelerate payment on outstanding borrowings and require cash collateralization of letters of credit, including: nonpayment of principal, interest and fees or other amounts; violation of covenants; inaccuracy of representations and warranties; cross default to certain other indebtedness; unpaid judgments; and certain bankruptcy and other insolvency events. If a change in control of the Company occurs, the lenders may terminate the commitment and require that California Lyon repay outstanding borrowings under the Revolver and cash collateralize letters of credit. Interest rates on borrowings generally will be based on either LIBOR or a base rate, plus the applicable spread. The commitment fee on the unused portion of the Facility currently accrues at an annual rate of 0.50%.

Borrowings under the Revolver, the availability of which is subject to a borrowing base formula, are required to be guaranteed by Parent and certain of Parent’s wholly-owned subsidiaries, are secured by a pledge of all equity interests held by such guarantors, and may be used for general corporate purposes. As of September 30, 2014, the Revolver was undrawn, other than a letter of credit for $4.0 million, reducing the amount available under the Revolver.

GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS

The following consolidating financial information includes:

(1) Consolidating balance sheets as of September 30, 2014 and December 31, 2013; consolidating statements of operations for the three and nine months ended September 30, 2014 and 2013; and consolidating statements of cash flows for the nine month periods ended September 30, 2014 and 2013, of (a) William Lyon Homes, as the parent, or “Delaware Lyon”, (b) William Lyon Homes, Inc., as the subsidiary issuer, or “California Lyon”, (c) the guarantor subsidiaries, (d) the non-guarantor subsidiaries and (e) William Lyon Homes, Inc. on a consolidated basis; and

(2) Elimination entries necessary to consolidate Delaware Lyon, with William Lyon Homes, Inc. and its guarantor and non-guarantor subsidiaries.

Delaware Lyon owns 100% of all of its guarantor subsidiaries and all guarantees are full and unconditional, joint and several. As a result, in accordance with Rule 3-10 (d) of Regulation S-X promulgated by the SEC, no separate financial statements are required for these subsidiaries as of September 30, 2014 and December 31, 2013, and for the three and nine month periods ended September 30, 2014 and 2013.

17

CONDENSED CONSOLIDATING BALANCE SHEET

(Unaudited)

As of September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	25,918		$	195		$	9,006		$	—		$	35,119
Restricted cash	—		504			—			—			—			504
Receivables	—		16,267			367			3,206			—			19,840
Escrow proceeds receivable	—		13,064			1,506			36			—			14,606
Real estate inventories
Owned	—		748,429			553,977			76,026			—			1,378,432
Deferred loan costs, net	—		25,975			—			—			—			25,975
Goodwill	—		14,209			48,919			—			—			63,128
Intangibles, net	—		1,477			5,900			—			—			7,377
Deferred income taxes, net	—		91,055			—			—			—			91,055
Other assets, net	—		14,943			2,301			369			—			17,613
Investments in subsidiaries	456,296		(35,547		)	(599,212		)	—			178,463			—
Intercompany receivables	—		—			231,084			—			(231,084		)	—
Total assets	$	456,296	$	916,294		$	245,037		$	88,643		$	(52,621	)	$	1,653,649
LIABILITIES AND EQUITY
Accounts payable	$	—	$	35,965		$	5,363		$	6,570		$	—		$	47,898
Accrued expenses	—		88,080			5,460			102			—			93,642
Notes payable	—		3,077			647			37,540			—			41,264
Senior unsecured facility	—		120,000			—			—			—			120,000
5 3/4% Senior Notes	—		150,000			—			—			—			150,000
8  1/2% Senior Notes	—		430,443			—			—			—			430,443
7% Senior Notes	—		300,000			—			—			—			300,000
Intercompany payables	—		165,211			—			65,873			(231,084		)	—
Total liabilities	—		1,292,776			11,470			110,085			(231,084		)	1,183,247
Equity
William Lyon Homes stockholders’ equity	456,296		(376,482		)	233,567			(35,547		)	178,463			456,297
Noncontrolling interests	—		—			—			14,105			—			14,105
Total liabilities and equity	$	456,296	$	916,294		$	245,037		$	88,643		$	(52,621	)	$	1,653,649

18

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	166,516	$	28	$	5,128		$	—		$	171,672
Restricted cash	—		854		—		—			—			854
Receivables	—		11,429		5		5,025			—			16,459
Escrow proceeds receivable	—		4,313		67		—			—			4,380
Real estate inventories
Owned	—		608,965		3,761		59,064			—			671,790
Not owned	—		12,960		—		—			—			12,960
Deferred loan costs, net	—		9,575		—		—			—			9,575
Goodwill	—		14,209		—		—			—			14,209
Intangibles, net	—		2,766		—		—			—			2,766
Deferred income taxes, net	—		95,580		—		—			—			95,580
Other assets, net	—		9,100		723		343			—			10,166
Investments in subsidiaries	428,179		9,975		—		—			(438,154		)	—
Intercompany receivables	—		—		225,056		(15		)	(225,041		)	—
Total assets	$	428,179	$	946,242	$	229,640	$	69,545		$	(663,195	)	$	1,010,411
LIABILITIES AND EQUITY
Accounts payable	$	—	$	12,489	$	1,959	$	2,651		$	—		$	17,099
Accrued expenses	—		59,376		744		83			—			60,203
Liabilities from inventories not owned	—		12,960		—		—			—			12,960
Notes payable	—		12,281		1,762		24,017			—			38,060
8 1/2% Senior Notes	—		431,295		—		—			—			431,295
Intercompany payables	—		214,837		—		10,204			(225,041		)	—
Total liabilities	—		743,238		4,465		36,955			(225,041		)	559,617
Equity
William Lyon Homes stockholders’ equity	428,179		203,004		225,175		9,975			(438,154		)	428,179
Noncontrolling interests	—		—		—		22,615			—			22,615
Total liabilities and equity	$	428,179	$	946,242	$	229,640	$	69,545		$	(663,195	)	$	1,010,411

19

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	113,716		$	64,656		$	17,933		$	—		$	196,305
Construction services	—		10,593			—			—			—			10,593
Management fees	—		455			—			—			(455		)	—
	—		124,764			64,656			17,933			(455		)	206,898
Operating costs
Cost of sales	—		(88,778		)	(54,828		)	(14,623		)	455			(157,774		)
Construction services	—		(8,262		)	—			—			—			(8,262		)
Sales and marketing	—		(7,636		)	(3,856		)	(984		)	—			(12,476		)
General and administrative	—		(11,532		)	(1,194		)	—			—			(12,726		)
Transaction expenses	—		(5,768		)	—			—			—			(5,768		)
Amortization of intangible assets	—		(174		)	—			—			—			(174		)
Other	—		(620		)	164			2			—			(454		)
	—		(122,770		)	(59,714		)	(15,605		)	455			(197,634		)
Income from subsidiaries	5,638		907			—			—			(6,545		)	—
Operating income	5,638		2,901			4,942			2,328			(6,545		)	9,264
Other income (expense), net	—		685			(4		)	(324		)	—			357
Income before provision for income taxes	5,638		3,586			4,938			2,004			(6,545		)	9,621
Provision for income taxes	—		(1,999		)	—			—			—			(1,999		)
Net income	5,638		1,587			4,938			2,004			(6,545		)	7,622
Less: Net income attributable to noncontrolling interests	—		483			—			(2,467		)	—			(1,984		)
Net income (loss) attributable to William Lyon Homes	5,638		2,070			4,938			(463		)	(6,545		)	5,638
Net income (loss) available to common stockholders	$	5,638	$	2,070		$	4,938		$	(463	)	$	(6,545	)	$	5,638

20

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	76,178		$	48,487		$	16,687		$	—		$	141,352
Construction services	—		9,478			—			—			—			9,478
Management fees	—		456			—			—			(456		)	—
	—		86,112			48,487			16,687			(456		)	150,830
Operating costs
Cost of sales	—		(55,968		)	(40,519		)	(11,926		)	456			(107,957		)
Construction services	—		(8,135		)	—			—			—			(8,135		)
Sales and marketing	—		(4,108		)	(2,256		)	(315		)	—			(6,679		)
General and administrative	—		(9,473		)	(726		)	(1		)	—			(10,200		)
Amortization of intangible assets	—		(191		)	—			—			—			(191		)
Other	—		(695		)	—			—			—			(695		)
	—		(78,570		)	(43,501		)	(12,242		)	456			(133,857		)
Income from subsidiaries	12,716		5,804			—			—			(18,520		)	—
Operating income	12,716		13,346			4,986			4,445			(18,520		)	16,973
Interest expense, net of amounts capitalized	—		(51		)	—			—			—			(51		)
Other income (expense), net	—		423			(9		)	(300		)	—			114
Income before provision for income taxes	12,716		13,718			4,977			4,145			(18,520		)	17,036
Provision for income taxes	—		(6,356		)	—			—			—			(6,356		)
Net (loss) income	12,716		7,362			4,977			4,145			(18,520		)	10,680
Less: Net income attributable to noncontrolling interests	—		—			—			(3,118		)	—			(3,118		)
Net (loss) income attributable to William Lyon Homes	12,716		7,362			4,977			1,027			(18,520		)	7,562
Preferred stock dividends	—		—			—			—			—			—
Net (loss) income available to common stockholders	$	12,716	$	7,362		$	4,977		$	1,027		$	(18,520	)	$	7,562

21

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	343,449		$	107,093		$	55,930		$	—		$	506,472
Construction services	—		30,186			—			—			—			30,186
Management fees	—		1,672			—			—			(1,672		)	—
	—		375,307			107,093			55,930			(1,672		)	536,658
Operating costs
Cost of sales	—		(262,360		)	(89,351		)	(43,573		)	1,672			(393,612		)
Construction services	—		(24,735		)	—			—			—			(24,735		)
Sales and marketing	—		(18,526		)	(6,671		)	(2,761		)	—			(27,958		)
General and administrative	—		(33,030		)	(2,849		)	(2		)	—			(35,881		)
Transaction expenses	—		(5,768		)	—			—			—			(5,768		)
Amortization of intangible assets	—		(1,294		)	—			—			—			(1,294		)
Other	—		(1,917		)	182			(10		)	—			(1,745		)
	—		(347,630		)	(98,689		)	(46,346		)	1,672			(490,993		)
Income from subsidiaries	26,620		7,730			—			—			(34,350		)	—
Operating income	26,620		35,407			8,404			9,584			(34,350		)	45,665
Interest expense, net of amounts capitalized	—		—			—			—			—			—
Other income (expense), net	—		1,550			(15		)	(705		)	—			830
Income before provision for income taxes	26,620		36,957			8,389			8,879			(34,350		)	46,495
Provision for income taxes	—		(12,779		)	—			—			—			(12,779		)
Net income	26,620		24,178			8,389			8,879			(34,350		)	33,716
Less: Net income attributable to noncontrolling interests	—		—			—			(7,096		)	—			(7,096		)
Net income attributable to William Lyon Homes	26,620		24,178			8,389			1,783			(34,350		)	26,620
Net income available to common stockholders	$	26,620	$	24,178		$	8,389		$	1,783		$	(34,350	)	$	26,620

22

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—		$	173,032		$	142,105		$	26,545		$	—		$	341,682
Construction services	—			21,439			—			—			—			21,439
Management fees	—			(727		)	—			—			727			—
	—			193,744			142,105			26,545			727			363,121
Operating costs
Cost of sales	—			(132,270		)	(119,051		)	(18,722		)	(727		)	(270,770		)
Construction services	—			(17,472		)	—			—			—			(17,472		)
Sales and marketing	—			(9,826		)	(6,867		)	(789		)	—			(17,482		)
General and administrative	—			(26,162		)	(1,835		)	(19		)	—			(28,016		)
Amortization of intangible assets	—			(1,173		)	—			—			—			(1,173		)
Other	—			(1,744		)	(2		)	—			—			(1,746		)
	—			(188,647		)	(127,755		)	(19,530		)	(727		)	(336,659		)
Income from subsidiaries	17,562			13,800			—			—			(31,362		)	—
Operating income	17,562			18,897			14,350			7,015			(31,362		)	26,462
Interest expense, net of amounts capitalized	—			(2,476		)	(126		)	—			—			(2,602		)
Other income (expense), net	—			1,184			(20		)	(907		)	—			257
Income before reorganization items and provision for income taxes	17,562			17,605			14,204			6,108			(31,362		)	24,117
Reorganization items, net	—			(464		)	—			—			—			(464		)
Income before provision for income taxes	17,562			17,141			14,204			6,108			(31,362		)	23,653
Provision for income taxes	—			(6,366		)	—			—			—			(6,366		)
Net income	17,562			10,775			14,204			6,108			(31,362		)	17,287
Less: Net income attributable to noncontrolling interests	—			—			—			(4,879		)	—			(4,879		)
Net income attributable to William Lyon Homes	17,562			10,775			14,204			1,229			(31,362		)	12,408
Preferred stock dividends	(1,528		)	—			—			—			—			(1,528		)
Net income available to common stockholders	$	16,034		$	10,775		$	14,204		$	1,229		$	(31,362	)	$	10,880

23

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash (used in) provided by operating activities	$	(1,496	)	$	358,000		$	(536,794	)	$	(2,396	)	$	1,496		$	(181,190	)
Investing activities
Distributions from unconsolidated joint ventures	—			146			—			—			—			146
Cash paid for acquisitions, net	—			(437,599		)	(51,186		)	—			—			(488,785		)
Purchases of property and equipment	—			(1,447		)	(288		)	8			—			(1,727		)
Investments in subsidiaries	—			56,889			595,575			—			(652,464		)	—
Net cash provided by (used in) investing activities	—			(382,011		)	544,101			8			(652,464		)	(490,366		)
Financing activities
Proceeds from borrowings on notes payable	—			1,113			(1,114		)	57,948			—			57,947
Principal payments on notes payable	—			(12,730		)	—			(44,425		)	—			(57,155		)
Proceeds from issuance of 5 3/4% notes	—			150,000			—			—			—			150,000
Proceeds from issuance of 7% senior notes	—			300,000			—			—			—			300,000
Borrowings on senior unsecured facility	—			120,000			—			—			—			120,000
Payment of deferred loan costs	—			(18,909		)	—			—			—			(18,909		)
Proceeds from exercise of stock options	—			285			—			—			—			285
Shares remitted to Company for employee tax withholding	—			(1,454		)	—			—			—			(1,454		)
Offering costs related to secondary sale of common stock	—			(105		)	—			—			—			(105		)
Noncontrolling interests contributions	—			—			—			9,641			—			9,641
Noncontrolling interests distributions	—			—			—			(25,247		)	—			(25,247		)
Advances to affiliates	—			—			2			(47,305		)	47,303			—
Intercompany receivables/payables	1,496			(654,787		)	(6,028		)	55,654			603,665			—
Net cash provided by (used in)financing activities	1,496			(116,587		)	(7,140		)	6,266			650,968			535,003
Net (decrease) increase in cash and cash equivalents	—			(140,598		)	167			3,878			—			(136,553		)
Cash and cash equivalents at beginning of period	—			166,516			28			5,128			—			171,672
Cash and cash equivalents at end of period	$	—		$	25,918		$	195		$	9,006		$	—		$	35,119

24

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash used in operating activities	$	—	$	(142,959	)	$	12,221		$	(34,181	)	$	—		$	(164,919	)
Investing activities
Purchases of property and equipment	—		(3,299		)	(57		)	(3		)	—			(3,359		)
Investments in subsidiaries	—		4,804			—			—			(4,804		)	—
Net cash (used in) provided by investing activities	—		1,505			(57		)	(3		)	(4,804		)	(3,359		)
Financing activities
Proceeds on borrowings on notes payable	—		16,790			1,762			32,892			—			51,444
Principal payments on notes payable	—		(26,360		)	—			(19,099		)	—			(45,459		)
Payment of deferred loan costs	—		(1,792		)	—			—			—			(1,792		)
Proceeds from issuance of common stock	—		179,438			—			—			—			179,438
Offering costs related to issuance of common stock	—		(15,655		)	—			—			—			(15,655		)
Payment of preferred stock dividends	—		(2,550		)	—			—			—			(2,550		)
Noncontrolling interests contributions	—		—			—			35,399			—			35,399
Noncontrolling interests distributions	—		—			—			(21,700		)	—			(21,700		)
Intercompany receivables/payables	—		183			(12,902		)	923			11,796			—
Advances to affiliates	—		—			(776		)	7,768			(6,992		)	—
Net cash provided by (used in) financing activities	—		150,054			(11,916		)	36,183			4,804			179,125
Net increase (decrease) in cash and cash equivalents	—		8,600			248			1,999			—			10,847
Cash and cash equivalents at beginning of period	—		69,376			65			1,634			—			71,075
Cash and cash equivalents at end of period	$	—	$	77,976		$	313		$	3,633		$	—		$	81,922

25

Note 7—Fair Value of Financial Instruments

In accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosure (“ASC 820”), the Company is required to disclose the estimated fair value of financial instruments. As of September 30, 2014 and December 31, 2013, the Company used the following assumptions to estimate the fair value of each type of financial instrument for which it is practicable to estimate:

• Notes payable—The carrying amount is a reasonable estimate of fair value of the notes payable because market rates are unchanged and/or the outstanding balance at quarter end is expected to be repaid within one year.

• Senior unsecured facility—The carrying amount is a reasonable estimate of fair value of the Senior unsecured facility as the facility was issued during the current period and the rate has not changed since issuance.

•     5 ³/₄% Senior Notes due April 15, 2019 —The 5 ³/4% Senior Notes are traded over the counter and their fair values were based upon quotes from industry sources.

• 8 ¹/2% Senior Notes due November 15, 2020 —The 8 ¹/2% Senior Notes are traded over the counter and their fair values were based upon quotes from industry sources.

• 7% Senior Notes due August 15, 2022 —The 7% Senior Notes were issued during the current quarter, and their fair values were based upon quotes from industry sources.

The following table excludes cash and cash equivalents, restricted cash, receivables and accounts payable, which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments. The estimated fair values of financial instruments are as follows (in thousands):

	September 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	41,264	$	41,264	$	38,060	$	38,060
Senior unsecured facility	$	120,000	$	120,000	$	—	$	—
5 3/4% Senior Notes due 2019	$	150,000	$	148,125	$	—	$	—
8 1/2% Senior Notes due 2020	$	430,443	$	460,063	$	431,295	$	466,877
7% Senior Notes due 2022	$	300,000	$	306,750	$	—	$	—

ASC 820 establishes a framework for measuring fair value, expands disclosures regarding fair value measurements and defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires the Company to maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. The Company used Level 3 to measure the fair value of its Notes payable and Senior unsecured facility, and Level 2 to measure the fair value of its Senior notes. The ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. The three levels of the hierarchy are as follows:

• Level 1—quoted prices for identical assets or liabilities in active markets;

• Level 2—quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3—valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table represents a reconciliation of the beginning and ending balance for the Company’s Level 3 fair value measurements:

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	Notes
	Payable
	(in thousands)
Fair value at December 31, 2013	$	38,060
Repayments of principal (1)	(57,156		)
Borrowings of principal (2)	60,360
Increase in value during the period	—
Fair value at September 30, 2014	$	41,264

(1) Represents the actual amount of principal repaid

(2) Represents the actual amount of principal borrowed

Note 8—Related Party Transactions

On September 3, 2009, Presley CMR, Inc., a California corporation (“Presley CMR”) and a wholly owned subsidiary of California Lyon, entered into an Aircraft Purchase and Sale Agreement (“PSA”) with an affiliate of General William Lyon to sell an aircraft (the “Aircraft”). The PSA provided for an aggregate purchase price for the Aircraft of $8.3 million, (which value was the appraised fair market value of the Aircraft), which consisted of: (i) cash in the amount of $2.1 million to be paid at closing and (ii) a promissory note from the affiliate in the amount of $6.2 million. The note is secured by the Aircraft. As part of the Company’s fresh start accounting, the note was adjusted to its fair value of $5.2 million. The discount on the fresh start adjustment is amortized over the remaining life of the note. The note requires semiannual interest payments to California Lyon of approximately $0.1 million. The note is due in September 2016.

For the nine months ended September 30, 2013, the Company incurred charges of $0.2 million related to rent on its corporate office, from a trust of which William H. Lyon is the sole beneficiary. The lease expired in March 2013 and the Company relocated its corporate office upon expiration of the lease. The Company has entered into a lease for the new location with an unrelated third party.

Note 9—Income Taxes

Since inception, the Company has operated solely within the United States. The Company’s effective income tax rate was 20.8% and 27.5%, and 37.3% and 26.9% for the three and nine months ended September 30, 2014 and 2013, respectively. The significant drivers of the effective tax rate are allocation of income to noncontrolling interests, related party loss recapture, domestic production activities deduction, and release of valuation allowance.

Management assesses its deferred tax assets quarterly to determine whether all or any portion of the asset is more likely than not unrealizable under ASC 740. The Company is required to establish a valuation allowance for any portion of the asset that management concludes is more likely than not to be unrealizable. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company's assessment considers all evidence, both positive and negative, including the nature, frequency and severity of any current and cumulative losses, taxable income in carry back years, the scheduled reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income in making this assessment. At September 30, 2014 the Company’s valuation allowance was $3.2 million due to projected excess realized built-in-losses and state net operating losses which may expire unused. In the fourth quarter of the year ended December 31, 2013, the Company recognized a $95.6 million income tax benefit that resulted from the reversal of all but $4.0 million of our deferred tax asset valuation allowance.

At September 30, 2014, the Company had no remaining federal net operating loss carryforwards and $77.6 million remaining state net operating loss carryforwards. State net operating loss carryforwards begin to expire in 2014. In addition, as of September 30, 2014, the Company had unused federal and state built-in losses of $71.4 million and $38.4 million, respectively. The 5 year testing period for built-in losses expires in 2017 and the unused built-in loss carryforwards begin to expire in 2033. The Company had AMT credit carryovers of $1.4 million at September 30, 2014, which have an indefinite life.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”) which is now codified as FASB ASC Topic 740, Income Taxes (“ASC 740”). ASC 740 prescribes a recognition threshold and a measurement criterion for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those

27

benefits to be recognized, a tax position must be considered more likely than not to be sustained upon examination by taxing authorities. The Company records interest and penalties related to uncertain tax positions as a component of the provision for income taxes. The Company has no unrecognized tax benefits.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal income tax examination for calendar tax years ended 2011 through 2013 and forward. The Company is subject to various state income tax examinations for calendar tax years ended 2009 through 2013 and forward. The Company does not have any tax examinations currently in progress.

Note 10—Income Per Common Share

Basic and diluted income per common share for the three and nine months ended September 30, 2014 and 2013 were calculated as follows (in thousands, except number of shares and per share amounts):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Basic weighted average number of common shares outstanding	31,232,655		30,975,160		31,184,101		22,569,810
Effect of dilutive securities:
Stock options, unvested common shares, and warrants	1,528,091		920,654		1,541,063		877,144
Diluted average shares outstanding	32,760,746		31,895,814		32,725,164		23,446,954
Net income available to common stockholders	$	5,638	$	7,562	$	26,620	$	10,880
Basic income per common share	$	0.18	$	0.24	$	0.85	$	0.48
Dilutive income per common share	$	0.17	$	0.24	$	0.81	$	0.46

Note 11—Stock Based Compensation

We account for share-based awards in accordance with ASC Topic 718, Compensation-Stock Compensation, which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at the fair value on the date of grant. Compensation expense for awards with performance based conditions is recognized over the vesting period once achievement of the performance condition is deemed probable.

During the three and nine months ended September 30, 2014, the Company granted 31,013 and 79,575 shares of restricted stock, respectively, and 24,812 and 312,551 shares of performance based restricted stock. On the Consolidated Balance Sheets and Statement of Equity, the Company considers unvested shares of restricted stock to be issued, but not outstanding.

Performance-Based Restricted Stock Awards

With respect to all but one of the performance based restricted stock awards granted during the three and nine months ended September 30, 2014, the actual number of such shares of restricted stock that will be earned (the “Earned Shares”) is subject to the Company’s achievement of a pre-established performance target as of the end of the 2014 fiscal year. The remaining grant does not contain a pre-established performance target, but the Earned Shares for such award will be determined by the exercise of the discretion of the Compensation Committee of Parent’s Board of Directors following the end of the 2014 fiscal year. For each of the aforementioned awards, one-third of the Earned Shares will vest on March 1st of each of 2015, 2016 and 2017, subject to each grantee’s continued service through each vesting date. Based on the assessment as of September 30, 2014, management determined that the currently available data was not sufficient to support that achievement of performance targets was probable, and as such no compensation expense has been recognized for these awards to date.

Additional Restricted Stock Awards

With respect to the restricted stock awards granted to certain other employees during the three and nine months ended September 30, 2014, representing 31,013 and 57,147 shares of restricted stock, respectively, for all but two of such awards 50% of the shares of restricted stock underlying such awards will vest on each of the first and second anniversaries of the grant

28

date, and for the remaining two awards 100% of the shares of restricted stock underlying such awards will vest on the second anniversary of the grant date, in each case subject to each grantee’s continued service through each vesting date. With respect to the restricted stock awards granted to certain non-employee directors of Parent during the three and nine months ended September 30, 2014, representing zero and 22,428 shares of restricted stock, the awards vest in equal quarterly installments on each of June 1, 2014, September 1, 2014, December 1, 2014 and March 1, 2015, subject to each grantee’s continued service on the board through each vesting date.

Stock based compensation expense during the three and nine months ended September 30, 2014 and 2013 was $0.9 million and $2.8 million, and $0.9 million and $2.2 million, respectively.

Note 12—Commitments and Contingencies

The Company’s commitments and contingent liabilities include the usual obligations incurred by real estate developers in the normal course of business. In the opinion of management, these matters will not have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

The Company is a defendant in various lawsuits related to its normal business activities. We believe that the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of September 30, 2014, it was not reasonably possible that an additional material loss had been incurred in an amount in excess of the estimated amounts already recognized on our condensed consolidated financial statements. The outcome of any of these proceedings, including the defense and other litigation-related costs and expenses we may incur, however, is inherently uncertain and could differ significantly from the estimate reflected in a related accrual, if made. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a related accrual or if no accrual had been made, could be material to our consolidated financial statements.

We have non-cancelable operating leases primarily associated with our office facilities. Rent expense under cancelable and non-cancelable operating leases totaled $0.8 million and $2.1 million, and $0.4 million and $1.3 million in the three and nine months ended September 30,2014 and 2013, respectively, and is included in general and administrative expense in our consolidated statements of operations for the respective periods. The table below shows the future minimum payments under non-cancelable operating leases at September 30, 2014 (in thousands).

Year Ending December 31
2014	$	577
2015	1,648
2016	1,233
2017	910
2018	897
Thereafter	2,832
Total	$	8,097

As of September 30, 2014 and December 31, 2013, the Company had $0.5 million and $0.9 million, respectively, in deposits as collateral for outstanding surety bonds to guarantee the Company’s financial obligations under certain contractual arrangements in the normal course of business. The standby letters of credit were secured by cash as reflected as restricted cash on the accompanying consolidated balance sheet.

The Company also had outstanding performance and surety bonds of $92.2 million at September 30, 2014, related principally to its obligations for site improvements at various projects. The Company does not believe that draws upon these bonds, if any, will have a material effect on the Company’s financial position, results of operations or cash flows. As of September 30, 2014, the Company had $133.5 million of project commitments relating to the construction of projects.

See Note 6 for additional information relating to the Company’s guarantee arrangements.

In addition to the land bank agreement discussed below, the Company has entered into various purchase option agreements with third parties to acquire land. As of September 30, 2014, the Company has made non-refundable deposits of $69.5 million. The Company is under no obligation to purchase the land, but would forfeit remaining deposits if the land were not purchased. The total remaining purchase price under the option agreements is $463.9 million as of September 30, 2014.

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Land Banking Arrangements

The Company enters into purchase agreements with various land sellers. As a method of acquiring land in staged takedowns, thereby minimizing the use of funds from the Company’s available cash or other corporate financing sources and limiting the Company’s risk, the Company transfers the Company’s right in such purchase agreements to entities owned by third parties (“land banking arrangements”). These entities use equity contributions and/or incur debt to finance the acquisition and development of the land. The entities grant the Company an option to acquire lots in staged takedowns. In consideration for this option, the Company makes a non-refundable deposit of 15% to 25% of the total purchase price. The Company is under no obligation to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to penalties if the lots were not purchased. The Company does not have legal title to these entities or their assets and has not guaranteed their liabilities. These land banking arrangements help the Company manage the financial and market risk associated with land holdings. As discussed above, with exception of the arrangement discussed below, these amounts are included in the total remaining purchase price listed above.

The Company participated in one land banking arrangement, which was not a VIE in accordance with ASC 810, but which is consolidated in accordance with FASB ASC Topic 470, Debt (“ASC 470”). The remaining lots under the above land banking agreement were purchased by the Company during April 2014. No further obligations remain under the agreement. Under the provisions of ASC 470, the Company has determined it is economically compelled, based on certain factors, to purchase the land in the land banking arrangement. The Company has recorded the remaining purchase price of the land of $13.0 million, as of December 31, 2013, which is included in real estate inventories not owned and liabilities from inventories not owned in the accompanying consolidated balance sheet, and represented the remaining net cash to be paid on the remaining land takedowns.

Note 13—Subsequent Events

No events have occurred subsequent to September 30, 2014, that would require recognition or disclosure in the Company’s financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

WILLIAM LYON HOMES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The Company is one of the largest Western U.S. regional homebuilders. Headquartered in Newport Beach, California, the Company is primarily engaged in the design, construction, marketing and sale of single-family detached and attached homes in California, Arizona, Nevada, Colorado, Oregon, and Washington. The Company’s core markets include Orange County, Los Angeles, San Diego, the San Francisco Bay Area, Phoenix, Las Vegas, Denver, Portland, and Seattle. The Company has a distinguished legacy of more than 58 years of homebuilding operations, over which time it has sold in excess of 93,000 homes. For the nine months ended September 30, 2014, or the 2014 period, the Company had revenues from homes sales of $504.5 million, a 49% increase from $338.4 million for the nine months ended September 30, 2013, or the 2013 period, which includes results from all seven reportable operating segments. The Company had net new home orders of 1,210 homes in the 2014 period, a 17% increase from 1,030 in the 2013 period, and the average sales price ("ASP") for homes closed increased 39% to $487,000 in the 2014 period from $349,300 in the 2013 period.

Basis of Presentation

The accompanying condensed consolidated financial statements included herein have been prepared under U.S. Generally Accepted Accounting Principles, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission, or the SEC, and are presented on a going concern basis, which assumes the Company will be able to operate in the ordinary course of its business and realize its assets and discharge its liabilities for the foreseeable future.

Results of Operations

In the nine months ended September 30, 2014, the Company delivered 1,036 homes, with an average selling price of approximately $487,000, and recognized home sales revenue of $504.5 million. The Company generated net income of $26.6 million for the nine months ended September 30, 2014, and earnings per share of $0.81, on a diluted basis. The Company recorded its tenth consecutive quarter of year-over-year improvement in certain key financial metrics, including new home orders and dollar value of backlog. The Company continues to see positive trends in sales prices over average sales price, as our average sales price of homes in backlog is approximately $525,900 as of September 30, 2014, which is 14% higher than the average sales price of homes closed for the three months ended September 30, 2014 of $462,500.

On August 12, 2014, the Company completed its acquisition of the residential homebuilding operations of PNW Home Builders, L.L.C. and its affiliates, such operations being referred herein as "Polygon Northwest Homes", which marked the beginning of the Washington and Oregon operating segments. Financial data herein as of September 30, 2014, and for the three and nine months ended September 30, 2014 include operations for the Washington and Oregon operating segments for the period from August 12, 2014 through September 30, 2014.

As of September 30, 2014, the Company was selling homes in 55 communities and had a consolidated backlog of 728 sold but unclosed homes, with an associated sales value of $382.9 million, representing a 56% increase in units, and 84% increase in dollar value, as compared to the backlog at September 30, 2013. During the nine months ended September 30, 2014, the Company added 23 net new communities, including 12 communities in conjunction with the acquisition of Polygon Northwest Homes.

Homebuilding gross margin percentage and adjusted homebuilding gross margin percentage was 22.3% and 26.4%, respectively, for the nine months ended September 30, 2014, as compared to 20.8% and 28.7%, respectively, for the nine months ended September 30, 2013.

During 2012 and most of 2013, we experienced a strong improvement in market conditions, including significant price appreciation and sales velocity, as evidenced by monthly absorption rates of 5.2 and 5.3 for the three and nine months ended September 30, 2012, and 4.0 and 5.0 for the three and nine months ended September 30, 2013, compared to 2.9 and 3.4 for the three and nine months ended September 30, 2014.

During 2014, we have experienced a leveling in demand, which we believe to be temporary based on uncertainty in the economy and low consumer confidence. We continue to believe in our growth trajectory, with the attractive fundamentals in our markets, including the newly added markets in Washington and Oregon, and our leading market share positions.

31

Comparisons of the Three Months Ended September 30, 2014 to September 30, 2013

Revenues from homes sales increased 39% to $196.1 million during the three months ended September 30, 2014, compared to $141.4 million during the three months ended September 30, 2013. The increase is primarily due to the addition of the Washington and Oregon segments on August 12, 2014, which contributed $38.9 million in revenue through 104 closings, and a 16% increase in the average sales price of homes closed to $462,500 in the 2014 period compared to $397,100 in the 2013 period. The number of net new home orders for the three months ended September 30, 2014 increased 35% to 422 homes from 312 homes for the three months ended September 30, 2013.

	Three Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount		%
Number of Net New Home Orders
Southern California	122		138		(16	)	(12	)%
Northern California	60		28		32		114	%
Arizona	45		72		(27	)	(38	)%
Nevada	49		62		(13	)	(21	)%
Colorado	45		12		33		275	%
Subtotal	321		312		9		3	%
Washington	42		—		42		NM
Oregon	59		—		59		NM
Total	422		312		110		35	%
Cancellation Rate	20	%	14	%	6	%

The 35% increase in net new homes orders is driven by a 88% increase in average number of sales locations to 49 average locations in 2014, compared to 26 in the 2013 period, offset by a decrease in absorption rates as the number of orders per sales location decreased in all of our markets. The absorption rates during the third quarter of 2013 in all of our markets were 12.0 orders per community, or 0.9 per week, compared to 8.6 orders per community, or 0.7 per week in the 2014 period. Cancellation rates during the 2014 period increased to 20% from 14% during the 2013 period.

	Three Months Ended September 30,		Increase (Decrease)
	2014	2013	Amount		%
Average Number of Sales Locations
Southern California	11	9	2		22	%
Northern California	7	2	5		250	%
Arizona	5	6	(1	)	(17	)%
Nevada	9	6	3		50	%
Colorado	11	3	8		267	%
Subtotal	43	26	17		65	%
Washington	3	—	3		NM
Oregon	3	—	3		NM
Total	49	26	23		88	%

The average number of sales locations for the Company increased to 49 locations for the three months ended September 30, 2014 compared to 26 for the three months ended September 30, 2013, and the opening of new communities in all markets except Arizona during 2014, as well as the addition of Polygon Northwest homes which increased our average number of locations by six during the 2014 period. The increase in average number of sales locations is in line with the Company's growth plans as we continue to convert our land supply into home sites for customers.

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	September 30,		Increase (Decrease)
	2014	2013	Amount		%
Backlog (units)
Southern California	206	178	28		16	%
Northern California	84	34	50		147	%
Arizona	56	127	(71	)	(56	)%
Nevada	109	97	12		12	%
Colorado	90	31	59		190	%
Subtotal	545	467	78		17	%
Washington	81	—	81		NM
Oregon	102	—	102		NM
Total	728	467	261		56	%

The Company’s backlog at September 30, 2014 increased 56% to 728 units from 467 units at September 30, 2013. The increase is primarily attributable to the addition of our Washington and Oregon segments, which added 81 and 102. units, respectively, as of September 30, 2014, for which there was no comparable amount in the 2013 period. In addition, the Southern California, Arizona, and Nevada segments had a higher number of units in backlog to begin the quarter, and a lower backlog conversion rate for the quarter than the prior year.

	September 30,				Increase (Decrease)
	2014		2013		Amount			%
	(dollars in thousands)
Backlog (dollars)
Southern California	$	135,020	$	113,769	$	21,251		19	%
Northern California	37,554		14,007		23,547			168	%
Arizona	14,817		33,776		(18,959		)	(56	)%
Nevada	88,825		32,828		55,997			171	%
Colorado	42,350		13,701		28,649			209	%
Subtotal	318,566		208,081		110,485			53	%
Washington	32,301		—		32,301			NM
Oregon	32,000		—		32,000			NM
Total	$	382,867	$	208,081	$	174,786		84	%

The dollar amount of backlog of homes sold but not closed as of September 30, 2014 was $382.9 million, up 84% from $208.1 million as of September 30, 2013. The increase primarily reflects (i) the addition of our Washington and Oregon segments, and (ii) an increase in average sales prices for new home orders. The Company experienced an increase of 18% in the average sales price of homes in backlog to $525,900 as of September 30, 2014 compared to $445,600 as of September 30, 2013. The increase is driven by a shift in product mix to projects with a higher selling price, and the Company's strategy of diversifying product offerings to move-up buyers. The increase in the dollar amount of backlog of homes sold but not closed as described above generally results in an increase in operating revenues in the subsequent period as compared to the previous period.

In Southern California, the dollar amount of backlog increased 19% to $135.0 million as of September 30, 2014 from $113.8 million as of September 30, 2013, which is attributable to a 16% increase in the number of homes in backlog, to 206 at September 30, 2014 compared to 178 at September 30, 2013. In Southern California, the cancellation rate increased to 14% for the three months ended September 30, 2014 from 9% for the three months ended September 30, 2013.

In Northern California, the dollar amount of backlog increased 168% to $37.6 million as of September 30, 2014 from $14.0 million as of September 30, 2013, which is attributable to a 147% increase in the number of homes in backlog, to 84 at September 30, 2014 compared to 34 at September 30, 2013, as well as a 9% increase in the average sales price of homes in backlog to $447,100 as of September 30, 2014, from $412,000 in the 2013 period. In Northern California, the cancellation rate decreased to 22% for the three months ended September 30, 2014 from 26% for the three months ended September 30, 2013.

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In Arizona, the dollar amount of backlog decreased 56% to $14.8 million as of September 30, 2014 from $33.8 million as of September 30, 2013, which is attributable to a 56% decrease in the number of homes in backlog, to 56 at September 30, 2014, from 127 at September 30, 2013. In the Arizona, the cancellation rate decreased to 13% for the three months ended September 30, 2014 from 14% for the three months ended September 30, 2013.

In Nevada, the dollar amount of backlog increased 171% to $88.8 million as of September 30, 2014 from $32.8 million as of September 30, 2013, attributable primarily to a 141% increase in average sales price of homes in backlog to $814,900 as of September 30, 2014, from $338,400 as of September 30, 2013. The increase reflects a shift in product mix to higher end projects during 2014. The dollar amount of backlog also reflects a 12% increase in the number of units in backlog as of September 30, 2013 to 109, from 97 in the 2013 period. In Nevada, the cancellation rate increased to 29% for the three months ended September 30, 2014 from 16% for the three months ended September 30, 2013.

In Colorado, the dollar amount of backlog increased 209% to $42.4 million as of September 30, 2014 from $13.7 million as of September 30, 2013, which is attributable to a 190% increase in the number of units in backlog, to 90 units as of September 30, 2014, from 31 units as of September 30, 2013. In Colorado, the cancellation rate decreased to 17% for the three months ended September 30, 2014 from 20% for the three months ended September 30, 2013.

In the Washington and Oregon operating segments, the dollar amount of backlog was $32.3 million and $32.0 million as of September 30, 2014, respectively, with no comparable amount as of September 30, 2013.

	Three Months Ended September 30,		Increase (Decrease)
	2014	2013	Amount		%
Number of Homes Closed
Southern California	133	65	68		105	%
Northern California	44	46	(2	)	(4	)%
Arizona	62	122	(60	)	(49	)%
Nevada	63	79	(16	)	(20	)%
Colorado	18	44	(26	)	(59	)%
Subtotal	320	356	(36	)	(10	)%
Washington	43	—	43		NM
Oregon	61	—	61		NM
Total	424	356	68		19	%

During the three months ended September 30, 2014, the number of homes closed increased 19% to 424 from 356 in the 2013 period. The increase was primarily attributable to the addition of our Washington and Oregon segments during the three months ended September 30, 2014, which contributed 104 units during the 2014 period for which there is no comparable amount in the prior year. The increase in Southern California is driven by a higher number of homes in backlog to begin the quarter compared to the prior year, offset by a lower conversion rate. The decrease in Arizona, Nevada and Colorado is driven by a lower conversion rate.

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	Three Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount			%
	(dollars in thousands)
Home Sales Revenue
Southern California	$	76,413	$	49,681	$	26,732		54	%
Northern California	18,480		18,312		168			1	%
Arizona	16,750		31,253		(14,503		)	(46	)%
Nevada	36,540		23,920		12,620			53	%
Colorado	9,005		18,186		(9,181		)	(50	)%
Subtotal	157,188		141,352		15,836			11	%
Washington	19,994		—		19,994			NM
Oregon	18,908		—		18,908			NM
Total	$	196,090	$	141,352	$	54,738		39	%

The increase in homebuilding revenue of 39% to $196.1 million for the 2014 period from $141.4 million for the 2013 period is primarily attributable to $38.9 million of combined homebuilding revenue contributed by our Washington and Oregon segments in the 2014 period, for which no comparable amount exists in the prior period, coupled with a 24% increase in the average sales price of homes closed in all of our previously established segments, to $491,200 during the 2014 period from $397,100 during the 2013 period, due to a change in product mix and higher price points.

	Three Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount			%
Average Sales Price of Homes Closed
Southern California	$	574,500	$	764,300	$	(189,800	)	(25	)%
Northern California	420,000		398,100		21,900			6	%
Arizona	270,200		256,200		14,000			5	%
Nevada	580,000		302,800		277,200			92	%
Colorado	500,300		413,300		87,000			21	%
Subtotal	491,200		397,100		94,100			24	%
Washington	465,000		—		465,000			NM
Oregon	310,000		—		310,000			NM
Total	$	462,500	$	397,100	$	65,400		16	%

The average sales price of homes closed for the 2014 period increased primarily due to increasing price points, or product mix, of our actively selling projects from projects available to first time buyers or first time “move up” buyers, particularly in our Nevada and Colorado segments. In Nevada, the increase in average sales price of homes closed was attributable to 20 closings with an average sales price in excess of $900,000 during 2014 for which there were no comparable closings in the 2013 period, and in Colorado the increase was due to 9 closings with an average sales price in excess of $500,000 with no comparable amounts in the prior period. These increases are partially offset by a 25% decrease in average sales price of homes closed in the Southern California segment. The overall average sales price decrease in Southern California is primarily due to 24 closings in two communities in the 2013 period with an average sales price exceeding $1,100,000 that were closed out prior to the 2014 period.

Gross Margin

Homebuilding gross margins decreased to 19.6% for the three months ended September 30, 2014 from 23.6% in the 2013 period. Relative to the Company's previously established segments, the two segments contributing the most revenue and gross margin dollars during the three months ended September 30, 2014 were Southern California and Nevada, which also had the largest change in vintage mix year-over-year, with each having less than 25% of their closings at projects we owned at the time we reset basis in conjunction with fresh start accounting in February, 2012. In addition, a number of the closings occurring in

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those divisions were located within master planned communities which typically have a lower margin and include some form of profit participation. Finally, with the application of purchase accounting related to the acquisition of our Washington and Oregon segments, gross margins were impacted by 200 basis points.

For the comparison of the three months ended September 30, 2014 and the three months ended September 30, 2013, adjusted homebuilding gross margin percentage, which excludes previously capitalized interest included in cost of sales as well as the effect of adjustments recorded in relation to purchase accounting, was 24.6% for the 2014 period compared to 30.2% for the 2013 period. The decrease was primarily a result of the changes for homebuilding gross margins described previously.

Adjusted homebuilding gross margin is a non-GAAP financial measure. The Company believes this information is meaningful as it isolates the impact that interest and purchase accounting have on homebuilding gross margin and permits investors to make better comparisons with its competitors, who also break out and adjust gross margins in a similar fashion. For comparative purposes purchase accounting is the net adjustment in basis related to the acquisition of our Colorado, Washington and Oregon operating divisions. See table set forth below reconciling this non-GAAP measure to homebuilding gross margin.

	Three Months Ended September 30,
	2014			2013
	(dollars in thousands)
Home sales revenue	$	196,090		$	141,352
Cost of home sales	157,565			107,957
Homebuilding gross margin	38,525			33,395
Homebuilding gross margin percentage	19.6		%	23.6		%
Add: Interest in cost of sales	5,970			7,569
Add: Purchase accounting adjustments	$	3,802		$	1,735
Adjusted homebuilding gross margin	$	48,297		$	42,699
Adjusted homebuilding gross margin percentage	24.6		%	30.2		%

Construction Services Revenue

Construction services revenue, which is only in the Southern and Northern California operating segments, was $10.6 million for the three months ended September 30, 2014, and $9.5 million for the three months ended September 30, 2013. The increase is primarily due to an increase in revenue attributable to one project in Northern California.

Sales and Marketing Expense

	Three Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount			%
	(dollars in thousands)
Sales and Marketing Expense
Southern California	$	3,863	$	2,183	$	1,680		77	%
Northern California	2,414		901		1,513			168	%
Arizona	846		1,322		(476		)	(36	)%
Nevada	2,343		1,289		1,054			82	%
Colorado	1,151		984		167			17	%
Subtotal	10,617		6,679		3,938			59	%
Washington	1,147		—		1,147			NM
Oregon	712		—		712			NM
Total	$	12,476	$	6,679	$	5,797		87	%

Sales and marketing expense as a percentage of homebuilding revenue increased to 6.4% in the 2014 period compared to 4.7% in the 2013 period. This is primarily attributable to an increase in advertising expense to $3.9 million, or 2.0% as a

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percentage of home sales revenue in the 2014 period, from $1.4 million, or 1.0% in the 2013 period due to an increase in the number of average sales locations to 49 in the 2014 period compared to 26 in the 2013 period.

General and Administrative Expense

	Three Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount		%
	(dollars in thousands)
General and Administrative Expense
Southern California	$	2,690	$	1,988	$	702	35	%
Northern California	1,243		687		556		81	%
Arizona	880		668		212		32	%
Nevada	968		910		58		6	%
Colorado	785		654		131		20	%
Subtotal	6,566		4,907		1,659		34	%
Washington	381		—		381		NM
Oregon	23		—		23		NM
Corporate	5,756		5,293		463		9	%
Total	$	12,726	$	10,200	$	2,526	25	%

General and administrative expense as a percentage of homebuilding revenues decreased to 6.5% in the 2014 period compared to 7.2% in the 2013 period. The decrease is driven by increased revenues, offset by an increase in salaries and benefits due to increased headcount in the 2014 period.

Transaction Expenses

Transaction expenses relate entirely to costs incurred in relation to the acquisition of Polygon Northwest Homes on August 12, 2014.

Other Items

Other operating costs remained consistent at $0.5 million in the 2014 period compared to $0.7 million in the 2013 period.

Interest activity for the three months ended September 30, 2014 and the three months ended September 30, 2013 is as follows (in thousands):

	Three Months Ended September 30,
	2014		2013
Interest incurred	$	17,504	$	7,511
Less: Interest capitalized	17,504		7,460
Interest expense, net of amounts capitalized	$	—	$	51
Cash paid for interest	$	2,925	$	283

The increase in interest incurred for the three months ended September 30, 2014, compared to the interest incurred for the three months ended September 30, 2013, reflects an increase in the Company's overall debt, offset by a decrease in effective interest rates. Interest capitalized relative to the amount incurred was higher in the 2014 period due to a higher amount of qualifying assets in the 2014 period as compared to the 2013 period.

Provision for Income Taxes

During the three months ended September 30, 2014, the Company recorded a provision for income taxes of $2.0 million. The significant drivers of the effective rate are the allocation of income to noncontrolling interests, related party loss recapture, domestic production activities deduction, state taxes, and release of valuation allowance. During the three months ended

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September 30, 2013, the Company recorded a provision for income taxes of $6.4 million due to positive operating results and a one-time election in 2013 to accelerate cancellation of debt income in the Company's 2012 federal tax return.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests decreased to $2.0 million during the 2014 period, from $3.1 million during the 2013 period. The decrease is attributable to a reduction in net income from a joint venture that was sold out during the first half of 2014 for which there was no activity during the three months ended September 30, 2014.

Net Income Attributable to William Lyon Homes

As a result of the foregoing factors, net income attributable to William Lyon Homes for the three months ended September 30, 2014, and 2013 was $5.6 million, and $7.6 million, respectively.

Lots Owned and Controlled

The table below summarizes the Company’s lots owned and controlled as of the periods presented:

	September 30,		Increase (Decrease)
	2014	2013	Amount		%
Lots Owned
Southern California	1,124	1,186	(62	)	(5	)%
Northern California	1,060	869	191		22	%
Arizona	5,471	5,653	(182	)	(3	)%
Nevada	2,909	2,864	45		2	%
Colorado	1,025	546	479		88	%
Subtotal	11,589	11,118	471		4	%
Washington	1,538	—	1,538		NM
Oregon	1,340	—	1,340		NM
Total	14,467	11,118	3,349		30	%
Lots Controlled(1)
Southern California	1,038	577	461		80	%
Northern California	544	684	(140	)	(20	)%
Arizona	—	220	(220	)	(100	)%
Nevada	215	215	—		—	%
Colorado	186	342	(156	)	(46	)%
Subtotal	1,983	2,038	(55	)	(3	)%
Washington	786	—	786		NM
Oregon	839	—	839		NM
Total	3,608	2,038	1,570		77	%
Total Lots Owned and Controlled	18,075	13,156	4,919		37	%

(1) Lots controlled may be purchased by the Company as consolidated projects or may be purchased by newly formed joint ventures.

Total lots owned and controlled has increased to 18,075 lots owned and controlled at September 30, 2014 from 13,156 lots at September 30, 2013, due primarily to acquisition of Polygon Northwest Homes.

Comparisons of the Nine Months Ended September 30, 2014 to September 30, 2013

Revenues from homes sales increased 49% to $504.5 million during the nine months ended September 30, 2014 compared to $338.4 million during the nine months ended September 30, 2013. The increase is primarily due to a 39% increase in the average sales price of homes closed to $487,000 in the 2014 period compared to $349,300 in the 2013 period. The

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number of net new home orders for the nine months ended September 30, 2014 increased 17% to 1,210 homes from 1,030 homes for the nine months ended September 30, 2013.

	Nine Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount		%
Number of Net New Home Orders
Southern California	475		310		165		53	%
Northern California	162		105		57		54	%
Arizona	160		301		(141	)	(47	)%
Nevada	200		222		(22	)	(10	)%
Colorado	112		92		20		22	%
Subtotal	1,109		1,030		79		8	%
Washington	42		—		42		NM
Oregon	59		—		59		NM
Total	1,210		1,030		180		17	%
Cancellation Rate	16	%	15	%	1	%

The 17% increase in net new homes orders is driven by a 74% increase in average number of sales locations to 40 locations in 2014, compared to 23 in the 2013 period, offset by a decrease in absorption rates as the number of orders per sales location decreased in all of our markets. The absorption rates during the first nine months of 2013 were strong, totaling 44.9 orders per community, or 1.2 per week, compared to 30.3 sales per community, or 0.8 per week in the 2014 period.

	Nine Months Ended September 30,		Increase (Decrease)
	2014	2013	Amount	%
Average Number of Sales Locations
Southern California	11	6	5	83	%
Northern California	5	2	3	150	%
Arizona	6	6	—	—	%
Nevada	9	5	4	80	%
Colorado	7	4	3	75	%
Subtotal	38	23	15	65	%
Washington	1	—	1	NM
Oregon	1	—	1	NM
Total	40	23	17	74	%

The average number of sales locations for the Company increased to 40 locations for the nine months ended September 30, 2014, including an increase in the average for the period of 2 locations due to the acquisition of Polygon Northwest Homes, compared to 23 for the nine months ended September 30, 2013, driven by the opening of communities in all markets except Arizona during 2014. The increase in average number of sales locations is in line with the Company's growth plans as we continue to convert our land supply into home sites for customers.

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	Nine Months Ended September 30,		Increase (Decrease)
	2014	2013	Amount		%
Number of Homes Closed
Southern California	438	164	274		167	%
Northern California	115	99	16		16	%
Arizona	167	346	(179	)	(52	)%
Nevada	163	217	(54	)	(25	)%
Colorado	49	143	(94	)	(66	)%
Subtotal	932	969	(37	)	(4	)%
Washington	43	—	43		NM
Oregon	61	—	61		NM
Total	1,036	969	67		7	%

During the nine months ended September 30, 2014, the number of homes closed increased by 67 units, to 1,036 from 969 in the 2013 period. There was a 167% increase in Southern California to 438 homes closed in the 2014 period compared to 164 homes closed in the 2013 period, and the addition of the Washington and Oregon segments contributed 104 closings for which there is no comparable balance in the prior year. These increases were partially offset by a 52% decrease in Arizona to 167 homes closed in the 2014 period compared to 346 homes closed in the 2013 period, a decrease in Colorado of 94 units to 49 in the 2014 period from 143 in the 2013 period, and a decrease of 54 units in Nevada, to 163 units in 2014 from 217 in the 2013 period.

	Nine Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount			%
	(dollars in thousands)
Home Sales Revenue
Southern California	$	276,689	$	103,948	$	172,741		166	%
Northern California	48,683		35,960		12,723			35	%
Arizona	44,748		83,183		(38,435		)	(46	)%
Nevada	72,081		56,421		15,660			28	%
Colorado	23,443		58,922		(35,479		)	(60	)%
Subtotal	465,644		338,434		127,210			38	%
Washington	19,994		—		19,994			NM
Oregon	18,908		—		18,908			NM
Total	$	504,546	$	338,434	$	166,112		49	%

The increase in homebuilding revenue of 49% to $504.5 million for the 2014 period from $338.4 million for the 2013 period is primarily attributable to a 39% increase in the average sales price of homes closed to $487,000 during the 2014 period from $349,300 during the 2013 period, and $38.9 million of homebuilding revenue contributed by the newly acquired Washington and Oregon segments in the 2014 period for which there is no comparable amount in the 2013 period, coupled with a 43% increase in the average sales price of homes closed in all of our previously established segments, to $499,600 in the 2014 period from $349,300 in the 2013 period, due to a change in product mix and higher price points.

.

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	Nine Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount			%
Average Sales Price of Homes Closed
Southern California	$	631,700	$	633,800	$	(2,100	)	—	%
Northern California	423,300		363,200		60,100			17	%
Arizona	268,000		240,400		27,600			11	%
Nevada	442,200		260,000		182,200			70	%
Colorado	478,400		412,000		66,400			16	%
Subtotal	499,600		349,300		150,300			43	%
Washington	465,000		—		465,000			NM
Oregon	310,000		—		310,000			NM
Total	$	487,000	$	349,300	$	137,700		39	%

The average sales price of homes closed for the 2014 period increased primarily due to increasing price points, or product mix, of our actively selling projects to “move up” buyers, particularly in the Northern California and Nevada segments. In the Northern California segment, the overall average sales price increase is primarily due to 30 closings with an average sales price exceeding $500,000 in the 2014 period, with no comparable closings in the 2013 period. In Nevada, the overall average sales price increase was driven by 20 closings with an average sales price exceeding $900,000 in the 2014 period, for which there was no comparable amount in the 2013 period.

Gross Margin

Homebuilding gross margins increased to 22.3% for the nine months ended September 30, 2014 from 20.8% in the 2013 period. The increase is due to an increase in revenue due to an increase in the average sales price of homes closed. During the nine months ended September 30, 2014, the average sales price of homes closed increased to $487,000, from $349,300 for the nine months ended September 30, 2013. On a same store basis, measuring the average sales price of homes closed that were actively selling during both periods, average sales price of homes closed increased to $452,300 from $339,300. In addition, the homes closed during the period in the Washington and Oregon segments were adjusted to fair market value in purchase accounting, and have lower margins of 18.2% and 12.8%, respectively.

For the comparison of the nine months ended September 30, 2014 and the nine months ended September 30, 2013, adjusted homebuilding gross margin percentage, which excludes previously capitalized interest included in cost of sales as well as the effect of adjustments recorded in relation to purchase accounting, was 26.4% for the 2014 period compared to 28.7% for the 2013 period. The decrease was primarily a result of lower interest in cost of sales during the nine months ended September 30, 2014, when compared with the 2013 period.

Adjusted homebuilding gross margin is a non-GAAP financial measure. The Company believes this information is meaningful as it isolates the impact that interest and purchase accounting have on homebuilding gross margin and permits investors to make better comparisons with its competitors, who also break out and adjust gross margins in a similar fashion. For comparative purposes purchase accounting is the net adjustment in basis related to the acquisition of our Colorado, Washington and Oregon operating divisions. See table set forth below reconciling this non-GAAP measure to homebuilding gross margin.

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	Nine Months Ended September 30,
	2014			2013
	(dollars in thousands)
Home sales revenue	$	504,546		$	338,434
Cost of home sales	392,083			267,932
Homebuilding gross margin	112,463			70,502
Homebuilding gross margin percentage	22.3		%	20.8		%
Add: Interest in cost of sales	16,496			20,729
Add: Purchase accounting adjustments	$	4,088		$	5,858
Adjusted homebuilding gross margin	$	133,047		$	97,089
Adjusted homebuilding gross margin percentage	26.4		%	28.7		%

Construction Services Revenue

Construction services revenue, which was recorded only in the Southern California and Northern California segments, was $30.2 million for the nine months ended September 30, 2014, and $21.4 million for the nine months ended September 30, 2013. The increase is primarily due to an increase in revenue attributable to one project in Northern California.

Sales and Marketing Expense

	Nine Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount			%
	(dollars in thousands)
Sales and Marketing Expense
Southern California	$	11,281	$	5,423	$	5,858		108	%
Northern California	4,810		2,091		2,719			130	%
Arizona	2,231		3,675		(1,444		)	(39	)%
Nevada	5,197		3,015		2,182			72	%
Colorado	2,580		3,278		(698		)	(21	)%
Subtotal	26,099		17,482		8,617			49	%
Washington	1,147		—		1,147			NM
Oregon	712		—		712			NM
Total	$	27,958	$	17,482	$	10,476		60	%

Sales and marketing expense as a percentage of homebuilding revenue increased to 5.5% in the 2014 period compared to 5.2% in the 2013 period. This is primarily due to an increase in advertising expense from $3.6 million, or 1.1% of revenue in the 2013 period, to $7.9 million, or 1.6% of revenue in the 2014 period. The increase is due primarily to the increase in sales locations.

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General and Administrative Expense

	Nine Months Ended September 30,				Increase (Decrease)
	2014		2013		Amount		%
	(dollars in thousands)
General and Administrative Expense
Southern California	$	6,762	$	4,944	$	1,818	37	%
Northern California	3,383		1,625		1,758		108	%
Arizona	2,360		2,011		349		17	%
Nevada	3,225		2,382		843		35	%
Colorado	2,494		1,613		881		55	%
Subtotal	18,224		12,575		5,649		45	%
Washington	381		—		381		NM
Oregon	23		—		23		NM
Corporate	17,253		15,441		1,812		12	%
Total	$	35,881	$	28,016	$	7,865	28	%

General and administrative expense as a percentage of homebuilding revenues decreased to 7.1% in the 2014 period from 8.3% in the 2013 period. The decrease is driven by increased revenues, offset by an increase in salaries and benefits due to increased headcount in the 2014 period.

Transaction Expenses

Transaction expenses relate entirely to costs incurred in relation to the acquisition of Polygon Northwest Homes on August 12, 2014.

Other Items

Other operating costs remained approximately consistent at $1.7 million in the 2014 period compared to $1.7 million in the 2013 period.

Interest activity for the nine months ended September 30, 2014 and the nine months ended September 30, 2013 is as follows (in thousands):

	Nine Months Ended September 30,
	2014		2013
Interest incurred	$	38,818	$	22,511
Less: Interest capitalized	38,818		19,909
Interest expense, net of amounts capitalized	$	—	$	2,602
Cash paid for interest	$	22,596	$	14,854

The increase in interest incurred for the nine months ended September 30, 2014, compared to the interest incurred for the nine months ended September 30, 2013, reflects an increase in the Company's overall debt, offset by a decrease in effective interest rates. Interest capitalized relative to the amount incurred was higher in the 2014 period due to higher qualifying assets in the 2014 period as compared to the 2013 period.

Provision for Income Taxes

During the nine months ended September 30, 2014, the Company recorded a provision for income taxes of $12.8 million. The significant drivers of the effective rate are the allocation of income to noncontrolling interests, related party loss recapture, domestic production activities deduction, state taxes, and release of valuation allowance. During the nine months ended September 30, 2013, the Company recorded a provision for income taxes of $6.4 million due to positive operating results and a one-time election in 2013 to accelerate cancellation of debt income in the Company's 2012 federal tax return.

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Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased to $7.1 million during the 2014 period, from $4.9 million during the 2013 period. This is primarily due to the formation of one additional joint venture during fiscal year 2014, resulting in increased activity during the nine months ended September 30, 2014 when compared to the same period in the prior year.

Net Income Attributable to William Lyon Homes

As a result of the foregoing factors, net income attributable to William Lyon Homes for the nine months ended September 30, 2014, and the nine months ended September 30, 2013 was net income of $26.6 million, and $12.4 million, respectively.

Preferred Stock Dividends

The Company did not have preferred stock outstanding during the 2014 period. As such, the Company did not record any amounts for preferred stock dividends in the 2014 period compared to $1.5 million in the 2013 period. The Company’s preferred stock was converted to common stock in conjunction with the Company’s Initial Public Offering (IPO) on May 21, 2013.

Financial Condition and Liquidity

Since our initial public offering, which raised approximately $163.7 million of net proceeds, the Company has access to the public equity and debt markets, which is a significant source of financing for investing in land in our existing markets or financing expansion into new markets, such as the Company’s acquisition of Polygon Northwest Homes. Since the IPO, and prior to the acquisition of Polygon Northwest Homes as discussed below, the Company has raised approximately $355.0 million in the debt markets, which has provided capital for growth, investing in land and ongoing operations.

The Company benefits from a sizable and well-located lot supply, and as of September 30, 2014, the Company owned 14,467 lots, all of which are entitled, and had options to purchase an additional 3,608 lots. The Company’s lot supply reflects its balanced approach to land investment. The Company has a diverse mix of finished lots available for near-term homebuilding operations and longer-term strategic land positions to support future growth. The Company believes that its current inventory of owned and controlled lots is sufficient to supply the vast majority of its projected future home closings for the next three years and a portion of future home closings for a multi-year period thereafter. The Company’s meaningful supply of owned lots allows it to be selective in identifying new land acquisition opportunities, with a primary focus on optioning and acquiring land to drive closings, revenues and earnings growth in 2016 and beyond and largely insulates it from the heavy pricing competition for near-term finished lots.

The Company provides for its ongoing cash requirements with the proceeds identified above, as well as from internally generated funds from the sales of homes and/or land sales. During the nine months ended September 30, 2014 the company has closed 1,036 homes and recorded total revenues of $536.7 million. During the nine months ended September 30, 2014, the Company had cash used in operations of $181.2 million, which included investment in land acquisitions of $266.0 million, for net cash from operations of $84.8 million. In addition, the Company has the option to use additional outside borrowing, form new joint ventures with partners that provide a substantial portion of the capital required for certain projects, and buy land via lot options or land banking arrangements. The Company has financed, and may in the future finance, certain projects and land acquisitions with construction loans secured by real estate inventories, seller-provided financing and land banking transactions. The Company may also draw on its $100.0 million revolving line of credit to fund land acquisitions, as discussed below, which at September 30, 2014, remains undrawn. We believe we are well-positioned with a strong balance sheet and sufficient liquidity for supporting our ongoing operations and growth initiatives.

Acquisition of Polygon Northwest Homes

On August 12, 2014, the Company acquired the residential homebuilding operations of Polygon Northwest Homes for an aggregate cash purchase price of $520.0 million, plus an additional approximately $28.0 million at closing pursuant to initial working capital adjustments ("the Acquisition"). The Company financed the Acquisition with a combination of proceeds from its issuance of $300 million in aggregate principal amount of 7.00% senior notes due 2022, cash on hand including approximately $100 million of aggregate proceeds from several separate land banking arrangements with respect to land

44

parcels located in California, Washington and Oregon, each of which is entitled but undeveloped, and including parcels acquired in the Acquisition, and $120 million of borrowings under a new one-year senior unsecured loan facility.

5 3/4% Senior Notes Due 2019

On March 31, 2014, California Lyon completed its offering of 5.75% Senior Notes due 2019 (the "5.75% Notes"), in an aggregate principal amount of $150 million. The 5.75% Notes were issued at 100% of their aggregate principal amount.

As of September 30, 2014, the outstanding amount of the 5.75% Notes was $150 million. The 5.75% Notes bear interest at a rate of 5.75% per annum, payable semiannually in arrears on April 15 and October 15, and mature on April 15, 2019. The 5.75% Notes are unconditionally guaranteed on a senior unsecured basis by Parent and certain of its existing and future direct and indirect wholly-owned subsidiaries. The 5.75% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $425 million in aggregate principal amount of 8.5% Senior Notes due 2020, as described below, and $300 million in aggregate principal amount of 7.00% Notes as described above. The 5.75% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 5.75% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

The indenture governing the 5.75% Notes contains covenants that limit the ability of Parent, California Lyon, and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends, distributions, or repurchase equity or make payments in respect of subordinated indebtedness; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

8 1/2% Senior Notes Due 2020

On November 8, 2012, California Lyon completed its offering of 8 1/2% Senior Notes due 2020, (the "initial 8.5% Notes"), in an aggregate principal amount of $325 million. The initial 8.5% Notes were issued at 100% of their aggregate principal amount.

On October 24, 2013, California Lyon completed the sale to certain purchasers of an additional $100.0 million in aggregate principal amount of its 8.5% Senior Notes due 2020 (the “additional 8.5% Notes”, and together with the initial 8.5% notes, the "8.5% Notes" ) at an issue price of 106.5% of their aggregate principal amount, plus accrued interest from and including May 15, 2013, in a private placement, resulting in net proceeds of approximately $104.6 million.

As of September 30, 2014 the outstanding principal amount of the 8.5% Notes was $430 million. The 8.5% Notes bear interest at a rate of 8.5% per annum, payable semiannually in arrears on May 15 and November 15, and mature on November 15, 2020. The 8.5% Notes are are unconditionally guaranteed on a joint and several unsecured basis by Parent and by certain of its existing and future subsidiaries. The 8.5% Notes are California Lyon's and the guarantors' senior unsecured obligations. The 8.5% Notes and the guarantees rank senior to all of California Lyon’s and the guarantors’ existing and future subordinated debt, and rank equally in right of payment with all of California Lyon's and the guarantors' existing and future unsecured senior debt, including the 5.75% Notes and 7.00% Notes, each as described above. The 8.5% Notes and the guarantees are and will be effectively junior to any of California Lyon’s and the guarantors’ existing and future secured debt.

The indenture governing the 8.5% Notes contains covenants that limit the ability of Parent, California Lyon and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends or make other distributions or repurchase stock; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

7.00% Senior Notes due 2022

45

On August 11, 2014, WLH PNW Finance Corp. (“Escrow Issuer”), completed its private placement with registration rights of 7.00% Senior Notes due 2022 (the “7.00% Notes”), in an aggregate principal amount of $300 million. The 7.00% Notes were issued at 100% of their aggregate principal amount. On August 12, 2014, in connection with the consummation of the Acquisition, Escrow Issuer merged with and into California Lyon, and California Lyon assumed the obligations of the Escrow Issuer under the 7.00% Notes and the related indenture by operation of law (the “Escrow Merger”). Following the Escrow Merger, California Lyon is the obligor under the 7.00% Notes.

As of September 30, 2014, the outstanding amount of the 7.00% Notes was $300 million. The 7.00% Notes bear interest at a rate of 7.00% per annum, payable semiannually in arrears on February 15 and August 15, and mature on August 15, 2022. The 7.00% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future direct and indirect wholly-owned subsidiaries. The 7.00% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $150 million in aggregate principal amount of 5.75% Senior Notes due 2019 and $425 million in aggregate principal amount of 8.5% Senior Notes due 2020, as described below. The 7.00% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 7.00% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

The indenture governing the 7.00% Notes contains covenants that limit the ability of Parent, California Lyon, and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends, distributions, or repurchase equity or make payments in respect of subordinated indebtedness; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

Senior Unsecured Facility

On August 12, 2014, the Company entered into a senior unsecured loan facility (the “Senior Unsecured Loan Facility”), pursuant to which the Company borrowed $120 million in order to pay a portion of the purchase price for the Acquisition (the “Senior Unsecured Loan”). The Senior Unsecured Loan bears interest at an annual rate equal to a Eurodollar rate (subject to a minimum “floor” of 1.00%), plus an initial margin, which margin will increase by 0.50% every three months after August 12, 2014 that the Senior Unsecured Loan remains outstanding, subject to an interest rate cap, which at September 30, 2014 was 7.25%. The Senior Unsecured Facility will initially mature on the one-year anniversary of August 12, 2014, and may be prepaid in whole or in part prior to maturity without penalty. Any Senior Unsecured Loan that has not been previously repaid in full on or prior to the initial maturity date will be automatically converted into a senior term loan facility, which could be exchanged at the option of the lenders thereunder in whole or in part for senior exchange notes. The obligations of California Lyon under the Senior Unsecured Facility are guaranteed by the same entities that are guarantors under the existing Revolving Credit Facility, and the Senior Unsecured Facility ranks pari passu with California Lyon’s existing and future unsecured indebtedness. The Company was in compliance with all such covenants as of September 30, 2014.

Revolving Lines of Credit

On August 7, 2013, California Lyon and the Company entered into a credit agreement providing for a revolving credit facility of up to $100 million (the “Revolver”). The Revolver will mature on August 5, 2016, unless terminated earlier pursuant to the terms of the Revolver. The Facility contains an uncommitted accordion feature under which its aggregate principal amount can be increased to up to $125 million under certain circumstances, as well as a sublimit of $50 million for letters of credit. The Facility contains various covenants, including financial covenants relating to tangible net worth, leverage, liquidity and interest coverage, as well as a limitation on investments in joint ventures and non-guarantor subsidiaries.

The Facility contains customary events of default, subject to cure periods in certain circumstances, that would result in the termination of the commitment and permit the lenders to accelerate payment on outstanding borrowings and require cash collateralization of letters of credit, including: nonpayment of principal, interest and fees or other amounts; violation of covenants; inaccuracy of representations and warranties; cross default to certain other indebtedness; unpaid judgments; and certain bankruptcy and other insolvency events. If a change in control of the Company occurs, the lenders may terminate the commitment and require that California Lyon repay outstanding borrowings under the Facility and cash collateralize letters of credit. Interest rates on borrowings generally will be based on either LIBOR or a base rate, plus the applicable spread. The commitment fee on the unused portion of the Facility currently accrues at an annual rate of 0.50%.

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On July 3, 2014, California Lyon and the lenders party thereto entered into an amendment to our $100.0 million revolving credit facility, which amendment, among other changes, incorporated a minimum borrowing base availability of $50.0 million and increased the maximum leverage ratio from 60% to 75% for the first four quarters following the Acquisition.

Borrowings under the Facility, the availability of which is subject to a borrowing base formula, are required to be guaranteed by the Company and certain of the Company’s wholly-owned subsidiaries, are secured by a pledge of all equity interests held by such guarantors, and may be used for general corporate purposes. As of September 30, 2014, the Facility was undrawn.

Construction Notes Payable

Certain of the Company's consolidated joint ventures have entered into construction notes payable agreements. The issuance date, total availability under each facility outstanding, maturity date and interest rate are listed in the table below as of September 30, 2014 (in millions):

Issuance Date	Facility Size		Outstanding		Maturity	Current Rate
March, 2014	$	26.0	$	4.2	October, 2016	3.15	%	(1)
December, 2013	18.6		14.1		January, 2016	4.25	%	(1)
June, 2013	28.0		19.2		June, 2016	4.00	%	(2)
	$	72.6	$	37.5

(1) Loan bears interest at the Company's option of either LIBOR +3.0% or the prime rate +1.0%.

(2) Loan bears interest at the prime rate +0.5%, with a rate floor of 4.0% .

Seller Financing

At September 30, 2014, the Company had $3.7 million of notes payable outstanding related to two land acquisitions for which seller financing was provided. The first note had a balance of $3.1 million as of September 30, 2014, bears interest at 7% per annum, is secured by the underlying land, and matures in May 2015. The second land acquisition consists of two separate notes, the first having a balance of $0.1 million as of September 30, 2014 and maturing in October 2014, and the second having a balance of $0.5 million as of September 30, 2014 and maturing in January 2015. Both notes bear interest at 4% per annum.

Net Debt to Total Capital

The Company’s ratio of net debt to net book capital was 68.1% and 39.7% as of September 30, 2014 and December 31, 2013, respectively. The ratio of net debt to net book capital is a non-GAAP financial measure, which is calculated by dividing notes payable and Senior Notes, net of cash and cash equivalents and restricted cash, by net book capital (notes payable and Senior Notes, net of cash and cash equivalents and restricted cash, plus redeemable convertible preferred stock and total equity (deficit)). The Company believes this calculation is a relevant and useful financial measure to investors in understanding the leverage employed in its operations, and may be helpful in comparing the Company with other companies in the homebuilding industry to the extent they provide similar information. See table set forth below reconciling this non-GAAP measure to the ratio of debt to total capital.

47

	Successor
	September 30, 2014			December 31, 2013
	(dollars in thousands)
Notes payable and Senior Notes	$	1,041,707		$	469,355
Total equity	470,402			450,794
Total capital	$	1,512,109		$	920,149
Ratio of debt to total capital	68.9		%	51.0		%
Notes payable and Senior Notes	$	1,041,707		$	469,355
Less: Cash and cash equivalents and restricted cash	(35,623		)	(172,526		)
Net debt	1,006,084			296,829
Total equity	470,402			450,794
Total capital	$	1,476,486		$	747,623
Ratio of net debt to total capital	68.1		%	39.7		%

Land Banking Arrangements

As a method of acquiring land in staged takedowns, thereby minimizing the use of funds from the Company’s available cash or other corporate financing sources and limiting the Company’s risk, the Company transfers its right in such purchase agreements to entities owned by third parties, or land banking arrangements. These entities use equity contributions and/or incur debt to finance the acquisition and development of the land being purchased. The entities grant the Company an option to acquire lots in staged takedowns. In consideration for this option, the Company makes a non-refundable deposit of 15% to 25% of the total purchase price. The Company is under no obligation to purchase the balance of the lots, but would forfeit remaining deposits and could be subject to penalties if the lots were not purchased. The Company does not have legal title to these entities or their assets and has not guaranteed their liabilities. These land banking arrangements help the Company manage the financial and market risk associated with land holdings. The use of these land banking arrangements is dependent on, among other things, the availability of capital to the option provider, general housing market conditions and geographic preferences.

The Company participated in one land banking arrangement that was not a variable interest entity in accordance with FASB ASC Topic 810, Consolidation (“ASC 810”), but was consolidated in accordance with FASB ASC Topic 470, Debt (“ASC 470”). Under the provisions of ASC 470, the Company had determined it is economically compelled, based on certain factors, to purchase the land in the land banking arrangement. The remaining lots under the above land banking agreement were purchased by the Company during April 2014. Therefore, the Company had recorded the remaining purchase price of the land of $13.0 million as of December 31, 2013, respectively, which was included in real estate inventories not owned and liabilities from inventories not owned in the accompanying balance sheet.

Joint Venture Financing

The Company and certain of its subsidiaries are general partners or members in joint ventures involved in the development and sale of residential projects. As described more fully in Critical Accounting Policies—Variable Interest Entities, certain joint ventures have been determined to be variable interest entities in which the Company is considered the primary beneficiary. Accordingly, the assets, liabilities and operations of these joint ventures have been consolidated with the Company’s financial statements for the periods presented. The financial statements of joint ventures in which the Company is not considered the primary beneficiary are not consolidated with the Company’s financial statements. The Company’s investments in unconsolidated joint ventures are accounted for using the equity method because the Company has a 50% or less voting or economic interest (and thus such joint ventures are not controlled by the Company). Based upon current estimates, substantially all future development and construction costs incurred by the joint ventures will be funded by the venture partners or from the proceeds of construction financing obtained by the joint ventures.

During the three months ended September 30, 2014, the Company acquired a non-controlling interest in an unconsolidated mortgage joint venture as a result of the acquisition of Polygon Northwest Homes. As of December 31, 2013, the Company had no investment in and advances to unconsolidated joint ventures.

Assessment District Bonds

In some jurisdictions in which the Company develops and constructs property, assessment district bonds are issued by municipalities to finance major infrastructure improvements and fees. Such financing has been an important part of financing master-planned communities due to the long-term nature of the financing, favorable interest rates when compared to the Company’s other sources of funds and the fact that the bonds are sold, administered and collected by the relevant government

48

entity. As a landowner benefited by the improvements, the Company is responsible for the assessments on its land. When the Company’s homes or other properties are sold, the assessments are either prepaid or the buyers assume the responsibility for the related assessments.

Cash Flows—Comparison of the Nine Months Ended September 30, 2014 to the Nine Months Ended September 30, 2013

For the nine months ended September 30, 2014 and 2013, the comparison of cash flows is as follows:

• Net cash used in operating activities increased to $181.2 million in the 2014 period from $164.9 million in the 2013 period. The change was primarily a result of (i) a net increase in real estate inventories-owned of $265.5 million in the 2014 period primarily driven by $266.0 million in land acquisitions, compared to an increase of $202.3 million in the 2013 period, and (ii) an increase in accounts payable of $29.4 million in the 2014 period compared to $0.7 million in the 2013 period due to timing of payments, (iii) consolidated net income of $33.7 million in the 2014 period compared to $17.3 million in the 2013 period, offset by (iv)  an increase in escrow proceeds receivable of $10.2 million in the 2014 period compared to an increase of $2.8 million in the 2013 period primarily attributable to the timing of proceeds received from escrow for home closings, and (v) an increase in accrued expenses of $26.0 million in the 2014 period compared to an increase of $18.8 million in the 2013 period primarily due to an increase in taxes payable and the timing of payments.

• Net cash used in investing activities was $490.4 million in the 2014 period compared to $3.4 million in the 2013 period, primarily driven by (i) net cash paid of $488.8 million to acquire the assets and operations of Polygon Northwest Homes and (ii) purchases of property and equipment of $1.7 million in the 2014 period, compared to $3.4 million in the 2013 period.

• Net cash provided by financing activities increased to $535.0 million in the 2014 period from $179.1 million in the 2013 period. The change was primarily as a result of (i) proceeds from the issuance of $300.0 million of 7% senior notes during the 2014 period with no comparable amount in the 2013 period, (ii) proceeds from issuance of 5 3/4% Senior notes of $150.0 million in the 2014 period, with no comparable amount in the 2013 period, (iii) borrowings of $120.0 million against the senior unsecured facility in the 2014 period for which there was no comparable amount in the 2013 period, and (iv) offering costs paid related to the sale of common stock of $0.1 million in the 2014 period compared to $15.7 million paid in the 2013 period, offset by (v) proceeds from the issuance of common stock during the 2013 period of $179.4 million with no comparable amount in the 2014 period, and (vi) net borrowings on notes payable of $0.8 million in the 2014 period as compared to $6.0 million in the 2013 period.

Based on the aforementioned, the Company believes it has sufficient cash and sources of financing for at least the next twelve months.

Contractual Obligations and Off-Balance Sheet Arrangements

The Company enters into certain off-balance sheet arrangements including joint venture financing, option agreements, land banking arrangements and variable interests in consolidated and unconsolidated entities. These arrangements are more fully described above and in Notes 3 and 12 of “Notes to Condensed Consolidated Financial Statements.” In addition, the Company is party to certain contractual obligations, including land purchases and project commitments, which are detailed in Note 11 of “Notes to Condensed Consolidated Financial Statements.”

Inflation

The Company’s revenues and profitability may be affected by increased inflation rates and other general economic conditions. In periods of high inflation, demand for the Company’s homes may be reduced by increases in mortgage interest rates. Further, the Company’s profits will be affected by increases in the costs of land, construction, labor and administrative expenses. The Company’s ability to raise prices at such times will depend upon demand and other competitive factors.

Description of Projects and Communities Under Development

The Company’s homebuilding projects usually take two to five years to develop. The following table presents project information relating to each of the Company’s homebuilding operating segments as of September 30, 2014 and only includes projects with lots owned as of September 30, 2014, lots consolidated in accordance with certain accounting principles as of September 30, 2014 or homes closed for the quarter ended September 30, 2014.

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Project (County or City)	Year of First Delivery	Estimated Number of Homes at Completion (1)	Cumulative Homes Closed as of September 30, 2014 (2)	Backlog at September 30, 2014 (3) (4)	Lots Owned as of September 30, 2014 (5)	Homes Closed for the Period Ended September 30, 2014	Sales Price Range (6)
SOUTHERN CALIFORNIA
Orange County:
Dana Point
Grand Monarch	2015	37	—	—	—	—	$2,350,000 - 2,650,000
Irvine
Agave	2013	96	72	17	24	57	$ 503,000 -  627,000
Lyon Branches (7)	2013	48	48	—	—	14	(10)
Willow Bend	2013	58	58	—	—	25	(10)
Lyon Whistler (7)	2013	83	44	25	39	38	$ 945,000 -  1,125,000
Ladera Ranch
Covenant Hills	2015	14	—	—	14	—	$ 2,500,000 -  2,650,000
Rancho Mission Viejo
Lyon Cabanas	2013	97	60	10	37	44	$ 370,000 - 450,000
Lyon Villas	2013	96	63	14	33	50	$ 440,000 - 522,000
Los Angeles County:
Glendora
La Colina Estates	2014	121	—	—	59	—	$ 1,249,000 -  1,624,000
Hawthorne
360 South Bay (8):
The Flats	2010	188	185	3	3	40	$ 399,000 -  569,000
The Rows	2012	94	90	3	4	37	$ 528,000 -  720,000
The Lofts	2013	9	9	—	—	2	(10)
The Townes	2013	96	48	29	48	32	$ 635,000 -  725,000
The Terraces	2014	93	26	36	67	26	$ 775,000 -  900,000
Lakewood
Canvas	2015	72	—	—	72	—	$ 425,000 -  454,000
Claremont
Meadow Park	2015	95	—	—	95	—	$ 282,000 -  488,000
San Diego County:
Escondido
Contempo	2013	84	84	—	—	61	(10)
San Diego
Atrium	2014	80	12	56	68	12	$ 390,000 -  525,000
Riverside County:
Riverside
Bridle Creek	2015	10	—	3	10	—	$ 500,000 -  543,000
SkyRidge	2014	90	—	2	90	—	$ 500,000 -  543,000
TurnLeaf				6
Crossings	2014	146	—	—	26	—	$ 505,000 -  549,000
Coventry	2014	154	—	—	13	—	$ 553,000 -  578,000
San Bernardino County:
Upland
The Orchards (Sultana) (7)
Citrus Court (7)	2015	77	—	—	77	—	$ 330,000 -  380,000
Citrus Pointe (7)	2015	132	—	—	132	—	$ 346,000 -  385,000

50

Chino
Laurel Lane	2015	70	—	—	70	—	$ 495,000 -  535,000
Yucaipa
Cedar Glen	2015	143	—	2	143	—	$ 295,000 -  305,000
SOUTHERN CALIFORNIA TOTAL		2,283	799	206	1,124	438
NORTHERN CALIFORNIA
Alameda County
Newark
Villages I	2016	115	—	—	115	—	$ 525,000 -  613,000
Villages II	2016	138	—	—	138	—	$ 599,000 -  659,000
Villages III	2015	106	—	—	106	—	$ 663,000 -  704,000
Villages IV	2015	111	—	—	111	—	$ 721,000 -  761,000
Villages V	2015	77	—	—	77	—	$ 786,000 -  826,000
Dublin
Terrace Ridge	2015	36	—	—	36	—	$ 1,040,000 -  1,105,000
Contra Costa County:
Pittsburgh
Vista Del Mar
Villages II (7)	2013	52	48	3	4	41	$ 365,000 -  414,000
Vineyard II (7)	2012	131	98	13	34	30	$ 497,000 -  516,000
Victory II (7)	2014	104	—	10	44	—	$ 528,000 -  592,000
Brentwood
Palmilla
El Sol (7)	2014	52	8	12	44	8	$ 334,000 -  358,000
Cielo (7)	2014	56	—	16	56	—	$ 393,000 -  453,000
Antioch
Oak Crest	2013	130	37	23	93	34	$ 408,000 -  453,000
San Joaquin County:
Lathrop
The Ranch @ Mossdale	2010	168	168	—	—	2	(10,000	)
Tracy
Maplewood	2015	59	—	7	59	—	$ 433,000 -  518,000
Santa Clara County:
Morgan Hill
Brighton Oaks	2015	110	—	—	110	—	$ 475,000 -  605,000
Mountain View
Guild 33	2015	33		—	33	—	$ 980,000 -  1,195,000
NORTHERN CALIFORNIA TOTAL		1,478	359	84	1,060	115

Project (County or City)	Year of First Delivery	Estimated Number of Homes at Completion (1)	Cumulative Homes Closed as of September 30, 2014 (2)	Backlog at September 30, 2014 (3) (4)	Lots Owned as of September 30, 2014 (5)	Homes Closed for the Period Ended September 30, 2014	Sales Price Range (6)
ARIZONA
Maricopa County:
Queen Creek
Hastings Farm
Villas	2012	337	297	25	40	63	$ 166,000 -  206,000

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Manor	2012	141	141	—	—	10	(10)
Estates	2012	153	112	6	41	31	$ 294,000 -  349,000
Meridian
Harvest	2015	448	—	—	448	—	$ 179,000 -  205,000
Homestead	2015	562	—	—	562	—	$ 186,000 -  232,000
Harmony	2015	505	—	—	505	—	$ 205,000 -  262,000
Horizons	2015	425	—	—	425	—	$ 239,000 -  287,000
Heritage	2015	370	—	—	370	—	$ 293,000 -  348,000
Mesa
Lehi Crossing
Settlers Landing	2012	235	77	8	158	34	$ 219,000 -  259,000
Wagon Trail	2013	244	53	10	191	15	$ 234,000 -  291,000
Monument Ridge	2013	248	27	7	221	14	$ 256,000 -  329,000
Albany Village	2016	228	—	—	228	—	$182,000 - $199,000
Peoria
Agua Fria	2015	197		—	197		$ 164,000 -  198,000
Surprise
Rancho Mercado
Cluster	2016	402	—	—	402	—	$ 164,000 -  176,000
45s	2016	457	—	—	457	—	$ 178,000 -  219,000
53s	2016	395	—	—	395	—	$ 199,000 -  253,000
58s	2016	239	—	—	239	—	$ 216,000 -  284,000
63s	2017	182	—	—	182	—	$ 272,000 -  320,000
75s	2017	221	—	—	221	—	$ 359,000 -  407,000
Gilbert
Lyon’s Gate	2016	189	—	—	189	—	$ 209,000 -  219,000
ARIZONA TOTAL		6,178	707	56	5,471	167
NEVADA
Clark County:
North Las Vegas
Tierra Este	2013	114	20	4	94	18	$ 205,000 -  230,000
Rhapsody	2014	63	22	7	41	22	$ 221,000 -  248,000
Las Vegas
Serenity Ridge	2013	108	61	11	47	25	$ 472,000 -  552,000
Tularosa at Mountain’s Edge .	2011	140	140	—	—	3	(10)
West Park Villas	2006	191	191	—	—	2	(10)
Mesa Canyon	2013	49	49	—	—	39	(10)
Lyon Estates	2014	128	12	6	116	12	$ 480,000 -  530,000
Sterling Ridge
Grand	2014	137	9	36	53	9	$ 850,000 -  895,000
Premier	2014	62	11	31	34	11	$ 1,199,000 -  1,279,000
Tuscan Cliffs	2014	77	—	3	77	—	$ 731,000 -  781,000
Brookshire	2015	133	—	—	133	—	$ 399,000 -  563,000
Henderson
Lago Vista	2016	52	—	—	52	—	$ 876,000 -  935,000
Nye County:
Pahrump
Mountain Falls
Series I	2011	211	90	8	121	20	$ 145,000 -  174,000
Series II	2014	218	2	3	216	2	$ 216,000 -  299,000
Land (9)	N/A	—	—	—	1,925	—	N/A

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NEVADA TOTAL		1,683	607	109	2,909	163
COLORADO
Arapahoe County
Aurora Southshore
Hometown	2014	68	2	11	66	2	$ 326,000 -  357,000
Generations	2014	64	—	2	64	—	$ 380,000 -  345,000
Harmony	2014	52	—	—	52	—	$ 415,000 -  494,000
Signature	2014	37	—	1	37	—	$ 531,000 -  584,000
Douglas County
Castle Rock
Cliffside	2014	49	5	10	44	5	$ 462,000 -  540,000
Parker
Canterberry	2014	37	—	9	37	—	$ 316,000 -  346,000
Idyllwilde	2012	42	42	—	—	4	-10
Grand County
Granby
Granby Ranch	2012	54	20	4	34	5	$ 499,000 -  526,000
Jefferson County
Arvada
Candelas	2014	66	24	22	42	24	$ 373,000 -  427,000
Candelas II
Generations	2014	91	—	—	91	—	TBD
4300's	2015	110	—	—	110	—	TBD
Leydon Rock
Garden	2014	56	—	6	56	—	$ 377,000 -  415,000
Park	2014	78	—	9	78	—	$ 370,000 -  415,000
Larimer County
Fort Collins
Timnath Ranch
Sonnet	2014	179	3	7	176	3	$ 347,000 -  418,000
Park	2014	92	6	8	86	6	$ 318,000 -  353,000
Loveland
Lakes at Centerra	2014	200	—	1	52	—	TBD
COLORADO TOTAL		1,275	102	90	1,025	49

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Project (County or City)	Year of First Delivery	Estimated Number of Homes at Completion (1)	Cumulative Homes Closed as of September 30, 2014 (2)	Backlog at September 30, 2014 (3) (4)	Lots Owned as of September 30, 2014 (5)	Homes Closed for the Period Ended September 30, 2014	Sales Price Range (6)
WASHINGTON (11)
King County
Cedar Falls Way	2014	14	10	3	4	10	$ 440,000 -  470,000
Highpoint	2014	3	3	—	—	3	(10)
Issaquah	2015	365	—	—	365	—	$ 414,990 - 789,990
Cascara	2014	69	1	8	68	1	$ 250,000 -  380,000
Viewridge at Issaquah Highlands	2014	14	12	2	2	12	$ 400,000 -  470,000
The Brownstones at Issaquah Highlands	2014	176	—	—	176	—	$ 416,000 -  555,000
The Towns at Mill Creek Meadows	2014	122	—	24	122	—	$ 240,000 -  300,000
Bryant Heights	2015	89	—	—	89	—	$ 400,000 - 1,199,600
Ridgeview Townhomes	2017	41	—	—	41	—	$ 325,990 - 399,990
Snohomish County
Riverfront	2016	190	—	—	190	—	$ 229,990 - 299,990
The Reserve at North Creek	2014	127	13	14	114	13	$ 443,000 -  520,000
Silverlake Center	2015	100	—	—	100	—	$ 245,990 - 295,990
Pierce County
The Reserve at Maple Valley	2014	41	4	12	37	4	$ 350,000 -  400,000
Spanaway 230	2015	230	—	—	230	—	$ 239,990 - 305,990
WASHINGTON TOTAL		1,581	43	63	1,538	43
OREGON (11)
Clarkamus County:
Villebois	2014	97	17	48	80	17	$ 235,000 -  470,000
Calais at Villebois	2015	84	—	—	84	—	$ 289,990 - 489,990
Grande Pointe at Villebois	2016	100	—	—	100	—	$ 389,990 - 489,990
Villebois Zion III	2014	147	—	—	147	—	$ 215,000 -  260,000
Villebois V	2016	93	—	—	93	—	$ 274,990 - 344,990
Sparrow Creek	2016	205	—	—	205	—	$ 219,990 - 344,990
Brenchley Estates	2014	17	6	7	11	6	$ 320,000 -  330,000
Washington County:
Baseline Woods	2014	232	19	19	213	19	$ 260,000 -  360,000
Edgewater/Tualatin	2014	33	8	19	25	8	$ 250,000 -  357,000
Murray & Weir	2014	81	5	5	76	5	$ 345,000 -  405,000
Twin Creeks at Copper Mountain	2014	94	—	3	94	—	$ 410,000 -  500,000
The Overlook at Timberland	2014	7	6	1	1	6	$ 230,000 -  250,000
Bethany Creek Falls	2015	36	—	—	36	—	$ 259,990 - 509,990
Orenco Woods	2015	71	—	—	71	—	$ 289,990 - 369,990
Sunset Ridge	2015	104	—	—	104	—	$ 274,990 - 439,990
OREGON TOTAL		1,401	61	102	1,340	61
GRAND TOTALS		15,879	2,678	710	14,467	1,036

54

(1) The estimated number of homes to be built at completion is subject to change, and there can be no assurance that the Company will build these homes. Includes lots owned, controlled or previously closed as of periods presented.

(2) “Cumulative Homes Closed” represents homes closed since the project opened, and may include prior years, in addition to the homes closed during the current year presented.

(3) Backlog consists of homes sold under sales contracts that have not yet closed, and there can be no assurance that closings of sold homes will occur.

(4) Of the total homes subject to pending sales contracts as of September 30, 2014, 644 represent homes completed or under construction.

(5) Lots owned as of September 30, 2014 include lots in backlog at September 30, 2014.

(6) Sales price range reflects the most recent pricing updates of the base price only and excludes any lot premium, buyer incentive and buyer selected options, which vary from project to project.

(7) Project is a joint venture and is consolidated as a VIE in accordance with ASC 810, Consolidation.

(8) All or a portion of the lots in this project are not owned as of September 30, 2014. The Company consolidated the purchase price of the lots in accordance with certain accounting rules, and considers the lots owned at September 30, 2014.

(9) Represents a parcel of land held for future development. It is unknown when the Company plans to develop homes on this land, thus the “year of first delivery” and “sales price range” are not applicable.

(10) Project is completely sold out, therefore the sales price range is not applicable as of September 30, 2014.

(11) Washington and Oregon were acquired on August 12, 2014 as part of the Polygon Northwest Homes Acquisition. Estimated number of homes at completion is the number of home to be built post-acquisition. Homes closed and year to date orders are from acquisition date through September 30, 2014.

Income Taxes

See Note 9 of “Notes to Condensed Consolidated Financial Statements” for a description of the Company’s income taxes.

Related Party Transactions

See Note 8 of “Notes to Condensed Consolidated Financial Statements” for a description of the Company’s transactions with related parties.

Critical Accounting Policies

The Company’s financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and costs and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those which impact its most critical accounting policies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, the Company’s most critical accounting policies are debtor in possession accounting; fresh start accounting; real estate inventories and cost of sales; impairment of real estate inventories; sales and profit recognition; variable interest entities; and income taxes. Management believes that there have been no significant changes to these policies during the nine months ended September 30, 2014, as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Annual Report on Form 10-K for the year ended December 31, 2013. As a result of the Company's acquisition of Polygon Northwest Homes on August 12, 2014, the Company has determined that business combination accounting is a critical accounting policy for the nine months ended September 30, 2014.

Business Combinations

The Company accounts for business combinations in accordance with FASB ASC Topic 805, Business Combinations. ASC Topic 805 requires that business combinations be accounted for under the acquisition method. The acquisition method requires: i) identifying the acquirer; ii) determining the acquisition date; iii) recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; and iv) recognizing and measuring goodwill or a gain from a bargain purchase. Under this method, all acquisition costs are expensed as incurred, and the assets and liabilities of the acquired entity are recorded at their acquisition date fair value, with any excess recorded as goodwill. Goodwill is allocated to the appropriate segments which benefited from the business combination when the goodwill arose. The allocation of the purchase

55

price to the fair value of acquired assets and liabilities assumed requires the use of significant estimates and assumptions. Significant assumptions can include i) expected selling prices of acquired projects, ii) anticipated sales pace of acquired projects , iii) cost to complete estimates of acquired projects, iv) highest and best use of acquired projects prior to acquisition, and v) comparable land values. Where appropriate, we consult with external advisors to assist with the determination of fair value.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s exposure to market risk for changes in interest rates relates to the Company’s floating rate debt with a total outstanding balance at September 30, 2014 of $157.5 million where the interest rate is variable based upon certain bank reference or prime rates. The average prime rate during the three months ended September 30, 2014 was 3.25%. If variable interest rates were to increase by 10%, there would be no impact on the Company’s condensed consolidated financial statements because the outstanding debt has an interest rate floor of 4.0% to 5.0%.

The following table presents principal cash flows by scheduled maturity, interest rates and the estimated fair value of our long-term fixed rate debt obligations as of September 30, 2014 (dollars in thousands):

	Years ending December 31,											Thereafter		Total		Fair Value  at September 30,  2014
	2014			2015		2016		2017		2018
Fixed rate debt	$	126		$	3,598	$	—	$	—	$	—	$	875,000	$	878,724	$	918,662
Interest rate	4.0		%	4.0%-7.0%		—		—		—		5.75%-8.5%		—		—

The Company does not utilize swaps, forward or option contracts on interest rates, foreign currencies or commodities, or other types of derivative financial instruments as of or during the nine months ended September 30, 2014. The Company does not enter into or hold derivatives for trading or speculative purposes.

Item 4. Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and, in reaching a reasonable level of assurance, our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures. We carried out an evaluation as of September 30, 2014, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures. Based upon their evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of September 30, 2014, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting. Our management determined that as of September 30, 2014, there were no changes in our internal control over financial reporting that occurred during the fiscal quarter then ended that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

56

WILLIAM LYON HOMES

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various legal proceedings, most of which relate to routine litigation and some of which are covered by insurance. In the opinion of the Company’s management, the Company does not have any currently pending litigation of which the outcome will have a material adverse effect on the Company’s operations or financial position.

Item 1A. Risk Factors

You should carefully consider the risks described in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2013, as our business, financial condition and results of operations could be adversely affected by any of the risks and uncertainties described therein. Other than as provided below, there have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

Risks Related to Our Indebtedness

We have substantial outstanding indebtedness and may incur additional debt in the future.

We are highly leveraged. At September 30, 2014, the total outstanding principal amount of our debt was $1,041.7 million. In addition, we have the ability to incur additional indebtedness under our Revolver with aggregate borrowing capacity of $100.0 million, subject to a borrowing base formula, and under our project-level financing facilities. As of September 30, 2014, we would have had approximately $73.3 million of additional borrowing capacity under our Revolver and our project-level financing facilities. Moreover, the terms of the indentures governing our 7.00% Notes, 8.5% Notes and 5.75% Notes permit us to incur additional debt, and the Senior Unsecured Facility and the Revolver permit us to incur additional debt, subject to certain restrictions. Our high level of indebtedness could have detrimental consequences, including the following:

• our ability to obtain additional financing as needed for working capital, land acquisition costs, building costs, other capital expenditures, or general corporate purposes, or to refinance existing indebtedness before its scheduled maturity, may be limited;

• we will need to use a substantial portion of cash flow from operations to pay interest and principal on our indebtedness, which will reduce the funds available for other purposes;

• if we are unable to comply with the terms of the agreements governing our indebtedness, the holders of that indebtedness could accelerate that indebtedness and exercise other rights and remedies against us;

• if we have a higher level of indebtedness than some of our competitors, it may put us at a competitive disadvantage and reduce our flexibility in planning for, or responding to, changing conditions in the industry, including increased competition; and

• the terms of any refinancing may not be as favorable as the debt being refinanced.

We cannot be certain that cash flow from operations will be sufficient to allow us to pay principal and interest on our debt, support operations and meet other obligations. If we do not have the resources to meet these and other obligations, we may be required to refinance all or part of our outstanding debt, sell assets or borrow more money. We may not be able to do so on acceptable terms, in a timely manner, or at all. If we are unable to refinance our debt on acceptable terms, we may be forced to dispose of our assets on disadvantageous terms, potentially resulting in losses. Defaults under our debt agreements could have a material adverse effect on our business, prospects, liquidity, financial condition or results of operations.

The agreements governing our debt impose significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities and taking some corporate actions.

The agreements governing our debt impose significant operating and financial restrictions. These restrictions limit our ability, among other things, to:

• incur or guarantee additional indebtedness or issue certain equity interests;

• pay dividends or distributions, repurchase equity or prepay subordinated debt;

• make certain investments;

• sell assets;

• incur liens;

• create certain restrictions on the ability of restricted subsidiaries to transfer assets;

57

• enter into transactions with affiliates;

• create unrestricted subsidiaries; and

• consolidate, merge or sell all or substantially all of our assets.

Our July 3, 2014 amendment to our Revolver incorporated, among other changes, a minimum borrowing base availability of $50.0 million and increased the maximum leverage ratio from 60% to 75% for the first four fiscal quarters following the Acquisition of Polygon Northwest Homes. Pursuant to the amendment, the minimum borrowing base availability is scheduled to decrease sequentially by $5.0 million the first day after each fiscal quarter end, commencing on January 1, 2015. In addition, the maximum leverage ratio will decrease from 75% to 70% on the last day of the fifth fiscal quarter following the closing of the Acquisition, and for the fiscal quarters thereafter, will return to 60%. We cannot assure you that we will have adequate liquidity to meet our obligations, including our obligations with respect to our outstanding senior notes and our other indebtedness, once the minimum borrowing base availability declines or falls away, nor can we assure you that we will be in compliance with our maximum leverage ratio covenant once the required level reverts to 60%. Our leverage ratio as of September 30, 2014, as calculated under the Revolver, was 73% as of September 30, 2014. Failure to have sufficient borrowing base availability in the future or to be in compliance with our maximum leverage ratio under the Revolver could have a material adverse effect on our operations and financial condition.

In addition, we may in the future enter into other agreements refinancing or otherwise governing indebtedness which impose yet additional restrictions and covenants, including covenants limiting our ability to incur additional debt, make certain investments, reduce liquidity below certain levels, make distributions to our stockholders and otherwise affect our operating policies. These restrictions may adversely affect our ability to finance future operations or capital needs or to pursue available business opportunities. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing that indebtedness.

Risks Related to the Polygon Acquisition

We have incurred and will continue to incur significant transaction and acquisition-related integration costs in connection with the Polygon Acquisition.

We incurred significant transaction costs in connection with the execution and consummation of the Acquisition as well as the financing transactions in connection therewith. In addition, we are currently implementing a plan to integrate the residential homebuilding operations of Polygon Northwest Homes following the closing of the Acquisition on August 12, 2014. Although we anticipate achieving synergies in connection with the Acquisition, we also expect to incur costs implementing such cost savings measures. We cannot identify the timing, nature and amount of all such charges as of the date of this quarterly report. Although we believe that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, will offset incremental transaction- and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all. We have identified some, but not all, of the actions necessary to achieve our anticipated cost and operational savings. Accordingly, the cost and operational savings may not be achievable in our anticipated amount or timeframe or at all.

We and Polygon Northwest Homes will be subject to business uncertainties after the consummation of the Acquisition that could adversely affect our and its business.

Uncertainty about the effect of the Acquisition on employees and customers may have an adverse effect on us and Polygon Northwest Homes. Although we and Polygon Northwest Homes intend to take actions to reduce any adverse effects, these uncertainties may impair our and their ability to attract, retain and motivate key personnel for a period of time after completion of the Acquisition. These uncertainties could cause customers, suppliers and others that deal with us and Polygon Northwest Homes to seek to change existing business relationships with us and Polygon Northwest Homes.

Additionally, employee retention could be reduced after the consummation of the Acquisition, as employees may experience uncertainty about their future roles or encounter difficulties in the integration process. The successful integration of Polygon Northwest Homes after completion of the Acquisition will depend, in part, upon our ability to retain the employees and members of senior management following the Acquisition. If, despite our and Polygon Northwest Homes’ retention efforts, key employees or members of senior management depart before or after consummation of the Acquisition, our business could be harmed and we may not realize all of the expected benefits of the Acquisition.

58

The unaudited pro forma condensed combined financial statements filed on Form 8-K/A on September 16, 2014 were presented for illustrative purposes only and do not purport to be an indication of our financial condition or results of operations following the Polygon Acquisition.

The unaudited pro forma condensed combined financial statements filed on Form 8-K/A on September 16, 2014 were presented for illustrative purposes only, are based on various adjustments and assumptions, many of which are preliminary, and do not purport to be an indication of our financial condition or results of operations following the Polygon Acquisition. Our actual financial condition and results of operations following the Polygon Acquisition may not be consistent with, or evident from, these pro forma condensed combined financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations following the Acquisition.

We have made certain assumptions relating to the Acquisition that may prove to be materially inaccurate.

We have made certain assumptions relating to the Acquisition, including, for example:

• projections of Polygon Northwest Homes’ future revenues;

• the amount of goodwill and intangibles that will result from the acquisition;

• certain other purchase accounting adjustments that we expect will be recorded in our financial statements in connection with the Acquisition; 

• acquisition costs, including transaction and integration costs; and

• other financial and strategic rationales and risks of the acquisition.

While management has made such assumptions in good faith and believes them to be reasonable, the assumptions may turn out to be materially inaccurate, including for reasons beyond our control.  If these assumptions are incorrect we may change or modify our assumptions, such change or modification could have a material adverse effect on our financial condition or results of operations.

We may write-off intangible assets, such as goodwill.

We expect to record intangible assets, including goodwill in connection with the Acquisition.  On an ongoing basis, we will evaluate whether facts and circumstances indicate any impairment of the value of intangible assets.  As circumstances change, we cannot assure you that the value of these intangible assets will be realized by us.  If we determine that a significant impairment has occurred, we will be required to write-off the impaired portion of intangible assets, which could have a material adverse effect on our results of operations in the period in which the write-off occurs. 

Prior to the Acquisition, Polygon Northwest Homes was a privately-held company and its new obligations of being a part of a public company may require significant resources and management attention.

Upon consummation of the Polygon Acquisition, the entities acquired from Polygon Northwest Homes became subsidiaries of our consolidated Company, and will need to comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations subsequently implemented by the SEC and the Public Company Accounting Oversight Board. We will need to ensure that Polygon Northwest Homes establishes and maintains effective disclosure controls as well as internal controls and procedures for financial reporting, and such compliance efforts may be costly and may divert the attention of management.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

59

Item 5. Other Information

Not applicable.

60

Item 6. Exhibits

Exhibit Index

Exhibit No.	Description
4.1	Indenture, dated August 11, 2014, among WLH PNW Finance Corp., the guarantors from time to time party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Form 8-K filed August 13, 2014).
4.2	Form of 7.00% Senior Notes due 2022 (included in Exhibit 4.1).
4.3	Second Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 8.5% Senior Notes due 2020 (incorporated by reference to Exhibit 4.3 of the Company's Form 8-K filed August 13, 2014).
4.4	First Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 5.75% Senior Notes due 2019 (incorporated by reference to Exhibit 4.4 of the Company's Form 8-K filed August 13, 2014).
4.5	First Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., William Lyon Homes, the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 7.00% Senior Notes due 2022 (incorporated by reference to Exhibit 4.5 of the Company's Form 8-K filed August 13, 2014).
4.6	Second Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 7.00% Senior Notes due 2022 (incorporated by reference to Exhibit 4.6 of the Company's Form 8-K filed August 13, 2014).
10.1	Bridge Loan Agreement, dated as of August 12, 2014, among William Lyon Homes, Inc., as Borrower, William Lyon Homes, as Parent, the Lenders from time to time party thereto, and J.P. Morgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed August 13, 2014).
10.2	Amendment No. 1 to Credit Agreement among William Lyon Homes, Inc., as Borrower, William Lyon Homes, as Parent, The Lenders from time to time party thereto, and Credit Suisse AG, as Administrative Agent, dated as of August 7, 2013.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbased Document.

* The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act (including this Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

61

** Pursuant to Rule 406T of Regulation S-T, the XBRL information will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 and will not be deemed filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, or otherwise subject to liability under those Sections.

62

WILLIAM LYON HOMES

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WILLIAM LYON HOMES,
	a Delaware corporation
Date: November 12, 2014	By:	/S/    COLIN T. SEVERN
		Colin T. Severn
		Vice President, Chief Financial Officer (Principal Accounting Officer and Duly Authorized Signatory)

63

Exhibit Index

Exhibit No.	Description
4.1	Indenture, dated August 11, 2014, among WLH PNW Finance Corp., the guarantors from time to time party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Form 8-K filed August 13, 2014).
4.2	Form of 7.00% Senior Notes due 2022 (included in Exhibit 4.1).
4.3	Second Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 8.5% Senior Notes due 2020 (incorporated by reference to Exhibit 4.3 of the Company's Form 8-K filed August 13, 2014).
4.4	First Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 5.75% Senior Notes due 2019 (incorporated by reference to Exhibit 4.4 of the Company's Form 8-K filed August 13, 2014).
4.5	First Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., William Lyon Homes, the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 7.00% Senior Notes due 2022 (incorporated by reference to Exhibit 4.5 of the Company's Form 8-K filed August 13, 2014).
4.6	Second Supplemental Indenture, dated as of August 12, 2014, among William Lyon Homes, Inc., the subsidiary guarantors named therein and U.S. Bank National Association, relating to the 7.00% Senior Notes due 2022 (incorporated by reference to Exhibit 4.6 of the Company's Form 8-K filed August 13, 2014).
10.1	Bridge Loan Agreement, dated as of August 12, 2014, among William Lyon Homes, Inc., as Borrower, William Lyon Homes, as Parent, the Lenders from time to time party thereto, and J.P. Morgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed August 13, 2014).
10.2	Amendment No. 1 to Credit Agreement among William Lyon Homes, Inc., as Borrower, William Lyon Homes, as Parent, The Lenders from time to time party thereto, and Credit Suisse AG, as Administrative Agent, dated as of August 7, 2013.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbased Document.

64

* The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act (including this Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

** Pursuant to Rule 406T of Regulation S-T, the XBRL information will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 and will not be deemed filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, or otherwise subject to liability under those Sections.

65

EX-10.2

EXECUTION VERSION

AMENDMENT NO. 1 dated as of July 3, 2014 (this “Amendment”), to the Credit Agreement dated as of August 7, 2013 (the “Credit Agreement”), among WILLIAM LYON HOMES, INC., a California corporation (the “Borrower”), WILLIAM LYON HOMES, a Delaware corporation (“Parent”), the lenders from time to time party thereto (the “Lenders”), and CREDIT SUISSE AG, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders.

A. Pursuant to the Credit Agreement, the Lenders have extended, and have agreed to extend, credit to the Borrower.

B.The Borrower has entered into a Purchase and Sale Agreement dated as of June 22, 2014 (the “Purchase and Sale Agreement”), with PNW Homebuilders, L.L.C., PNW Home Builders North, L.L.C., PNW Home Builders South, L.L.C. and Crescent Ventures, L.L.C. (collectively, the “Sellers”), pursuant to which it intends to acquire (the “Polygon Acquisition”) the Residential Business (as defined in the Purchase and Sale Agreement) of the Sellers.

C.In connection with the foregoing, the Borrower and Parent have requested, and the Required Lenders have agreed, to amend certain provisions of the Credit Agreement as provided herein.

D.Capitalized terms used but not defined herein shall have the meanings given them in the Credit Agreement.

Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.Amendments to the Credit Agreement. Subject to the satisfaction of the conditions set forth in Section 4 hereof, the Credit Agreement is hereby amended as follows:

(a)Section 1.1 of the Credit Agreement is hereby amended by inserting the following defined terms in the appropriate alphabetical order therein:

“Amendment No. 1”: Amendment No. 1 dated as of July 3, 2014, to this Agreement.

“Minimum Borrowing Base Amount”: from and after the closing of the Polygon Acquisition (as defined in Amendment No. 1), an amount initially equal to $50,000,000, reducing by $5,000,000 on January 1, 2015 and on the first day of each fiscal quarter thereafter.

(b)The definition of the term “Borrowing Base” set forth in Section 1.1 of the Credit Agreement is hereby amended by (i) deleting the word “and” at the end of clause (ii) thereof and (ii) replacing the period at the end of clause (iii) thereof with the following:

“; and

(iv) from and after the closing date of the Polygon Acquisition (as defined in Amendment No. 1), the Borrowing Base at any time shall be deemed to be not less than the Minimum Borrowing Base Amount at such time.”

(c)Section 7.1(a) of the Credit Agreement is hereby amended by inserting at the end thereof the following:

“; provided that, (i) on the last day of each of the first four fiscal quarters ending after the closing of the Polygon Acquisition, the maximum Leverage Ratio permitted by this Section 7.1(a) shall be 75%, and (ii) on the last day of the fifth fiscal quarter ending after the closing of the Polygon Acquisition, the maximum Leverage Ratio permitted by this Section 7.1(a) shall be 70%”

SECTION 2.Representations and Warranties. To induce the other parties hereto to enter into this Amendment, Parent and the Borrower represent and warrant to each of the Lenders and the Administrative Agent that, after giving effect to this Amendment, (a) the representations and warranties set forth in Section 4 of the Credit Agreement are true and correct in all material respects (except any representations and warranties which are qualified by materiality, which are correct and accurate in all respects) on and as of the Amendment No. 1 Effective Date (as defined below) as if made on and as of the Amendment No. 1 Effective Date, provided if any such representations and warranties are expressly made only as of a prior date, such representations and warranties are true and correct in all material respects (except any representations and warranties which are qualified by materiality are correct and accurate in all respects) as of such prior date; and (b) No Default or Event of Default shall have occurred and be continuing on the Amendment No. 1 Effective Date.

SECTION 3.Amendment Effectiveness. This Amendment shall become effective on the date (the “Amendment No. 1 Effective Date”) on which (a) the Administrative Agent shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, Parent and the Required Lenders; and (b) the Administrative Agent shall have received all fees and reimbursement of all expenses required to be paid by the Borrower in connection with the transactions contemplated hereby.

SECTION 4.Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Lenders or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Loan Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. After the date hereof, any reference to the Credit Agreement shall mean the Credit Agreement as modified hereby. This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

SECTION 5.Acknowledgement and Consent. Each Loan Party hereby acknowledges that it has read this Amendment and consents to the terms hereof and further hereby affirms, confirms and agrees that (a) notwithstanding the effectiveness of this Amendment, the obligations of such Loan Party under each of the Loan Documents to which it is a party shall not be impaired and each of the Loan Documents to which such Loan Party is a party is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects, in each case, as amended hereby; and (b) its guaranty of the Obligations, and the pledge of and/or grant of a security interest in its assets as Collateral to secure the Obligations, all as and to the extent provided in the Security Documents as originally executed, shall continue in full force and effect in respect of, and to secure, the Obligations as modified hereby.

SECTION 6.Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or other customary means of electronic transmission (e.g., “pdf”) shall be as effective as delivery of a manually executed counterpart hereof.

SECTION 7.Applicable Law. THIS AMENDMENT AND ALL CLAIMS AND CONTROVERSIES IN CONNECTION HEREWITH SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 8.Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Amendment, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined only in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Amendment shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Amendment or the other Loan Documents against the Borrower, Parent or their respective properties in the courts of any jurisdiction.

SECTION 9.Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

WILLIAM LYON HOMES, INC.,
By
	/S/ Matthew R. Zaist
	Name: Matthew R. Zaist
	Title: President & Chief Operating           Officer
By
	/S/ Colin T. Severn
	Name: Colin T. Severn
	Title: Vice President & Chief            Financial Officer

WILLIAM LYON HOMES,
By
		/S/ Matthew R. Zaist
		Name: Matthew R. Zaist
		Title: President & Chief Operating           Officer
By
	/S/ Colin T. Severn
	Name: Colin T. Severn
	Title: Vice President & Chief            Financial Officer

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, individually and as Administrative Agent,
by
	/S/ Bill O’Daly
	Name: Bill O’Daly
	Title: Authorized Signatory
by
	/S/ Sally Reyes
	Name: Sally Reyes
	Title: Authorized Signatory

Name of Lender: JP Morgan Chase Bank, N.A.

By
	/S/ Donald Shokrian
	Name: Donald Shokrian
	Title: Managing Director

By
	Name:
	Title:

Name of Lender: Citibank, N.A.

By
	/S/ John C. Rowland
	Name: John C. Rowland
	Title: Vice President

By
	Name:
	Title:

[[NYCORP:3477998v3:3142W: 06/30/2014--05:56 PM]]

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William H. Lyon, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of William Lyon Homes;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2014	/S/ WILLIAM H. LYON
	William H. Lyon
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Colin T. Severn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of William Lyon Homes;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2014	/S/ COLIN T. SEVERN
	Colin T. Severn
	Vice President, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, William H. Lyon, Chief Executive Officer of William Lyon Homes (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Quarterly Report of the Company on Form 10-Q for the quarterly period ended September 30, 2014, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ WILLIAM H. LYON

William H. Lyon

Chief Executive Officer

November 12, 2014

This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Colin T. Severn, Chief Financial Officer of William Lyon Homes (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Quarterly Report of the Company on Form 10-Q for the quarterly period ended September 30, 2014, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ COLIN T. SEVERN

Colin T. Severn

Vice President, Chief Financial Officer

November 12, 2014

This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

XML

Segment Information - Segment Schedule of Homebuilding Assets (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Homebuilding assets:
Total homebuilding assets	$ 1,653,649		$ 1,010,411
Southern California | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	340,317		275,975
Northern California | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	228,156		143,693
Arizona | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	175,950		157,892
Nevada | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	130,758		85,695
Colorado | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	126,959		60,233
Washington | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	281,675		0
Oregon | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	204,349		0
Corporate | Reportable Geographical Components
Homebuilding assets:
Total homebuilding assets	$ 165,485	[1]	$ 286,923	[1]

[1] Comprised primarily of cash and cash equivalents, deferred income taxes, receivables, deferred loan costs, and other assets.

XML

Fair Value of Financial Instruments - Fair Value of Debt (Details) (Note Payable, USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Note Payable
Fair Value Measurements Of Financial Instruments [Line Items]
Fair value at December 31, 2013	$ 38,060
Repayments of principal	(57,156)	[1]
Borrowings of principal	60,360	[2]
Increase in value during the period	0
Fair value at September 30, 2014	$ 41,264

[1] Represents the actual amount of principal repaid

[2] Represents the actual amount of principal borrowed

XML

Senior Notes, Secured, and Unsecured Indebtedness - Notes Payable - Narrative (Details) (USD $)	0 Months Ended	9 Months Ended		0 Months Ended			9 Months Ended					9 Months Ended
	Sep. 03, 2009	Sep. 30, 2014 land_acquisition	Dec. 31, 2013	Jul. 03, 2014 Revolving Credit Facility Revolving Credit Facility Agreement	Jul. 02, 2014 Revolving Credit Facility Revolving Credit Facility Agreement	Aug. 07, 2013 Revolving Credit Facility Revolving Credit Facility Agreement	Sep. 30, 2014 Revolving Credit Facility Revolving Credit Facility Agreement	Jul. 03, 2014 Revolving Credit Facility Revolving Credit Facility Agreement	Aug. 07, 2013 Revolving Credit Facility Revolving Credit Facility Agreement	Sep. 30, 2014 Seller financing	Dec. 31, 2013 Seller financing	Sep. 30, 2014 Seller financing First note Seller Financing Notes Payable Maturing May 2015	Sep. 30, 2014 Seller financing First note Seller Financing Notes Payable, Notes Maturing October 2014	Sep. 30, 2014 Seller financing Second note Seller Financing Notes Payable Maturing January 2015
Debt Instrument [Line Items]
Notes payable		$ 41,264,000	$ 38,060,000							$ 3,724,000	$ 13,862,000	$ 3,100,000	$ 100,000	$ 500,000
Number of land acquisitions		2
Stated interest rate										4.00%		7.00%
Maturity date	Sep. 30, 2016					Aug. 05, 2016						May 31, 2015
Maximum borrowing capacity									100,000,000
Additional capacity under accordion feature									125,000,000
Minimum borrowing capacity								50,000,000.0	50,000,000
Maximum leverage ratio				75.00%	60.00%
Commitment fee percentage							0.50%
Outstanding letter of credit							$ 4,000,000

XML

Related Party Transactions - Narrative (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended	9 Months Ended
	Sep. 03, 2009	Mar. 31, 2013	Sep. 30, 2013
Related Party Transactions [Abstract]
Aggregate purchase price of aircraft	$ 8.3
Cash paid on sale of aircraft	2.1
Promissory note from the affiliate	6.2
Adjusted fair value	5.2
Semiannual interest payments received	0.1
Maturity date	Sep. 30, 2016
Charges related to the rent expense			$ 0.2
Current lease expiry date		Mar. 31, 2013

XML

Senior Notes, Secured, and Unsecured Indebtedness Senior Notes, Secured, and Unsecured Indebtedness - Senior Unsecured Facility - Narrative (Details) (USD $) In Thousands, unless otherwise specified			0 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Aug. 12, 2014 Senior unsecured loan facility	Sep. 30, 2014 Senior unsecured loan facility	Aug. 12, 2014 Senior unsecured loan facility
Debt Instrument [Line Items]
Total senior notes	$ 880,443	$ 431,295			$ 120,000
Variable rate basis			Eurodollar rate
Basis spread on variable rate			1.00%
Debt Instrument, Interest Rate, Increase (Decrease)			0.50%
Derivative, Cap Interest Rate				7.25%
Debt Instrument, Maturity Period			1 year

XML

Acquisition of Polygon Northwest Homes - Reconciliation of Consideration Transferred as of Acquisition Date (Details) (Polygon Northwest Homes, USD $) In Thousands, unless otherwise specified	0 Months Ended
	Aug. 12, 2014
Polygon Northwest Homes
Business Acquisition [Line Items]
Purchase consideration	$ 552,252
Net proceeds received from Polygon inventory involved in land banking transactions	(59,834)
Total consideration transferred	$ 492,418

XML

Income Per Common Share - Basic and Diluted Income (Loss) Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share [Abstract]
Basic weighted average number of common shares outstanding (in shares)	31,232,655	30,975,160	31,184,101	22,569,810
Effect of dilutive securities:
Stock options, unvested common shares, and warrants (in shares)	1,528,091	920,654	1,541,063	877,144
Diluted average shares outstanding (in shares)	32,760,746	31,895,814	32,725,164	23,446,954
Net income available to common stockholders	$ 5,638	$ 7,562	$ 26,620	$ 10,880
Basic income per common share (in USD per share)	$ 0.18	$ 0.24	$ 0.85	$ 0.48
Dilutive income per common share (in USD per share)	$ 0.17	$ 0.24	$ 0.81	$ 0.46

XML

Senior Notes, Secured, and Unsecured Indebtedness (Tables)

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Details of Notes Payable and Senior Notes

	September 30, 2014		December 31, 2013
Notes payable:
Construction notes payable	$	37,540	$	24,198
Seller financing	3,724		13,862
Revolving lines of credit	—		—
Total notes payable	$	41,264	$	38,060
Senior unsecured facility	$	120,000	$	—
Senior notes:
5 3/4% Senior Notes due April 15, 2019	$	150,000	$	—
8 1/2% Senior Notes due November 15, 2020	430,443		431,295
7% Senior Notes due August 15, 2022	$	300,000	$	—
Total senior notes	$	880,443	$	431,295
Total notes payable and senior notes	$	1,041,707	$	469,355

Maturities of Notes Payable and Senior Notes

Certain of the Company's consolidated joint ventures have entered into construction notes payable agreements. The issuance date, total availability under each facility outstanding, maturity date and interest rate are listed in the table below as of September 30, 2014 (in millions):

Issuance Date	Facility Size		Outstanding		Maturity	Current Rate
March, 2014	$	26.0	$	4.2	October, 2016	3.15	%	(1)
December, 2013	18.6		14.1		January, 2016	4.25	%	(1)
June, 2013	28.0		19.2		June, 2016	4.00	%	(2)
	$	72.6	$	37.5

(1) Loan bears interest at the Company's option of either LIBOR +3.0% or the prime rate +1.0%.

(2) Loan bears interest at the prime rate +0.5%, with a rate floor of 4.0% .

As of September 30, 2014, the maturities of the Notes payable, Senior unsecured facility, 7% Senior Notes, 5 3/4% Senior Notes, and 8 1/2% Senior Notes are as follows (in thousands):

Year Ending December 31,
2014	$	126
2015	123,598
2016	37,540
2017	—
2018	—
Thereafter	875,000
	$	1,036,264

Summary of Senior Notes Redemption Prices Percentage

On or after April 15, 2016, California Lyon may redeem all or a portion of the 5.75% Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the period beginning on each of the dates indicated below:

Year	Percentage
April 15, 2016	104.313	%
October 15, 2016	102.875	%
April 15, 2017	101.438	%
April 15, 2018 and thereafter	100.000	%

On or after August 15, 2017, California Lyon may redeem all or a portion of the 7.00% Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the period beginning on each of the dates indicated below:

Year	Percentage
August 15, 2017	103.500	%
August 15, 2018	101.750	%
August 15, 2019 and thereafter	100.000	%

Condensed Consolidating Balance Sheet

CONDENSED CONSOLIDATING BALANCE SHEET

(Unaudited)

As of September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	25,918		$	195		$	9,006		$	—		$	35,119
Restricted cash	—		504			—			—			—			504
Receivables	—		16,267			367			3,206			—			19,840
Escrow proceeds receivable	—		13,064			1,506			36			—			14,606
Real estate inventories
Owned	—		748,429			553,977			76,026			—			1,378,432
Deferred loan costs, net	—		25,975			—			—			—			25,975
Goodwill	—		14,209			48,919			—			—			63,128
Intangibles, net	—		1,477			5,900			—			—			7,377
Deferred income taxes, net	—		91,055			—			—			—			91,055
Other assets, net	—		14,943			2,301			369			—			17,613
Investments in subsidiaries	456,296		(35,547		)	(599,212		)	—			178,463			—
Intercompany receivables	—		—			231,084			—			(231,084		)	—
Total assets	$	456,296	$	916,294		$	245,037		$	88,643		$	(52,621	)	$	1,653,649
LIABILITIES AND EQUITY
Accounts payable	$	—	$	35,965		$	5,363		$	6,570		$	—		$	47,898
Accrued expenses	—		88,080			5,460			102			—			93,642
Notes payable	—		3,077			647			37,540			—			41,264
Senior unsecured facility	—		120,000			—			—			—			120,000
5 3/4% Senior Notes	—		150,000			—			—			—			150,000
8  1/2% Senior Notes	—		430,443			—			—			—			430,443
7% Senior Notes	—		300,000			—			—			—			300,000
Intercompany payables	—		165,211			—			65,873			(231,084		)	—
Total liabilities	—		1,292,776			11,470			110,085			(231,084		)	1,183,247
Equity
William Lyon Homes stockholders’ equity	456,296		(376,482		)	233,567			(35,547		)	178,463			456,297
Noncontrolling interests	—		—			—			14,105			—			14,105
Total liabilities and equity	$	456,296	$	916,294		$	245,037		$	88,643		$	(52,621	)	$	1,653,649

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	166,516	$	28	$	5,128		$	—		$	171,672
Restricted cash	—		854		—		—			—			854
Receivables	—		11,429		5		5,025			—			16,459
Escrow proceeds receivable	—		4,313		67		—			—			4,380
Real estate inventories
Owned	—		608,965		3,761		59,064			—			671,790
Not owned	—		12,960		—		—			—			12,960
Deferred loan costs, net	—		9,575		—		—			—			9,575
Goodwill	—		14,209		—		—			—			14,209
Intangibles, net	—		2,766		—		—			—			2,766
Deferred income taxes, net	—		95,580		—		—			—			95,580
Other assets, net	—		9,100		723		343			—			10,166
Investments in subsidiaries	428,179		9,975		—		—			(438,154		)	—
Intercompany receivables	—		—		225,056		(15		)	(225,041		)	—
Total assets	$	428,179	$	946,242	$	229,640	$	69,545		$	(663,195	)	$	1,010,411
LIABILITIES AND EQUITY
Accounts payable	$	—	$	12,489	$	1,959	$	2,651		$	—		$	17,099
Accrued expenses	—		59,376		744		83			—			60,203
Liabilities from inventories not owned	—		12,960		—		—			—			12,960
Notes payable	—		12,281		1,762		24,017			—			38,060
8 1/2% Senior Notes	—		431,295		—		—			—			431,295
Intercompany payables	—		214,837		—		10,204			(225,041		)	—
Total liabilities	—		743,238		4,465		36,955			(225,041		)	559,617
Equity
William Lyon Homes stockholders’ equity	428,179		203,004		225,175		9,975			(438,154		)	428,179
Noncontrolling interests	—		—		—		22,615			—			22,615
Total liabilities and equity	$	428,179	$	946,242	$	229,640	$	69,545		$	(663,195	)	$	1,010,411

Condensed Consolidating Statement of Operations

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	113,716		$	64,656		$	17,933		$	—		$	196,305
Construction services	—		10,593			—			—			—			10,593
Management fees	—		455			—			—			(455		)	—
	—		124,764			64,656			17,933			(455		)	206,898
Operating costs
Cost of sales	—		(88,778		)	(54,828		)	(14,623		)	455			(157,774		)
Construction services	—		(8,262		)	—			—			—			(8,262		)
Sales and marketing	—		(7,636		)	(3,856		)	(984		)	—			(12,476		)
General and administrative	—		(11,532		)	(1,194		)	—			—			(12,726		)
Transaction expenses	—		(5,768		)	—			—			—			(5,768		)
Amortization of intangible assets	—		(174		)	—			—			—			(174		)
Other	—		(620		)	164			2			—			(454		)
	—		(122,770		)	(59,714		)	(15,605		)	455			(197,634		)
Income from subsidiaries	5,638		907			—			—			(6,545		)	—
Operating income	5,638		2,901			4,942			2,328			(6,545		)	9,264
Other income (expense), net	—		685			(4		)	(324		)	—			357
Income before provision for income taxes	5,638		3,586			4,938			2,004			(6,545		)	9,621
Provision for income taxes	—		(1,999		)	—			—			—			(1,999		)
Net income	5,638		1,587			4,938			2,004			(6,545		)	7,622
Less: Net income attributable to noncontrolling interests	—		483			—			(2,467		)	—			(1,984		)
Net income (loss) attributable to William Lyon Homes	5,638		2,070			4,938			(463		)	(6,545		)	5,638
Net income (loss) available to common stockholders	$	5,638	$	2,070		$	4,938		$	(463	)	$	(6,545	)	$	5,638

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	76,178		$	48,487		$	16,687		$	—		$	141,352
Construction services	—		9,478			—			—			—			9,478
Management fees	—		456			—			—			(456		)	—
	—		86,112			48,487			16,687			(456		)	150,830
Operating costs
Cost of sales	—		(55,968		)	(40,519		)	(11,926		)	456			(107,957		)
Construction services	—		(8,135		)	—			—			—			(8,135		)
Sales and marketing	—		(4,108		)	(2,256		)	(315		)	—			(6,679		)
General and administrative	—		(9,473		)	(726		)	(1		)	—			(10,200		)
Amortization of intangible assets	—		(191		)	—			—			—			(191		)
Other	—		(695		)	—			—			—			(695		)
	—		(78,570		)	(43,501		)	(12,242		)	456			(133,857		)
Income from subsidiaries	12,716		5,804			—			—			(18,520		)	—
Operating income	12,716		13,346			4,986			4,445			(18,520		)	16,973
Interest expense, net of amounts capitalized	—		(51		)	—			—			—			(51		)
Other income (expense), net	—		423			(9		)	(300		)	—			114
Income before provision for income taxes	12,716		13,718			4,977			4,145			(18,520		)	17,036
Provision for income taxes	—		(6,356		)	—			—			—			(6,356		)
Net (loss) income	12,716		7,362			4,977			4,145			(18,520		)	10,680
Less: Net income attributable to noncontrolling interests	—		—			—			(3,118		)	—			(3,118		)
Net (loss) income attributable to William Lyon Homes	12,716		7,362			4,977			1,027			(18,520		)	7,562
Preferred stock dividends	—		—			—			—			—			—
Net (loss) income available to common stockholders	$	12,716	$	7,362		$	4,977		$	1,027		$	(18,520	)	$	7,562

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	343,449		$	107,093		$	55,930		$	—		$	506,472
Construction services	—		30,186			—			—			—			30,186
Management fees	—		1,672			—			—			(1,672		)	—
	—		375,307			107,093			55,930			(1,672		)	536,658
Operating costs
Cost of sales	—		(262,360		)	(89,351		)	(43,573		)	1,672			(393,612		)
Construction services	—		(24,735		)	—			—			—			(24,735		)
Sales and marketing	—		(18,526		)	(6,671		)	(2,761		)	—			(27,958		)
General and administrative	—		(33,030		)	(2,849		)	(2		)	—			(35,881		)
Transaction expenses	—		(5,768		)	—			—			—			(5,768		)
Amortization of intangible assets	—		(1,294		)	—			—			—			(1,294		)
Other	—		(1,917		)	182			(10		)	—			(1,745		)
	—		(347,630		)	(98,689		)	(46,346		)	1,672			(490,993		)
Income from subsidiaries	26,620		7,730			—			—			(34,350		)	—
Operating income	26,620		35,407			8,404			9,584			(34,350		)	45,665
Interest expense, net of amounts capitalized	—		—			—			—			—			—
Other income (expense), net	—		1,550			(15		)	(705		)	—			830
Income before provision for income taxes	26,620		36,957			8,389			8,879			(34,350		)	46,495
Provision for income taxes	—		(12,779		)	—			—			—			(12,779		)
Net income	26,620		24,178			8,389			8,879			(34,350		)	33,716
Less: Net income attributable to noncontrolling interests	—		—			—			(7,096		)	—			(7,096		)
Net income attributable to William Lyon Homes	26,620		24,178			8,389			1,783			(34,350		)	26,620
Net income available to common stockholders	$	26,620	$	24,178		$	8,389		$	1,783		$	(34,350	)	$	26,620

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—		$	173,032		$	142,105		$	26,545		$	—		$	341,682
Construction services	—			21,439			—			—			—			21,439
Management fees	—			(727		)	—			—			727			—
	—			193,744			142,105			26,545			727			363,121
Operating costs
Cost of sales	—			(132,270		)	(119,051		)	(18,722		)	(727		)	(270,770		)
Construction services	—			(17,472		)	—			—			—			(17,472		)
Sales and marketing	—			(9,826		)	(6,867		)	(789		)	—			(17,482		)
General and administrative	—			(26,162		)	(1,835		)	(19		)	—			(28,016		)
Amortization of intangible assets	—			(1,173		)	—			—			—			(1,173		)
Other	—			(1,744		)	(2		)	—			—			(1,746		)
	—			(188,647		)	(127,755		)	(19,530		)	(727		)	(336,659		)
Income from subsidiaries	17,562			13,800			—			—			(31,362		)	—
Operating income	17,562			18,897			14,350			7,015			(31,362		)	26,462
Interest expense, net of amounts capitalized	—			(2,476		)	(126		)	—			—			(2,602		)
Other income (expense), net	—			1,184			(20		)	(907		)	—			257
Income before reorganization items and provision for income taxes	17,562			17,605			14,204			6,108			(31,362		)	24,117
Reorganization items, net	—			(464		)	—			—			—			(464		)
Income before provision for income taxes	17,562			17,141			14,204			6,108			(31,362		)	23,653
Provision for income taxes	—			(6,366		)	—			—			—			(6,366		)
Net income	17,562			10,775			14,204			6,108			(31,362		)	17,287
Less: Net income attributable to noncontrolling interests	—			—			—			(4,879		)	—			(4,879		)
Net income attributable to William Lyon Homes	17,562			10,775			14,204			1,229			(31,362		)	12,408
Preferred stock dividends	(1,528		)	—			—			—			—			(1,528		)
Net income available to common stockholders	$	16,034		$	10,775		$	14,204		$	1,229		$	(31,362	)	$	10,880

Condensed Consolidating Statement of Cash Flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash (used in) provided by operating activities	$	(1,496	)	$	358,000		$	(536,794	)	$	(2,396	)	$	1,496		$	(181,190	)
Investing activities
Distributions from unconsolidated joint ventures	—			146			—			—			—			146
Cash paid for acquisitions, net	—			(437,599		)	(51,186		)	—			—			(488,785		)
Purchases of property and equipment	—			(1,447		)	(288		)	8			—			(1,727		)
Investments in subsidiaries	—			56,889			595,575			—			(652,464		)	—
Net cash provided by (used in) investing activities	—			(382,011		)	544,101			8			(652,464		)	(490,366		)
Financing activities
Proceeds from borrowings on notes payable	—			1,113			(1,114		)	57,948			—			57,947
Principal payments on notes payable	—			(12,730		)	—			(44,425		)	—			(57,155		)
Proceeds from issuance of 5 3/4% notes	—			150,000			—			—			—			150,000
Proceeds from issuance of 7% senior notes	—			300,000			—			—			—			300,000
Borrowings on senior unsecured facility	—			120,000			—			—			—			120,000
Payment of deferred loan costs	—			(18,909		)	—			—			—			(18,909		)
Proceeds from exercise of stock options	—			285			—			—			—			285
Shares remitted to Company for employee tax withholding	—			(1,454		)	—			—			—			(1,454		)
Offering costs related to secondary sale of common stock	—			(105		)	—			—			—			(105		)
Noncontrolling interests contributions	—			—			—			9,641			—			9,641
Noncontrolling interests distributions	—			—			—			(25,247		)	—			(25,247		)
Advances to affiliates	—			—			2			(47,305		)	47,303			—
Intercompany receivables/payables	1,496			(654,787		)	(6,028		)	55,654			603,665			—
Net cash provided by (used in)financing activities	1,496			(116,587		)	(7,140		)	6,266			650,968			535,003
Net (decrease) increase in cash and cash equivalents	—			(140,598		)	167			3,878			—			(136,553		)
Cash and cash equivalents at beginning of period	—			166,516			28			5,128			—			171,672
Cash and cash equivalents at end of period	$	—		$	25,918		$	195		$	9,006		$	—		$	35,119

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash used in operating activities	$	—	$	(142,959	)	$	12,221		$	(34,181	)	$	—		$	(164,919	)
Investing activities
Purchases of property and equipment	—		(3,299		)	(57		)	(3		)	—			(3,359		)
Investments in subsidiaries	—		4,804			—			—			(4,804		)	—
Net cash (used in) provided by investing activities	—		1,505			(57		)	(3		)	(4,804		)	(3,359		)
Financing activities
Proceeds on borrowings on notes payable	—		16,790			1,762			32,892			—			51,444
Principal payments on notes payable	—		(26,360		)	—			(19,099		)	—			(45,459		)
Payment of deferred loan costs	—		(1,792		)	—			—			—			(1,792		)
Proceeds from issuance of common stock	—		179,438			—			—			—			179,438
Offering costs related to issuance of common stock	—		(15,655		)	—			—			—			(15,655		)
Payment of preferred stock dividends	—		(2,550		)	—			—			—			(2,550		)
Noncontrolling interests contributions	—		—			—			35,399			—			35,399
Noncontrolling interests distributions	—		—			—			(21,700		)	—			(21,700		)
Intercompany receivables/payables	—		183			(12,902		)	923			11,796			—
Advances to affiliates	—		—			(776		)	7,768			(6,992		)	—
Net cash provided by (used in) financing activities	—		150,054			(11,916		)	36,183			4,804			179,125
Net increase (decrease) in cash and cash equivalents	—		8,600			248			1,999			—			10,847
Cash and cash equivalents at beginning of period	—		69,376			65			1,634			—			71,075
Cash and cash equivalents at end of period	$	—	$	77,976		$	313		$	3,633		$	—		$	81,922

XML

Senior Notes, Secured, and Unsecured Indebtedness - Condensed Consolidating Balance Sheet (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013		Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 35,119		$ 171,672		$ 81,922	$ 71,075
Restricted cash	504		854
Receivables	19,840		16,459
Escrow proceeds receivable	14,606		4,380
Real estate inventories
Owned	1,378,432		671,790
Not owned	0	[1]	12,960	[1]
Deferred loan costs, net	25,975		9,575
Goodwill	63,128		14,209
Intangibles, net	7,377		2,766
Deferred income taxes, net	91,055		95,580
Other assets, net	17,613		10,166
Investments in subsidiaries	0		0
Intercompany receivables	0		0
Total assets	1,653,649		1,010,411
LIABILITIES AND EQUITY
Accounts payable	47,898		17,099
Accrued expenses	93,642		60,203
Liabilities from inventories not owned	0		12,960
Total notes payable	41,264		38,060
Total senior notes	1,041,707		469,355
Intercompany payables	0		0
Total liabilities	1,183,247		559,617
Equity
William Lyon Homes stockholders’ equity	456,297		428,179
Noncontrolling interests	14,105		22,615
Total liabilities and equity	1,653,649		1,010,411
Delaware Lyon
ASSETS
Cash and cash equivalents	0		0		0	0
Restricted cash	0		0
Receivables	0		0
Escrow proceeds receivable	0		0
Real estate inventories
Owned	0		0
Not owned			0
Deferred loan costs, net	0		0
Goodwill	0		0
Intangibles, net	0		0
Deferred income taxes, net	0		0
Other assets, net	0		0
Investments in subsidiaries	456,296		428,179
Intercompany receivables	0		0
Total assets	456,296		428,179
LIABILITIES AND EQUITY
Accounts payable	0		0
Accrued expenses	0		0
Liabilities from inventories not owned			0
Total notes payable	0		0
Intercompany payables	0		0
Total liabilities	0		0
Equity
William Lyon Homes stockholders’ equity	456,296		428,179
Noncontrolling interests	0		0
Total liabilities and equity	456,296		428,179
California Lyon
ASSETS
Cash and cash equivalents	25,918		166,516		77,976	69,376
Restricted cash	504		854
Receivables	16,267		11,429
Escrow proceeds receivable	13,064		4,313
Real estate inventories
Owned	748,429		608,965
Not owned			12,960
Deferred loan costs, net	25,975		9,575
Goodwill	14,209		14,209
Intangibles, net	1,477		2,766
Deferred income taxes, net	91,055		95,580
Other assets, net	14,943		9,100
Investments in subsidiaries	(35,547)		9,975
Intercompany receivables	0		0
Total assets	916,294		946,242
LIABILITIES AND EQUITY
Accounts payable	35,965		12,489
Accrued expenses	88,080		59,376
Liabilities from inventories not owned			12,960
Total notes payable	3,077		12,281
Intercompany payables	165,211		214,837
Total liabilities	1,292,776		743,238
Equity
William Lyon Homes stockholders’ equity	(376,482)		203,004
Noncontrolling interests	0		0
Total liabilities and equity	916,294		946,242
Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	195		28		313	65
Restricted cash	0		0
Receivables	367		5
Escrow proceeds receivable	1,506		67
Real estate inventories
Owned	553,977		3,761
Not owned			0
Deferred loan costs, net	0		0
Goodwill	48,919		0
Intangibles, net	5,900		0
Deferred income taxes, net	0		0
Other assets, net	2,301		723
Investments in subsidiaries	(599,212)		0
Intercompany receivables	231,084		225,056
Total assets	245,037		229,640
LIABILITIES AND EQUITY
Accounts payable	5,363		1,959
Accrued expenses	5,460		744
Liabilities from inventories not owned			0
Total notes payable	647		1,762
Intercompany payables	0		0
Total liabilities	11,470		4,465
Equity
William Lyon Homes stockholders’ equity	233,567		225,175
Noncontrolling interests	0		0
Total liabilities and equity	245,037		229,640
Non-Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	9,006		5,128		3,633	1,634
Restricted cash	0		0
Receivables	3,206		5,025
Escrow proceeds receivable	36		0
Real estate inventories
Owned	76,026		59,064
Not owned			0
Deferred loan costs, net	0		0
Goodwill	0		0
Intangibles, net	0		0
Deferred income taxes, net	0		0
Other assets, net	369		343
Investments in subsidiaries	0		0
Intercompany receivables	0		(15)
Total assets	88,643		69,545
LIABILITIES AND EQUITY
Accounts payable	6,570		2,651
Accrued expenses	102		83
Liabilities from inventories not owned			0
Total notes payable	37,540		24,017
Intercompany payables	65,873		10,204
Total liabilities	110,085		36,955
Equity
William Lyon Homes stockholders’ equity	(35,547)		9,975
Noncontrolling interests	14,105		22,615
Total liabilities and equity	88,643		69,545
Eliminations
ASSETS
Cash and cash equivalents	0		0		0	0
Restricted cash	0		0
Receivables	0		0
Escrow proceeds receivable	0		0
Real estate inventories
Owned	0		0
Not owned			0
Deferred loan costs, net	0		0
Goodwill	0		0
Intangibles, net	0		0
Deferred income taxes, net	0		0
Other assets, net	0		0
Investments in subsidiaries	178,463		(438,154)
Intercompany receivables	(231,084)		(225,041)
Total assets	(52,621)		(663,195)
LIABILITIES AND EQUITY
Accounts payable	0		0
Accrued expenses	0		0
Liabilities from inventories not owned			0
Total notes payable	0		0
Intercompany payables	(231,084)		(225,041)
Total liabilities	(231,084)		(225,041)
Equity
William Lyon Homes stockholders’ equity	178,463		(438,154)
Noncontrolling interests	0		0
Total liabilities and equity	(52,621)		(663,195)
Senior unsecured loan facility
LIABILITIES AND EQUITY
Total senior notes	120,000		0
Senior unsecured loan facility | Delaware Lyon
LIABILITIES AND EQUITY
Total senior notes	0
Senior unsecured loan facility | California Lyon
LIABILITIES AND EQUITY
Total senior notes	120,000
Senior unsecured loan facility | Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0
Senior unsecured loan facility | Non-Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0
Senior unsecured loan facility | Eliminations
LIABILITIES AND EQUITY
Total senior notes	0
5 3/4% Senior notes due April 15, 2019
LIABILITIES AND EQUITY
Total senior notes	150,000		0
5 3/4% Senior notes due April 15, 2019 | Delaware Lyon
LIABILITIES AND EQUITY
Total senior notes	0
5 3/4% Senior notes due April 15, 2019 | California Lyon
LIABILITIES AND EQUITY
Total senior notes	150,000
5 3/4% Senior notes due April 15, 2019 | Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0
5 3/4% Senior notes due April 15, 2019 | Non-Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0
5 3/4% Senior notes due April 15, 2019 | Eliminations
LIABILITIES AND EQUITY
Total senior notes	0
8 1/2% Senior notes due November 15, 2020
LIABILITIES AND EQUITY
Total senior notes	430,443		431,295
8 1/2% Senior notes due November 15, 2020 | Delaware Lyon
LIABILITIES AND EQUITY
Total senior notes	0		0
8 1/2% Senior notes due November 15, 2020 | California Lyon
LIABILITIES AND EQUITY
Total senior notes	430,443		431,295
8 1/2% Senior notes due November 15, 2020 | Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0		0
8 1/2% Senior notes due November 15, 2020 | Non-Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0		0
8 1/2% Senior notes due November 15, 2020 | Eliminations
LIABILITIES AND EQUITY
Total senior notes	0		0
7% Senior notes due August 15, 2022
LIABILITIES AND EQUITY
Total senior notes	300,000		0
7% Senior notes due August 15, 2022 | Delaware Lyon
LIABILITIES AND EQUITY
Total senior notes	0
7% Senior notes due August 15, 2022 | California Lyon
LIABILITIES AND EQUITY
Total senior notes	300,000
7% Senior notes due August 15, 2022 | Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0
7% Senior notes due August 15, 2022 | Non-Guarantor Subsidiaries
LIABILITIES AND EQUITY
Total senior notes	0
7% Senior notes due August 15, 2022 | Eliminations
LIABILITIES AND EQUITY
Total senior notes	$ 0

[1] Represents the consolidation of a land banking arrangement, net of deposits. The final lots attributable to this amount were purchased in April 2014.

XML

Senior Notes, Secured, and Unsecured Indebtedness - Maturities of Notes Payable, Senior Unsecured Facility, 5 3/4% and 8 1/2% Senior Notes (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Debt Instrument [Line Items]
Total notes payable and senior notes	$ 1,041,707,000	$ 469,355,000
Senior notes
Debt Instrument [Line Items]
2014	126,000
2015	123,598,000
2016	37,540,000
2017	0
2018	0
Thereafter	875,000,000
Total notes payable and senior notes	1,036,264,000
Unamortized premium	$ 5,400,000

XML

Segment Information - Narrative (Details)	6 Months Ended	9 Months Ended	0 Months Ended	3 Months Ended
	Jun. 30, 2014 segment	Sep. 30, 2014 segment	Aug. 12, 2014 Polygon Northwest Homes segment	Sep. 30, 2014 Polygon Northwest Homes segment
Segment Reporting Information [Line Items]
Number of operating segments	5	1	2	2

XML

Senior Notes, Secured, and Unsecured Indebtedness - Condensed Consolidating Statement of Cash Flows (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities
Net cash (used in) provided by operating activities	$ (181,190)	$ (164,919)
Investing activities
Distributions from unconsolidated joint ventures	146	0
Cash paid for acquisitions, net	(488,785)	0
Purchases of property and equipment	(1,727)	(3,359)
Investments in subsidiaries	0	0
Net cash used in investing activities	(490,366)	(3,359)
Financing activities
Proceeds from borrowings on notes payable	57,947	51,444
Principal payments on notes payable	(57,155)	(45,459)
Borrowings on senior unsecured facility	120,000	0
Payment of deferred loan costs	(18,909)	(1,792)
Proceeds from stock options exercised	285	0
Proceeds from issuance of common stock	0	179,438
Shares remitted to Company for employee tax withholding	(1,454)	0
Offering costs related to secondary sale of common stock	(105)	(15,655)
Payment of preferred stock dividends	0	(2,550)
Noncontrolling interests contributions	9,641	35,399
Noncontrolling interests distributions	(25,247)	(21,700)
Advances to affiliates	0	0
Intercompany receivables/payables	0	0
Net cash provided by (used in)financing activities	535,003	179,125
Net (decrease) increase in cash and cash equivalents	(136,553)	10,847
Cash and cash equivalents — beginning of period	171,672	71,075
Cash and cash equivalents — end of period	35,119	81,922
Delaware Lyon
Operating activities
Net cash (used in) provided by operating activities	(1,496)	0
Investing activities
Distributions from unconsolidated joint ventures	0
Cash paid for acquisitions, net	0
Purchases of property and equipment	0	0
Investments in subsidiaries	0	0
Net cash used in investing activities	0	0
Financing activities
Proceeds from borrowings on notes payable	0	0
Principal payments on notes payable	0	0
Borrowings on senior unsecured facility	0
Payment of deferred loan costs	0	0
Proceeds from stock options exercised	0
Proceeds from issuance of common stock		0
Shares remitted to Company for employee tax withholding	0
Offering costs related to secondary sale of common stock	0	0
Payment of preferred stock dividends		0
Noncontrolling interests contributions	0	0
Noncontrolling interests distributions	0	0
Advances to affiliates	0	0
Intercompany receivables/payables	1,496	0
Net cash provided by (used in)financing activities	1,496	0
Net (decrease) increase in cash and cash equivalents	0	0
Cash and cash equivalents — beginning of period	0	0
Cash and cash equivalents — end of period	0	0
California Lyon
Operating activities
Net cash (used in) provided by operating activities	358,000	(142,959)
Investing activities
Distributions from unconsolidated joint ventures	146
Cash paid for acquisitions, net	(437,599)
Purchases of property and equipment	(1,447)	(3,299)
Investments in subsidiaries	56,889	4,804
Net cash used in investing activities	(382,011)	1,505
Financing activities
Proceeds from borrowings on notes payable	1,113	16,790
Principal payments on notes payable	(12,730)	(26,360)
Borrowings on senior unsecured facility	120,000
Payment of deferred loan costs	(18,909)	(1,792)
Proceeds from stock options exercised	285
Proceeds from issuance of common stock		179,438
Shares remitted to Company for employee tax withholding	(1,454)
Offering costs related to secondary sale of common stock	(105)	(15,655)
Payment of preferred stock dividends		(2,550)
Noncontrolling interests contributions	0	0
Noncontrolling interests distributions	0	0
Advances to affiliates	0	0
Intercompany receivables/payables	(654,787)	183
Net cash provided by (used in)financing activities	(116,587)	150,054
Net (decrease) increase in cash and cash equivalents	(140,598)	8,600
Cash and cash equivalents — beginning of period	166,516	69,376
Cash and cash equivalents — end of period	25,918	77,976
Guarantor Subsidiaries
Operating activities
Net cash (used in) provided by operating activities	(536,794)	12,221
Investing activities
Distributions from unconsolidated joint ventures	0
Cash paid for acquisitions, net	(51,186)
Purchases of property and equipment	(288)	(57)
Investments in subsidiaries	595,575	0
Net cash used in investing activities	544,101	(57)
Financing activities
Proceeds from borrowings on notes payable	(1,114)	1,762
Principal payments on notes payable	0	0
Borrowings on senior unsecured facility	0
Payment of deferred loan costs	0	0
Proceeds from stock options exercised	0
Proceeds from issuance of common stock		0
Shares remitted to Company for employee tax withholding	0
Offering costs related to secondary sale of common stock	0	0
Payment of preferred stock dividends		0
Noncontrolling interests contributions	0	0
Noncontrolling interests distributions	0	0
Advances to affiliates	2	(776)
Intercompany receivables/payables	(6,028)	(12,902)
Net cash provided by (used in)financing activities	(7,140)	(11,916)
Net (decrease) increase in cash and cash equivalents	167	248
Cash and cash equivalents — beginning of period	28	65
Cash and cash equivalents — end of period	195	313
Non-Guarantor Subsidiaries
Operating activities
Net cash (used in) provided by operating activities	(2,396)	(34,181)
Investing activities
Distributions from unconsolidated joint ventures	0
Cash paid for acquisitions, net	0
Purchases of property and equipment	8	(3)
Investments in subsidiaries	0	0
Net cash used in investing activities	8	(3)
Financing activities
Proceeds from borrowings on notes payable	57,948	32,892
Principal payments on notes payable	(44,425)	(19,099)
Borrowings on senior unsecured facility	0
Payment of deferred loan costs	0	0
Proceeds from stock options exercised	0
Proceeds from issuance of common stock		0
Shares remitted to Company for employee tax withholding	0
Offering costs related to secondary sale of common stock	0	0
Payment of preferred stock dividends		0
Noncontrolling interests contributions	9,641	35,399
Noncontrolling interests distributions	(25,247)	(21,700)
Advances to affiliates	(47,305)	7,768
Intercompany receivables/payables	55,654	923
Net cash provided by (used in)financing activities	6,266	36,183
Net (decrease) increase in cash and cash equivalents	3,878	1,999
Cash and cash equivalents — beginning of period	5,128	1,634
Cash and cash equivalents — end of period	9,006	3,633
Eliminations
Operating activities
Net cash (used in) provided by operating activities	1,496	0
Investing activities
Distributions from unconsolidated joint ventures	0
Cash paid for acquisitions, net	0
Purchases of property and equipment	0	0
Investments in subsidiaries	(652,464)	(4,804)
Net cash used in investing activities	(652,464)	(4,804)
Financing activities
Proceeds from borrowings on notes payable	0	0
Principal payments on notes payable	0	0
Borrowings on senior unsecured facility	0
Payment of deferred loan costs	0	0
Proceeds from stock options exercised	0
Proceeds from issuance of common stock		0
Shares remitted to Company for employee tax withholding	0
Offering costs related to secondary sale of common stock	0	0
Payment of preferred stock dividends		0
Noncontrolling interests contributions	0	0
Noncontrolling interests distributions	0	0
Advances to affiliates	47,303	(6,992)
Intercompany receivables/payables	603,665	11,796
Net cash provided by (used in)financing activities	650,968	4,804
Net (decrease) increase in cash and cash equivalents	0	0
Cash and cash equivalents — beginning of period	0	0
Cash and cash equivalents — end of period	0	0
5 3/4% Senior notes due April 15, 2019
Financing activities
Proceeds from issuance of senior notes	150,000	0
5 3/4% Senior notes due April 15, 2019 | Delaware Lyon
Financing activities
Proceeds from issuance of senior notes	0
5 3/4% Senior notes due April 15, 2019 | California Lyon
Financing activities
Proceeds from issuance of senior notes	150,000
5 3/4% Senior notes due April 15, 2019 | Guarantor Subsidiaries
Financing activities
Proceeds from issuance of senior notes	0
5 3/4% Senior notes due April 15, 2019 | Non-Guarantor Subsidiaries
Financing activities
Proceeds from issuance of senior notes	0
5 3/4% Senior notes due April 15, 2019 | Eliminations
Financing activities
Proceeds from issuance of senior notes	0
7% Senior notes due August 15, 2022
Financing activities
Proceeds from issuance of senior notes	300,000	0
7% Senior notes due August 15, 2022 | Delaware Lyon
Financing activities
Proceeds from issuance of senior notes	0
7% Senior notes due August 15, 2022 | California Lyon
Financing activities
Proceeds from issuance of senior notes	300,000
7% Senior notes due August 15, 2022 | Guarantor Subsidiaries
Financing activities
Proceeds from issuance of senior notes	0
7% Senior notes due August 15, 2022 | Non-Guarantor Subsidiaries
Financing activities
Proceeds from issuance of senior notes	0
7% Senior notes due August 15, 2022 | Eliminations
Financing activities
Proceeds from issuance of senior notes	$ 0

XML

Senior Notes, Secured, and Unsecured Indebtedness - Maturities of Construction Notes Payable (Details) (USD $)			9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 March 2014 Construction Notes Payable London Interbank Offered Rate (LIBOR)	Sep. 30, 2014 March 2014 Construction Notes Payable Prime Rate	Sep. 30, 2014 June 2013 Construction Notes Payable	Sep. 30, 2014 Construction Loans	Sep. 30, 2014 Construction Loans March 2014 Construction Notes Payable		Sep. 30, 2014 Construction Loans December 2013 Construction Notes Payable		Sep. 30, 2014 Construction Loans June 2013 Construction Notes Payable
Debt Instrument [Line Items]
Total notes payable	$ 41,264,000	$ 38,060,000				$ 72,600,000	$ 26,000,000		$ 18,600,000		$ 28,000,000
Outstanding						$ 37,500,000	$ 4,200,000		$ 14,100,000		$ 19,200,000
Current Rate							3.15%	[1]	4.25%	[1]	4.00%	[2]
Basis spread on variable rate			3.00%	1.00%	0.50%
Minimum stated interest rate					4.00%

[1] Loan bears interest at the Company's option of either LIBOR +3.0% or the prime rate +1.0%.

[2] Loan bears interest at the prime rate +0.5%, with a rate floor of 4.0% .

XML

Variable Interest Entities and Noncontrolling Interests (Notes)

9 Months Ended

Sep. 30, 2014

Noncontrolling Interest [Abstract]

Variable Interest Entities and Noncontrolling Interests

Variable Interest Entities and Noncontrolling Interests

During the nine months ended September 30, 2014, the Company formed one joint venture for the purpose of land development and homebuilding activities which we have determined to be a VIE. The Company, as the managing member, has the power to direct the activities of the VIE since it manages the daily operations and has exposure to the risks and rewards of the VIE, which is based on the allocation of income and loss per the joint venture agreement. Therefore, the Company is the primary beneficiary of the joint venture, and the VIE was consolidated as of September 30, 2014. The Company is also party to an additional three joint ventures that were formed in prior periods, for which the Company has also determined that it is the primary beneficiary, and thus has also included them in its consolidated results as of September 30, 2014, and December 31, 2013.

As of September 30, 2014, the assets of the consolidated VIEs totaled $74.5 million, of which $8.7 million was cash and cash equivalents and $62.8 million was real estate inventories. The liabilities of the consolidated VIEs totaled $44.6 million, primarily comprised of notes payable, accounts payable and accrued liabilities.

As of December 31, 2013, the assets of the consolidated VIEs totaled $66.4 million, of which $4.7 million was cash and cash equivalents and $56.8 million was real estate inventories. The liabilities of the consolidated VIEs totaled $27.1 million, primarily comprised of notes payable, accounts payable and accrued liabilities.

XML

Senior Notes, Secured, and Unsecured Indebtedness - Senior Notes - Narrative (Details) (USD $)	0 Months Ended										0 Months Ended			0 Months Ended	9 Months Ended		0 Months Ended		9 Months Ended							9 Months Ended
	Sep. 03, 2009	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 7% Senior notes due August 15, 2022	Dec. 31, 2013 7% Senior notes due August 15, 2022	Sep. 30, 2014 5 3/4% Senior notes due April 15, 2019	Dec. 31, 2013 5 3/4% Senior notes due April 15, 2019	Sep. 30, 2014 8 1/2% Senior notes due November 15, 2020	Dec. 31, 2013 8 1/2% Senior notes due November 15, 2020	Sep. 30, 2014 Senior notes	Aug. 11, 2014 Senior notes 7% Senior notes due August 15, 2022	Sep. 30, 2014 Senior notes 7% Senior notes due August 15, 2022	Aug. 11, 2014 Senior notes 7% Senior notes due August 15, 2022	Mar. 31, 2014 Senior notes 5 3/4% Senior notes due April 15, 2019	Sep. 30, 2014 Senior notes 5 3/4% Senior notes due April 15, 2019	Mar. 31, 2014 Senior notes 5 3/4% Senior notes due April 15, 2019	Oct. 24, 2013 Senior notes 8 1/2% Senior notes due November 15, 2020	Nov. 08, 2012 Senior notes 8 1/2% Senior notes due November 15, 2020	Sep. 30, 2014 Senior notes 8 1/2% Senior notes due November 15, 2020	Oct. 24, 2013 Senior notes 8 1/2% Senior notes due November 15, 2020	Nov. 08, 2012 Senior notes 8 1/2% Senior notes due November 15, 2020	Sep. 30, 2014 California Lyon 7% Senior notes due August 15, 2022	Sep. 30, 2014 California Lyon 5 3/4% Senior notes due April 15, 2019	Sep. 30, 2014 California Lyon 8 1/2% Senior notes due November 15, 2020	Dec. 31, 2013 California Lyon 8 1/2% Senior notes due November 15, 2020	Sep. 30, 2014 California Lyon Senior notes 7% Senior notes due August 15, 2022	Sep. 30, 2014 California Lyon Senior notes 5 3/4% Senior notes due April 15, 2019	Sep. 30, 2014 Minimum Senior notes 7% Senior notes due August 15, 2022	Sep. 30, 2014 Minimum Senior notes 5 3/4% Senior notes due April 15, 2019	Sep. 30, 2014 Maximum Senior notes 7% Senior notes due August 15, 2022	Sep. 30, 2014 Maximum Senior notes 5 3/4% Senior notes due April 15, 2019
Debt Instrument [Line Items]
Stated interest rate				7.00%	7.00%	5.75%	5.75%	8.50%	8.50%			7.00%	7.00%		5.75%	5.75%			8.50%		8.50%
Principal amount												$ 300,000,000	$ 300,000,000			$ 150,000,000			$ 425,000,000	$ 100,000,000.0	$ 325,000,000
Percentage of principal amount											100.00%			100.00%			106.50%	100.00%
Total senior notes		1,041,707,000	469,355,000	300,000,000	0	150,000,000	0	430,443,000	431,295,000	1,036,264,000												300,000,000	150,000,000	430,443,000	431,295,000
Maturity date	Sep. 30, 2016														Apr. 15, 2019				Nov. 15, 2020
Redemption notice period																												30 days	30 days	60 days	60 days
Redemption price, percentage																										100.00%	100.00%
California Lyon redemption percentage of aggregate principal																										35.00%	35.00%
California Lyon redemption price, percentage																										107.00%	105.75%
Net proceeds from issuance of debt																	$ 104,600,000

XML

Basis of Presentation and Significant Accounting Policies - Narrative (Details)	9 Months Ended
	Sep. 30, 2014 segment
Significant Accounting Policies [Line Items]
Real estate warranty period	1 year
Number of reportable segments	7
Minimum
Significant Accounting Policies [Line Items]
Percentage of home sale price reserved	1.00%
Percentage of service revenue	3.00%
Maximum
Significant Accounting Policies [Line Items]
Percentage of home sale price reserved	1.25%
Percentage of service revenue	5.00%

XML

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Payments Under Non-Cancelable Operating Leases

The table below shows the future minimum payments under non-cancelable operating leases at September 30, 2014 (in thousands).

Year Ending December 31
2014	$	577
2015	1,648
2016	1,233
2017	910
2018	897
Thereafter	2,832
Total	$	8,097

XML

Income Taxes - Narrative (Details) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Income Taxes [Line Items]
Effective income tax rate	20.80%		37.30%	27.50%	26.90%
Valuation allowance	$ 3,211,000	$ 3,959,000		$ 3,211,000
Income tax expense (benefit)	1,999,000	(95,600,000)	6,356,000	12,779,000	6,366,000
Testing Period				5 years
AMT credit carryovers	1,400,000			1,400,000
Unrecognized tax benefits	0			0
Federal
Income Taxes [Line Items]
Operating loss carry forwards	0			0
Unused built-in losses	71,400,000			71,400,000
State
Income Taxes [Line Items]
Operating loss carry forwards	77,600,000			77,600,000
Unused built-in losses	$ 38,400,000			$ 38,400,000

XML

Senior Notes, Secured, and Unsecured Indebtedness - Summary of Senior Notes Redemption Prices Percentage for 5 3/4% Senior Notes (Details) (Senior notes, 5 3/4% Senior notes due April 15, 2019)	9 Months Ended
	Sep. 30, 2014
Senior notes | 5 3/4% Senior notes due April 15, 2019
Debt Instrument [Line Items]
April 15, 2016	104.313%
October 15, 2016	102.875%
April 15, 2017	101.438%
April 15, 2018 and thereafter	100.00%

XML

Basis of Presentation and Significant Accounting Policies - Summary of Changes in Warranty Liability (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Accounting Policies [Abstract]
Warranty liability, beginning of period	$ 14,935	$ 14,317
Warranty provision during period	5,343	3,131
Warranty payments during period	(4,997)	(3,900)
Warranty charges related to pre-existing warranties during period	341	354
Warranty charges related to construction services projects	591	267
Warranty liability, end of period	$ 16,213	$ 14,169

XML

Basis of Presentation and Significant Accounting Policies - Schedule of Interest Incurred under Company's Debt Obligations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Accounting Policies [Abstract]
Interest incurred	$ 17,504	$ 7,511	$ 38,818	$ 22,511
Less: Interest capitalized	17,504	7,460	38,818	19,909
Interest expense, net of amounts capitalized	0	51	0	2,602
Cash paid for interest	$ 2,925	$ 283	$ 22,596	$ 14,854

XML

Acquisition of Polygon Northwest Homes (Notes)

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Acquisition of Polygon Northwest Homes

Acquisition of Polygon Northwest Homes

On August 12, 2014, the Company completed its acquisition of the residential homebuilding business of PNW Home Builders, L.L.C. (“PNW Parent”) pursuant to the Purchase and Sale Agreement (the “Purchase Agreement”) dated June 22, 2014 among William Lyon Homes, Inc., a California corporation and wholly-owned subsidiary of Parent ("California Lyon"), PNW Parent, PNW Home Builders North, L.L.C., PNW Home Builders South, L.L.C. and Crescent Ventures, L.L.C. Prior to such completion, California Lyon assigned its interests in the Purchase Agreement to Polygon WLH LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of California Lyon (“Polygon WLH”). Pursuant to the Purchase Agreement, Polygon WLH acquired, for cash, all of the membership interests of the underlying limited liability companies and certain service companies and other assets that comprised the residential homebuilding operations of PNW Parent (such operations being referred herein as "Polygon Northwest Homes") and which conducts business as Polygon Northwest Company (“Polygon”), for an aggregate cash purchase price of $520.0 million, an additional approximately $28.0 million at closing pursuant to initial working capital adjustments, plus an additional $4.3 million of consideration, a portion of which remains subject to final adjustment in accordance with the terms of the Purchase Agreement (the “Acquisition”). The acquired entities now operate as two new divisions of the Company under the Polygon name, one in Washington, with a core market of Seattle, and the other in Oregon, with a core market of Portland.

The Company financed the Acquisition with a combination of proceeds from its issuance of $300 million in aggregate principal amount of 7.00% senior notes due 2022, cash on hand including approximately $100 million of aggregate proceeds from several separate land banking arrangements with respect to land parcels located in California, Washington and Oregon, each of which is entitled but undeveloped, and including parcels acquired in the Acquisition, and $120 million of borrowings under a new one-year senior unsecured loan facility.

As a result of the Acquisition, the entities comprising the business of Polygon Northwest Homes became wholly-owned direct or indirect subsidiaries of the Company, and its results are included in our condensed consolidated financial statements and related disclosures from the date of the Acquisition. For the period from August 12, 2014 through September 30, 2014, operating revenue and income before provision for income taxes from Polygon operations, were $38.9 million and $4.0 million, respectively.

The Acquisition was accounted for as a business combination in accordance with ASC 805. Under ASC 805, the Company recorded the acquired assets and assumed liabilities of Polygon Northwest Homes at their estimated fair values, with the excess allocated to Goodwill, as shown below. Goodwill represents the value the Company expects to achieve through the operational synergies and the expansion of the Company into new markets. The Company estimates that the entire $48.9 million of goodwill resulting from the Acquisition will be tax deductible. Goodwill will be allocated to the Washington and Oregon operating segments (see Note 4). A reconciliation of the consideration transferred as of the acquisition date is as follows:

Purchase consideration	$	552,252
Net proceeds received from Polygon inventory involved in land banking transactions	(59,834		)
	$	492,418

As of September 30, 2014 the Company had not completed its final estimate of the fair value of the net assets of Polygon Northwest Homes, due to the Acquisition's close proximity to quarter end. As such, the estimates used as of September 30, 2014 are subject to change. The following table summarizes the preliminary amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):

Assets Acquired
	Real estate inventories	$	439,628
	Goodwill	48,919
	Intangible asset - brand name	5,900
	Joint venture in mortgage business	2,000
	Other	545
	Total Assets	$	496,992
Liabilities Assumed
	Accounts payable	$	603
	Accrued expenses	3,971
	Total liabilities	4,574
	Net assets acquired	$	492,418

The Company determined the fair value of real estate inventories on a project level basis using a combination of discounted cash flow models, and market comparable land transactions, where available. These methods are significantly impacted by estimates relating to i) expected selling prices, ii) anticipated sales pace, iii) cost to complete estimates, iv) highest and best use of projects prior to acquisition, and v) comparable land values. These estimates were developed and used at the individual project level, and may vary significantly between projects.

The acquisition date fair value of the Intangible asset relating to brand name was estimated using comparable values ascribed in other recent market transactions, as well as taking into account Polygon Northwest Homes market position as a leading builder in the Seattle, WA, and Portland, OR, residential markets. This asset is deemed to have an indefinite life. Additionally, the Company acquired a non-controlling interest in a joint venture mortgage business. The fair value of this investment was estimated using the discounted cash flow method, which was significantly impacted by estimated cash flow streams and income of the joint venture.

Other assets, accounts payable, and accrued expenses were generally stated at historical value due to the short-term nature of these liabilities.

The Company recorded $5.8 million in acquisition related costs for the three and nine months ended September 30, 2014, respectively, which are included in the Condensed Consolidated Statement of Operations in Transaction expenses. Such costs were expensed as incurred in accordance with ASC 805. There were no acquisition related costs incurred during 2013.

Supplemental Pro Forma Information

The following table presents unaudited pro forma amounts for the three and nine months ended September 30, 2014 and September 30, 2013 as if the Acquisition had been completed as of January 1, 2013 (amounts in thousands, except per share data):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Operating revenues	$	241,726	$	222,475	$	688,543	$	563,365
Net income available to common stockholders	$	6,441	$	8,582	$	31,631	$	17,299
Income per share - basic	$	0.21	$	0.28	$	1.01	$	0.77
Income per share - diluted	$	0.20	$	0.27	$	0.97	$	0.74

The unaudited pro forma operating results have been determined after adjusting the unaudited operating results of Polygon Northwest Homes to reflect the estimated purchase accounting and other acquisition adjustments including interest expense associated with the debt used to fund a portion of the acquisition. The unaudited pro forma results presented above do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Acquisition, the costs to combine the operations of the Company and Polygon Northwest Homes or the costs necessary to achieve any of the foregoing cost savings, operating synergies or revenue enhancements. As such, the unaudited pro forma amounts are for comparative purposes only and may not necessarily reflect the results of operations which would have resulted had the acquisition been completed at the beginning of the applicable period or indicative of the results that will be attained in the future.

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Acquisition of Polygon Northwest Homes Acquisition of Polygon Northwest Homes - Narrative (Details) (USD $)	3 Months Ended		6 Months Ended	9 Months Ended			0 Months Ended	3 Months Ended				0 Months Ended				2 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Jun. 30, 2014 segment	Sep. 30, 2014 segment	Sep. 30, 2013	Dec. 31, 2013	Aug. 12, 2014 Polygon Northwest Homes segment	Sep. 30, 2014 Polygon Northwest Homes segment	Dec. 31, 2013 Polygon Northwest Homes	Sep. 30, 2014 7% Senior notes due August 15, 2022	Dec. 31, 2013 7% Senior notes due August 15, 2022	Aug. 11, 2014 7% Senior notes due August 15, 2022 Senior notes	Sep. 30, 2014 7% Senior notes due August 15, 2022 Senior notes	Aug. 11, 2014 7% Senior notes due August 15, 2022 Senior notes	Aug. 12, 2014 Senior unsecured loan facility	Sep. 30, 2014 Polygon Northwest Homes	Sep. 30, 2014 General and administrative expense Polygon Northwest Homes
Business Acquisition [Line Items]
Cash purchase price							$ 520,000,000
Working capital adjustments							28,000,000
Additional consideration, partly subject to final adjustment							4,300,000
Number of operating segments as a result of acquired business			5	1			2	2
Principal amount													300,000,000	300,000,000
Stated interest rate										7.00%	7.00%		7.00%	7.00%
Proceeds from land banking arrangements												100,000,000
Total senior notes	880,443,000			880,443,000		431,295,000									120,000,000
Operation revenues	206,898,000	150,830,000		536,658,000	363,121,000											38,900,000
Income before provision for income taxes	9,621,000	17,036,000		46,495,000	23,653,000											4,000,000
Goodwill, expected tax deductible amount								48,900,000
Acquisition related costs									$ 0								$ 5,800,000

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Real Estate Inventories - Summary of Real Estate Inventories (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Real estate inventories owned:
Land deposits	$ 70,961		$ 46,632
Land and land under development	963,964		458,437
Homes completed and under construction	291,083		144,736
Model homes	52,424		21,985
Total	1,378,432		671,790
Real estate inventories not owned:
Other land options contracts — land banking arrangement	$ 0	[1]	$ 12,960	[1]

[1] Represents the consolidation of a land banking arrangement, net of deposits. The final lots attributable to this amount were purchased in April 2014.

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Fair Value of Financial Instruments - Estimated Fair Values of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financial liabilities:
Notes payable	$ 41,264	$ 38,060
Notes payable, fair value	41,264	38,060
Total senior notes	1,041,707	469,355
Senior unsecured loan facility
Financial liabilities:
Total senior notes	120,000	0
Long-term Debt, Fair Value	120,000	0
5 3/4% Senior notes due April 15, 2019
Financial liabilities:
Total senior notes	150,000	0
Long-term Debt, Fair Value	148,125	0
Stated interest rate	5.75%	5.75%
8 1/2% Senior notes due November 15, 2020
Financial liabilities:
Total senior notes	430,443	431,295
Long-term Debt, Fair Value	460,063	466,877
Stated interest rate	8.50%	8.50%
7% Senior notes due August 15, 2022
Financial liabilities:
Total senior notes	300,000	0
Long-term Debt, Fair Value	$ 306,750	$ 0
Stated interest rate	7.00%	7.00%

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
ASSETS
Cash and cash equivalents	$ 35,119		$ 171,672
Restricted cash	504		854
Receivables	19,840		16,459
Escrow proceeds receivable	14,606		4,380
Real estate inventories
Owned	1,378,432		671,790
Not owned	0	[1]	12,960	[1]
Deferred loan costs, net	25,975		9,575
Goodwill	63,128		14,209
Intangibles, net of accumulated amortization of $8,900 as of September 30, 2014 and $7,611 as of December 31, 2013	7,377		2,766
Deferred income taxes, net valuation allowance of $3,211 as of September 30, 2014 and $3,959 as of December 31, 2013	91,055		95,580
Other assets, net	17,613		10,166
Total assets	1,653,649		1,010,411
LIABILITIES AND EQUITY
Accounts payable	47,898		17,099
Accrued expenses	93,642		60,203
Liabilities from inventories not owned	0		12,960
Notes payable	41,264		38,060
Total senior notes	1,041,707		469,355
Total liabilities	1,183,247		559,617
Commitments and contingencies
Equity:
Preferred stock, par value $0.01 per share, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively	0		0
Additional paid-in capital	313,356		311,863
Retained earnings	142,622		116,002
Total William Lyon Homes stockholders’ equity	456,297		428,179
Noncontrolling interests	14,105		22,615
Total equity	470,402		450,794
Total liabilities and equity	1,653,649		1,010,411
Common stock, Class A, par value $0.01 per share; 150,000,000 shares authorized; 28,078,301 and 27,622,283 shares issued, 27,430,927 and 27,216,813 outstanding at September 30, 2014 and December 31, 2013, respectively
Equity:
Common stock	281		276
Common stock, Class B, par value $0.01 per share; 30,000,000 shares authorized; 3,813,884 shares issued and outstanding at September 30, 2014 and December 31, 2013
Equity:
Common stock	38		38
Senior unsecured facility
LIABILITIES AND EQUITY
Total senior notes	120,000		0
5 3/4% Senior notes due April 15, 2019
LIABILITIES AND EQUITY
Total senior notes	150,000		0
8 1/2% Senior notes due November 15, 2020
LIABILITIES AND EQUITY
Total senior notes	430,443		431,295
7% Senior notes due August 15, 2022
LIABILITIES AND EQUITY
Total senior notes	$ 300,000		$ 0

[1] Represents the consolidation of a land banking arrangement, net of deposits. The final lots attributable to this amount were purchased in April 2014.

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Senior Notes, Secured, and Unsecured Indebtedness Senior Notes, Secured, and Unsecured Indebtedness - Summary of Senior Notes Redemption Prices Percentage for 7% Senior Notes (Details) (Senior notes, 7% Senior notes due August 15, 2022)	9 Months Ended
	Sep. 30, 2014
Senior notes | 7% Senior notes due August 15, 2022
Debt Instrument [Line Items]
August 15, 2017	103.50%
August 15, 2018	101.75%
August 15, 2019 and thereafter	100.00%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities
Net income	$ 33,716	$ 17,287
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	5,240	2,184
Provision for deferred income taxes	4,525	0
Stock based compensation expense	2,772	2,207
Equity in earnings of unconsolidated joint ventures	(146)	0
Loss on sale of property and equipment	0	4
Net changes in operating assets and liabilities, net of the effects from Acquisition:
Restricted cash	350	0
Receivables	(3,346)	(4,033)
Escrow proceeds receivable	(10,226)	(2,833)
Real estate inventories — owned	(265,453)	(202,294)
Real estate inventories — not owned	12,960	18,291
Other assets	(3,995)	3,110
Accounts payable	29,409	665
Accrued expenses	25,964	18,784
Liabilities from real estate inventories not owned	(12,960)	(18,291)
Net cash used in operating activities	(181,190)	(164,919)
Investing activities
Distributions from unconsolidated joint ventures	146	0
Cash paid for acquisitions, net	(488,785)	0
Purchases of property and equipment	(1,727)	(3,359)
Net cash used in investing activities	(490,366)	(3,359)
Financing activities
Proceeds from borrowings on notes payable	57,947	51,444
Principal payments on notes payable	(57,155)	(45,459)
Borrowings on senior unsecured facility	120,000	0
Payment of deferred loan costs	(18,909)	(1,792)
Proceeds from stock options exercised	285	0
Proceeds from issuance of common stock	0	179,438
Shares remitted to Company for employee tax withholding	(1,454)	0
Offering costs related to sale of common stock	(105)	(15,655)
Payment of preferred stock dividends	0	(2,550)
Noncontrolling interests contributions	9,641	35,399
Noncontrolling interests distributions	(25,247)	(21,700)
Net cash provided by financing activities	535,003	179,125
Net (decrease)/increase in cash and cash equivalents	(136,553)	10,847
Cash and cash equivalents — beginning of period	171,672	71,075
Cash and cash equivalents — end of period	35,119	81,922
Supplemental disclosures of non-cash investing and financing activities:
Conversion of convertible preferred stock to common stock	0	70,386
Issuance of note payable related to land acquisition	2,413	16,238
Accrued purchases of property, plant and equipment	0	142
Accrued acquisition costs	3,633	0
5 3/4% Senior notes due April 15, 2019
Financing activities
Proceeds from issuance of senior notes	150,000	0
7% Senior notes due August 15, 2022
Financing activities
Proceeds from issuance of senior notes	$ 300,000	$ 0

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Commitments and Contingencies - Narrative (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 Project	Sep. 30, 2013	Sep. 30, 2014 Project	Sep. 30, 2013	Dec. 31, 2013
Loss Contingencies [Line Items]
Rent expense under cancelable and non-cancelable operating leases	$ 0.8	$ 0.4	$ 2.1	$ 1.3
Collateral for outstanding irrevocable	0.5		0.5		0.9
Outstanding performance and surety bonds	92.2		92.2
Non-refundable deposits	69.5		69.5
Remaining purchase price of land	463.9		463.9
Number of land banking projects	1		1
Minimum
Loss Contingencies [Line Items]
Non-refundable deposit	15.00%		15.00%
Maximum
Loss Contingencies [Line Items]
Non-refundable deposit	25.00%		25.00%
Balance of lots still under option and not purchased
Loss Contingencies [Line Items]
Purchase price					13.0
Project construction commitment
Loss Contingencies [Line Items]
Other Commitment	$ 133.5		$ 133.5

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Acquisition of Polygon Northwest Homes - Summary of Pro Forma Amounts of Polygon Northwest Homes Acquisition (Details) (Polygon Northwest Homes, USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Polygon Northwest Homes
Business Acquisition [Line Items]
Operating revenues	$ 241,726	$ 222,475	$ 688,543	$ 563,365
Net income available to common stockholders	$ 6,441	$ 8,582	$ 31,631	$ 17,299
Income per share - basic (in USD per share)	$ 0.21	$ 0.28	$ 1.01	$ 0.77
Income per share - diluted (in USD per share)	$ 0.20	$ 0.27	$ 0.97	$ 0.74

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Acquisition of Polygon Northwest Homes (Tables)

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Reconciliation of Consideration Transferred as of Acquisition Date

A reconciliation of the consideration transferred as of the acquisition date is as follows:

Purchase consideration	$	552,252
Net proceeds received from Polygon inventory involved in land banking transactions	(59,834		)
	$	492,418

Summary of Acquired Assets and Liabilities Recorded at Fair Value

The following table summarizes the preliminary amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):

Assets Acquired
	Real estate inventories	$	439,628
	Goodwill	48,919
	Intangible asset - brand name	5,900
	Joint venture in mortgage business	2,000
	Other	545
	Total Assets	$	496,992
Liabilities Assumed
	Accounts payable	$	603
	Accrued expenses	3,971
	Total liabilities	4,574
	Net assets acquired	$	492,418

Summary of Pro Forma Amounts of Polygon Northwest Homes Acquisition

The following table presents unaudited pro forma amounts for the three and nine months ended September 30, 2014 and September 30, 2013 as if the Acquisition had been completed as of January 1, 2013 (amounts in thousands, except per share data):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Operating revenues	$	241,726	$	222,475	$	688,543	$	563,365
Net income available to common stockholders	$	6,441	$	8,582	$	31,631	$	17,299
Income per share - basic	$	0.21	$	0.28	$	1.01	$	0.77
Income per share - diluted	$	0.20	$	0.27	$	0.97	$	0.74

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Variable Interest Entities and Noncontrolling Interests - Narrative (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014 joint_venture Joint_Ventures	Dec. 31, 2013 joint_venture
Noncontrolling Interest [Line Items]
Number of joint ventures	1
Number of joint ventures formed in prior periods	3	3
Consolidated variable interest entities, assets	$ 74.5	$ 66.4
Consolidated variable interest entities, liabilities	44.6	27.1
Cash
Noncontrolling Interest [Line Items]
Consolidated variable interest entities, assets	8.7	4.7
Real estate
Noncontrolling Interest [Line Items]
Consolidated variable interest entities, assets	$ 62.8	$ 56.8

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Real Estate Inventories (Tables)

9 Months Ended

Sep. 30, 2014

Real Estate [Abstract]

Schedule of Real Estate Inventories

Real estate inventories consist of the following (in thousands):

	September 30, 2014		December 31, 2013
Real estate inventories owned:
Land deposits	$	70,961	$	46,632
Land and land under development	963,964		458,437
Homes completed and under construction	291,083		144,736
Model homes	52,424		21,985
Total	$	1,378,432	$	671,790
Real estate inventories not owned: (1)
Other land options contracts — land banking arrangement	$	—	$	12,960

(1) Represents the consolidation of a land banking arrangement, net of deposits. The final lots attributable to this amount were purchased in April 2014.

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Basis of Presentation and Significant Accounting Policies (Notes)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies

Operations

William Lyon Homes, a Delaware corporation (“Parent” and together with its subsidiaries, the “Company”), is primarily engaged in designing, constructing, marketing and selling single-family detached and attached homes in California, Arizona, Nevada, Colorado (under the Village Homes brand), Washington and Oregon (each under the Polygon Northwest Homes brand).

Basis of Presentation

The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities as of September 30, 2014 and December 31, 2013 and revenues and expenses for the three and nine month periods ended September 30, 2014 and 2013. Accordingly, actual results could differ from those estimates. The significant accounting policies using estimates include real estate inventories and cost of sales, impairment of real estate inventories, warranty reserves, loss contingencies, sales and profit recognition, accounting for variable interest entities, business combinations, and valuation of deferred tax assets. The current economic environment increases the uncertainty inherent in these estimates and assumptions.

The condensed consolidated financial statements include the accounts of the Company and all majority-owned and controlled subsidiaries and joint ventures, and certain joint ventures and other entities which have been determined to be variable interest entities ("VIEs") in which the Company is considered the primary beneficiary (see Note 3). The accounting policies of the joint ventures are substantially the same as those of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated financial statements were prepared from our books and records without audit and include all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented. Readers of this quarterly report should refer to our audited consolidated financial statements as of and for the year ended December 31, 2013, which are included in our 2013 Annual Report on Form 10-K, as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

Real Estate Inventories

Real estate inventories are carried at cost net of impairment losses, if any. Real estate inventories consist primarily of land deposits, land and land under development, homes completed and under construction, and model homes. All direct and indirect land costs, offsite and onsite improvements and applicable interest and other carrying charges are capitalized to real estate projects during periods when the project is under development. Land, offsite costs and all other common costs are allocated to land parcels benefited based upon relative fair values before construction. Onsite construction costs and related carrying charges (principally interest and property taxes) are allocated to the individual homes within a phase based upon the relative sales value of the homes. The Company relieves its real estate inventories through cost of sales for the estimated cost of homes sold. Selling expenses and other marketing costs are expensed in the period incurred.

A provision for warranty costs relating to the Company’s limited warranty plans is included in cost of sales and accrued expenses at the time the sale of a home is recorded. The Company generally reserves either approximately one to one and one quarter percent of the sales price of its homes, or a set amount per home closed depending on operating division, against the possibility of future charges relating to its one-year limited warranty and similar potential claims. Factors that affect the Company’s warranty liability include the number of homes under warranty, historical and anticipated rates of warranty claims, and cost per claim. The Company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary. Changes in the Company’s warranty liability for the nine months ended September 30, 2014 and 2013, are as follows (in thousands):

	Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Warranty liability, beginning of period	$	14,935		$	14,317
Warranty provision during period	5,343			3,131
Warranty payments during period	(4,997		)	(3,900		)
Warranty charges related to pre-existing warranties during period	341			354
Warranty charges related to construction services projects	591			267
Warranty liability, end of period	$	16,213		$	14,169

The Company began accruing for warranty costs for units closed in the Washington and Oregon segments in conjunction with their acquisition (see Note 2) at a set rate per home, however the Company did not assume any warranty liability for units closed prior to the Acquisition date.

Interest incurred under the Company’s debt obligations, as more fully discussed in Note 6, is capitalized to qualifying real estate projects under development. Any additional interest charges related to real estate projects not under development are expensed in the period incurred. Interest activity for the three months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Interest incurred	$	17,504	$	7,511	$	38,818	$	22,511
Less: Interest capitalized	17,504		7,460		38,818		19,909
Interest expense, net of amounts capitalized	$	—	$	51	$	—	$	2,602
Cash paid for interest	$	2,925	$	283	$	22,596	$	14,854

Construction Services

The Company accounts for construction management agreements using the Percentage of Completion Method in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605 Revenue Recognition (“ASC 605”). Under ASC 605, the Company records revenues and expenses as a contracted project progresses, and based on the percentage of costs incurred to date compared to the total estimated costs of the contract.

The Company entered into construction management agreements to build, sell and market homes in certain communities. For such services, the Company will receive fees (generally 3 to 5 percent of the sales price, as defined) and may, under certain circumstances, receive additional compensation if certain financial thresholds are achieved.

Financial Instruments

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, restricted cash, receivables, and deposits. The Company typically places its cash and cash equivalents in investment grade short-term instruments. Deposits, included in other assets, are due from municipalities or utility companies and are generally collected from such entities through fees assessed to other developers. The Company is an issuer of, or subject to, financial instruments with off-balance sheet risk in the normal course of business which exposes it to credit risks. These financial instruments include letters of credit and obligations in connection with assessment district bonds. These off-balance sheet financial instruments are described in more detail in Note 12.

Cash and Cash Equivalents

Short-term investments with a maturity of three months or less when purchased are considered cash equivalents. The Company’s cash and cash equivalents balance exceeds federally insurable limits as of September 30, 2014 and December 31, 2013. The Company monitors the cash balances in its operating accounts and adjusts the cash balances between accounts based on operational needs; however, these cash balances could be negatively impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.

Restricted Cash

Restricted cash consists of deposits made by the Company to a bank account as collateral for the use of letters of credit to guarantee the Company’s financial obligations under certain other contractual arrangements in the normal course of business.

Deferred Loan Costs

Deferred loan costs represent debt issuance costs and are primarily amortized to interest incurred using the straight line method which approximates the effective interest method.

Goodwill

In accordance with the provisions of ASC 350, Intangibles, Goodwill and Other, goodwill amounts are not amortized, but rather are analyzed for impairment at the reporting segment level. Goodwill is analyzed on an annual basis, or when indicators of impairment exist. We have determined that we have seven reporting segments, as discussed in Note 4, and we perform an annual goodwill impairment analysis during the fourth quarter of each fiscal year.

Intangible Assets

Recorded intangible assets primarily relate to brand names of acquired entities, construction management contracts, homes in backlog, and joint venture management fee contracts recorded in conjunction with FASB ASC Topic 852, Reorganizations ("ASC 852"), or FASB ASC Topic 805, Business Combinations ("ASC 805"). All Intangible assets with the exception of those relating to brand names were valued based on expected cash flows related to home closings, and the asset is amortized on a per unit basis, as homes under the contracts close. Our brand name intangible assets are deemed to have an indefinite useful life.

Income (loss) per common share

The Company computes income (loss) per common share in accordance with FASB ASC Topic 260, Earnings per Share, which requires income (loss) per common share for each class of stock to be calculated using the two-class method. The two-class method is an allocation of income (loss) between the holders of common stock and a company’s participating security holders.

Basic income (loss) per common share is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of determining diluted income (loss) per common share, basic income (loss) per common share is further adjusted to include the effect of potential dilutive common shares.

Income Taxes

Income taxes are accounted for under the provisions of Financial Accounting Standards Board ASC 740, Income Taxes, using an asset and liability approach. Deferred income taxes reflect the net effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards measured by applying currently enacted tax laws. A valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized. ASC 740 prescribes a recognition threshold and a measurement criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered “more-likely-than-not” to be sustained upon examination by taxing authorities. In addition, the Company has elected to recognize interest and penalties related to uncertain tax positions in the income tax provision.

Impact of Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which clarifies existing accounting literature relating to how and when revenue is recognized by an entity. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. In doing so, an entity will need to exercise a greater degree of judgment and make more estimates than under the current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. ASU 2014-09 also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. ASU 2014-09 is effective for public companies for interim and annual reporting periods beginning after December 15, 2016, and is to be applied either retrospectively or using the cumulative effect transition method, with early adoption not permitted. The Company has not yet selected a transition method, and is currently evaluating the impact the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and related disclosures.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Intangibles - Accumulated Amortization	$ 8,900	$ 7,611
Deferred Income Taxes - Valuation Allowance	$ 3,211	$ 3,959
Preferred stock, par value (in USD per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, Class A
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	150,000,000	150,000,000
Common stock, shares issued (in shares)	28,078,301	27,622,283
Common stock, shares outstanding (in shares)	27,430,927	27,216,813
Common stock, Class B
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	30,000,000	30,000,000
Common stock, shares issued (in shares)	3,813,884	3,813,884
Common stock, shares outstanding (in shares)	3,813,884	3,813,884
5 3/4% Senior notes due April 15, 2019
Stated interest rate	5.75%	5.75%
8 1/2% Senior notes due November 15, 2020
Stated interest rate	8.50%	8.50%
7% Senior notes due August 15, 2022
Stated interest rate	7.00%	7.00%

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Stock Based Compensation (Notes)

9 Months Ended

Sep. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

Note 11—Stock Based Compensation

We account for share-based awards in accordance with ASC Topic 718, Compensation-Stock Compensation, which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at the fair value on the date of grant. Compensation expense for awards with performance based conditions is recognized over the vesting period once achievement of the performance condition is deemed probable.

During the three and nine months ended September 30, 2014, the Company granted 31,013 and 79,575 shares of restricted stock, respectively, and 24,812 and 312,551 shares of performance based restricted stock. On the Consolidated Balance Sheets and Statement of Equity, the Company considers unvested shares of restricted stock to be issued, but not outstanding.

Performance-Based Restricted Stock Awards

With respect to all but one of the performance based restricted stock awards granted during the three and nine months ended September 30, 2014, the actual number of such shares of restricted stock that will be earned (the “Earned Shares”) is subject to the Company’s achievement of a pre-established performance target as of the end of the 2014 fiscal year. The remaining grant does not contain a pre-established performance target, but the Earned Shares for such award will be determined by the exercise of the discretion of the Compensation Committee of Parent’s Board of Directors following the end of the 2014 fiscal year. For each of the aforementioned awards, one-third of the Earned Shares will vest on March 1st of each of 2015, 2016 and 2017, subject to each grantee’s continued service through each vesting date. Based on the assessment as of September 30, 2014, management determined that the currently available data was not sufficient to support that achievement of performance targets was probable, and as such no compensation expense has been recognized for these awards to date.

Additional Restricted Stock Awards

With respect to the restricted stock awards granted to certain other employees during the three and nine months ended September 30, 2014, representing 31,013 and 57,147 shares of restricted stock, respectively, for all but two of such awards 50% of the shares of restricted stock underlying such awards will vest on each of the first and second anniversaries of the grant date, and for the remaining two awards 100% of the shares of restricted stock underlying such awards will vest on the second anniversary of the grant date, in each case subject to each grantee’s continued service through each vesting date. With respect to the restricted stock awards granted to certain non-employee directors of Parent during the three and nine months ended September 30, 2014, representing zero and 22,428 shares of restricted stock, the awards vest in equal quarterly installments on each of June 1, 2014, September 1, 2014, December 1, 2014 and March 1, 2015, subject to each grantee’s continued service on the board through each vesting date.

Stock based compensation expense during the three and nine months ended September 30, 2014 and 2013 was $0.9 million and $2.8 million, and $0.9 million and $2.2 million, respectively.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 10, 2014 Common stock, Class A	Nov. 10, 2014 Common stock, Class B
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Trading Symbol	WLH
Entity Registrant Name	WILLIAM LYON HOMES
Entity Central Index Key	0001095996
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		27,431,347	3,813,884

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Commitments and Contingencies (Notes)

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company’s commitments and contingent liabilities include the usual obligations incurred by real estate developers in the normal course of business. In the opinion of management, these matters will not have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

The Company is a defendant in various lawsuits related to its normal business activities. We believe that the accruals we have recorded for probable and reasonably estimable losses with respect to these proceedings are adequate and that, as of September 30, 2014, it was not reasonably possible that an additional material loss had been incurred in an amount in excess of the estimated amounts already recognized on our condensed consolidated financial statements. The outcome of any of these proceedings, including the defense and other litigation-related costs and expenses we may incur, however, is inherently uncertain and could differ significantly from the estimate reflected in a related accrual, if made. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a related accrual or if no accrual had been made, could be material to our consolidated financial statements.

We have non-cancelable operating leases primarily associated with our office facilities. Rent expense under cancelable and non-cancelable operating leases totaled $0.8 million and $2.1 million, and $0.4 million and $1.3 million in the three and nine months ended September 30,2014 and 2013, respectively, and is included in general and administrative expense in our consolidated statements of operations for the respective periods. The table below shows the future minimum payments under non-cancelable operating leases at September 30, 2014 (in thousands).

Year Ending December 31
2014	$	577
2015	1,648
2016	1,233
2017	910
2018	897
Thereafter	2,832
Total	$	8,097

As of September 30, 2014 and December 31, 2013, the Company had $0.5 million and $0.9 million, respectively, in deposits as collateral for outstanding surety bonds to guarantee the Company’s financial obligations under certain contractual arrangements in the normal course of business. The standby letters of credit were secured by cash as reflected as restricted cash on the accompanying consolidated balance sheet.

The Company also had outstanding performance and surety bonds of $92.2 million at September 30, 2014, related principally to its obligations for site improvements at various projects. The Company does not believe that draws upon these bonds, if any, will have a material effect on the Company’s financial position, results of operations or cash flows. As of September 30, 2014, the Company had $133.5 million of project commitments relating to the construction of projects.

See Note 6 for additional information relating to the Company’s guarantee arrangements.

In addition to the land bank agreement discussed below, the Company has entered into various purchase option agreements with third parties to acquire land. As of September 30, 2014, the Company has made non-refundable deposits of $69.5 million. The Company is under no obligation to purchase the land, but would forfeit remaining deposits if the land were not purchased. The total remaining purchase price under the option agreements is $463.9 million as of September 30, 2014.

Land Banking Arrangements

The Company enters into purchase agreements with various land sellers. As a method of acquiring land in staged takedowns, thereby minimizing the use of funds from the Company’s available cash or other corporate financing sources and limiting the Company’s risk, the Company transfers the Company’s right in such purchase agreements to entities owned by third parties (“land banking arrangements”). These entities use equity contributions and/or incur debt to finance the acquisition and development of the land. The entities grant the Company an option to acquire lots in staged takedowns. In consideration for this option, the Company makes a non-refundable deposit of 15% to 25% of the total purchase price. The Company is under no obligation to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to penalties if the lots were not purchased. The Company does not have legal title to these entities or their assets and has not guaranteed their liabilities. These land banking arrangements help the Company manage the financial and market risk associated with land holdings. As discussed above, with exception of the arrangement discussed below, these amounts are included in the total remaining purchase price listed above.

The Company participated in one land banking arrangement, which was not a VIE in accordance with ASC 810, but which is consolidated in accordance with FASB ASC Topic 470, Debt (“ASC 470”). The remaining lots under the above land banking agreement were purchased by the Company during April 2014. No further obligations remain under the agreement. Under the provisions of ASC 470, the Company has determined it is economically compelled, based on certain factors, to purchase the land in the land banking arrangement. The Company has recorded the remaining purchase price of the land of $13.0 million, as of December 31, 2013, which is included in real estate inventories not owned and liabilities from inventories not owned in the accompanying consolidated balance sheet, and represented the remaining net cash to be paid on the remaining land takedowns.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Operating revenue
Home sales	$ 196,090	$ 141,352	$ 504,546	$ 338,434
Lots, land and other sales	215	0	1,926	3,248
Construction services	10,593	9,478	30,186	21,439
Operating revenue	206,898	150,830	536,658	363,121
Operating costs
Cost of sales — homes	(157,565)	(107,957)	(392,083)	(267,932)
Cost of sales — lots, land and other	(209)	0	(1,529)	(2,838)
Construction services	(8,262)	(8,135)	(24,735)	(17,472)
Sales and marketing	(12,476)	(6,679)	(27,958)	(17,482)
General and administrative	(12,726)	(10,200)	(35,881)	(28,016)
Transaction expenses	(5,768)	0	(5,768)	0
Amortization of intangible assets	(174)	(191)	(1,294)	(1,173)
Other	(454)	(695)	(1,745)	(1,746)
Total operating costs	(197,634)	(133,857)	(490,993)	(336,659)
Operating income	9,264	16,973	45,665	26,462
Interest expense, net of amounts capitalized	0	(51)	0	(2,602)
Other income, net	357	114	830	257
Income before reorganization items	9,621	17,036	46,495	24,117
Reorganization items, net	0	0	0	(464)
Income before provision for income taxes	9,621	17,036	46,495	23,653
Provision for income taxes	(1,999)	(6,356)	(12,779)	(6,366)
Net income	7,622	10,680	33,716	17,287
Less: Net income attributable to noncontrolling interests	(1,984)	(3,118)	(7,096)	(4,879)
Net income attributable to William Lyon Homes	5,638	7,562	26,620	12,408
Preferred stock dividends	0	0	0	(1,528)
Net income available to common stockholders	$ 5,638	$ 7,562	$ 26,620	$ 10,880
Income per common share:
Basic (in USD per share)	$ 0.18	$ 0.24	$ 0.85	$ 0.48
Diluted (in USD per share)	$ 0.17	$ 0.24	$ 0.81	$ 0.46
Weighted average common shares outstanding:
Basic (in shares)	31,232,655	30,975,160	31,184,101	22,569,810
Diluted (in shares)	32,760,746	31,895,814	32,725,164	23,446,954

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Senior Notes, Secured, and Unsecured Indebtedness (Notes)

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Senior Notes and Secured Indebtedness

Senior Notes, Secured, and Unsecured Indebtedness

	September 30, 2014		December 31, 2013
Notes payable:
Construction notes payable	$	37,540	$	24,198
Seller financing	3,724		13,862
Revolving lines of credit	—		—
Total notes payable	$	41,264	$	38,060
Senior unsecured facility	$	120,000	$	—
Senior notes:
5 3/4% Senior Notes due April 15, 2019	$	150,000	$	—
8 1/2% Senior Notes due November 15, 2020	430,443		431,295
7% Senior Notes due August 15, 2022	$	300,000	$	—
Total senior notes	$	880,443	$	431,295
Total notes payable and senior notes	$	1,041,707	$	469,355

As of September 30, 2014, the maturities of the Notes payable, Senior unsecured facility, 7% Senior Notes, 5 3/4% Senior Notes, and 8 1/2% Senior Notes are as follows (in thousands):

Year Ending December 31,
2014	$	126
2015	123,598
2016	37,540
2017	—
2018	—
Thereafter	875,000
	$	1,036,264

Maturities above exclude premium of $5.4 million as of September 30, 2014.

Senior Notes

5 3/4% Senior Notes Due 2019

On March 31, 2014, California Lyon completed its private placement with registration rights of 5.75% Senior Notes due 2019 (the "5.75% Notes"), in an aggregate principal amount of $150 million. The 5.75% Notes were issued at 100% of their aggregate principal amount.

As of September 30, 2014, the outstanding amount of the 5.75% Notes was $150 million. The 5.75% Notes bear interest at a rate of 5.75% per annum, payable semiannually in arrears on April 15 and October 15, and mature on April 15, 2019. The 5.75% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future direct and indirect wholly-owned subsidiaries. The 5.75% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $425 million in aggregate principal amount of 8.5% Senior Notes due 2020, as described below, and $300 million in aggregate principal amount of 7.00% Notes, as described above. The 5.75% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 5.75% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

On or after April 15, 2016, California Lyon may redeem all or a portion of the 5.75% Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the period beginning on each of the dates indicated below:

Year	Percentage
April 15, 2016	104.313	%
October 15, 2016	102.875	%
April 15, 2017	101.438	%
April 15, 2018 and thereafter	100.000	%

Prior to April 15, 2016, the 5.75% Notes may be redeemed in whole or in part at a redemption price equal to 100% of the principal amount plus a “make-whole” premium, and accrued and unpaid interest to, the redemption date.

In addition, any time prior to April 15, 2016, California Lyon may, at its option on one or more occasions, redeem the 5.75% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 5.75% Notes issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 105.75%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings by Parent.

The indenture governing the 5.75% Notes contains covenants that limit the ability of Parent, California Lyon, and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends, distributions, or repurchase equity or make payments in respect of subordinated indebtedness; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

8 1/2% Senior Notes Due 2020

On November 8, 2012, California Lyon completed its offering of 8 1/2% Senior Notes due 2020, (the "initial 8.5% notes"), in an aggregate principal amount of $325 million. The initial 8.5% Notes were issued at 100% of their aggregate principal amount.

On October 24, 2013, California Lyon completed the sale of an additional $100.0 million in aggregate principal amount of its 8.5% Senior Notes due 2020 (the “additional 8.5 % Notes”, and together with the initial 8.5% notes, the "8.5% Notes" ) at an issue price of 106.5% of their aggregate principal amount, plus accrued interest from and including May 15, 2013, resulting in net proceeds of approximately $104.6 million.

As of both September 30, 2014 and December 31, 2013, the outstanding amount of the 8.5% Notes was $430 million, and $431 million, respectively. The 8.5% Notes bear interest at a rate of 8.5% per annum, payable semiannually in arrears on May 15 and November 15, and mature on November 15, 2020. The 8.5% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and by certain of its existing and future direct and indirect wholly-owned subsidiaries. The 8.5% Notes are California Lyon's and the guarantors' senior unsecured obligations. The 8.5% Notes and the guarantees rank senior to all of California Lyon’s and the guarantors’ existing and future subordinated debt, and rank equally in right of payment with all of California Lyon's and the guarantors' existing and future unsecured senior debt, including the 5.75% Notes and the 7.00% Notes as described above. The 8.5% Notes and the guarantees are and will be effectively junior to any of California Lyon’s and the guarantors’ existing and future secured debt.

The indenture governing the 8.5% Notes contains covenants that limit the ability of Parent, California Lyon and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends or make other distributions or repurchase stock; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

7% Senior Notes Due 2022

On August 11, 2014, WLH PNW Finance Corp. (“Escrow Issuer”), completed its private placement with registration rights of 7.00% Senior Notes due 2022 (the “7.00% Notes”), in an aggregate principal amount of $300 million. The 2022 Notes were issued at 100% of their aggregate principal amount. On August 12, 2014, in connection with the consummation of the Acquisition, Escrow Issuer merged with and into California Lyon, and California Lyon assumed the obligations of the Escrow Issuer under the 2022 Notes and the related indenture by operation of law (the “Escrow Merger”). Following the Escrow Merger, California Lyon is the obligor under the 2022 Notes.

As of September 30, 2014, the outstanding amount of the notes was $300 million. The notes bear interest at a rate of 7.00% per annum, payable semiannually in arrears on February 15 and August 15, and mature on August 15, 2022. The 7.00% Notes are unconditionally guaranteed on a joint and several unsecured basis by Parent and certain of its existing and future direct and indirect wholly-owned subsidiaries. The 7.00% Notes and the related guarantees are California Lyon’s and the guarantors’ unsecured senior obligations and rank equally in right of payment with all of California Lyon’s and the guarantors’ existing and future unsecured senior debt, including California Lyon’s $150 million in aggregate principal amount of 5.75% Senior Notes due 2019 and $425 million in aggregate principal amount of 8.5% Senior Notes due 2020, as described below. The 7.00% Notes rank senior in right of payment to all of California Lyon’s and the guarantors’ future subordinated debt. The 7.00% Notes and the guarantees are and will be effectively junior to California Lyon’s and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such debt.

On or after August 15, 2017, California Lyon may redeem all or a portion of the 7.00% Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the period beginning on each of the dates indicated below:

Year	Percentage
August 15, 2017	103.500	%
August 15, 2018	101.750	%
August 15, 2019 and thereafter	100.000	%

Prior to August 15, 2017, the 7.00% Notes may be redeemed in whole or in part at a redemption price equal to 100% of the principal amount plus a “make-whole” premium, and accrued and unpaid interest to, the redemption date.

In addition, any time prior to August 15, 2017, California Lyon may, at its option on one or more occasions, redeem the 7.00% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 7.00% Notes issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 107.00%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings by Parent.

The indenture governing the 7.00% Notes contains covenants that limit the ability of Parent, California Lyon, and their restricted subsidiaries to, among other things: (i) incur or guarantee certain additional indebtedness; (ii) pay dividends, distributions, or repurchase equity or make payments in respect of subordinated indebtedness; (iii) make certain investments; (iv) sell assets; (v) incur liens; (vi) enter into agreements restricting the ability of the Company’s restricted subsidiaries to pay dividends or transfer assets; (vii) enter into transactions with affiliates; (viii) create unrestricted subsidiaries; and (viii) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications as described in the Indenture. The Company was in compliance with all such covenants as of September 30, 2014.

Senior Unsecured Facility

On August 12, 2014, the Company entered into a senior unsecured loan facility (the “Senior Unsecured Loan Facility”), pursuant to which the Company borrowed $120 million in order to pay a portion of the purchase price for the Acquisition (the “Senior Unsecured Loan”). The Senior Unsecured Loan bears interest at an annual rate equal to a Eurodollar rate (subject to a minimum “floor” of 1.00%), plus an initial margin, which margin will increase by 0.50% every three months after August 12, 2014 that the Senior Unsecured Loan remains outstanding, subject to an interest rate cap, which at September 30, 2014 was 7.25%. The Senior Unsecured Facility will initially mature on the one-year anniversary of August 12, 2014, and may be prepaid in whole or in part prior to maturity without penalty. Any Senior Unsecured Loan that has not been previously repaid in full on or prior to the initial maturity date will be automatically converted into a senior term loan facility, which could be exchanged at the option of the lenders thereunder in whole or in part for senior exchange notes. The obligations of California Lyon under the Senior Unsecured Facility are guaranteed by the same entities that are guarantors under the Revolver, as described below, and the Senior Unsecured Facility ranks pari passu with California Lyon’s existing and future unsecured indebtedness.

In addition to other covenants, the Senior Unsecured Loan Facility places limits on the Parent, California Lyon and its subsidiaries’ ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, declare dividends or redeem or repurchase capital stock, alter the business conducted by the Parent, California Lyon and its subsidiaries, or transact with affiliates. The Senior Unsecured Loan Facility contains customary events of default, subject to cure periods in certain circumstances, that would permit the lenders of the Senior Unsecured Loan to accelerate payment, including: nonpayment of principal, interest and fees or other amounts; violation of covenants; cross default to certain other indebtedness; unpaid judgments; and certain bankruptcy and other insolvency events. The Company was in compliance with all such covenants as of September 30, 2014.

Notes Payable

Construction Notes Payable

Certain of the Company's consolidated joint ventures have entered into construction notes payable agreements. The issuance date, total availability under each facility outstanding, maturity date and interest rate are listed in the table below as of September 30, 2014 (in millions):

Issuance Date	Facility Size		Outstanding		Maturity	Current Rate
March, 2014	$	26.0	$	4.2	October, 2016	3.15	%	(1)
December, 2013	18.6		14.1		January, 2016	4.25	%	(1)
June, 2013	28.0		19.2		June, 2016	4.00	%	(2)
	$	72.6	$	37.5

(1) Loan bears interest at the Company's option of either LIBOR +3.0% or the prime rate +1.0%.

(2) Loan bears interest at the prime rate +0.5%, with a rate floor of 4.0% .

Seller Financing

At September 30, 2014, the Company had $3.7 million of notes payable outstanding related to two land acquisitions for which seller financing was provided. The first note had a balance of $3.1 million as of September 30, 2014, bears interest at 7% per annum, is secured by the underlying land, and matures in May 2015. The second land acquisition consists of two separate notes, the first having a balance of $0.1 million as of September 30, 2014 and maturing in October 2014, and the second having a balance of $0.5 million as of September 30, 2014 and maturing in January 2015. Both notes bear interest at 4% per annum.

Revolving Lines of Credit

On August 7, 2013, California Lyon and Parent entered into a credit agreement providing for a revolving credit facility of up to $100 million (the “Revolver”). The Revolver will mature on August 5, 2016, unless terminated earlier pursuant to the terms of the Revolver. The Revolver contains an uncommitted accordion feature under which its aggregate principal amount can be increased to up to $125 million under certain circumstances, as well as a sublimit of $50 million for letters of credit. The Revolver contains various covenants, including financial covenants relating to tangible net worth, leverage, liquidity and interest coverage, as well as a limitation on investments in joint ventures and non-guarantor subsidiaries. The total amount available under the Revolver is subject to a borrowing base calculation. On July 3, 2014, California Lyon and the lender parties thereto entered into an amendment to the Revolver, which incorporated a minimum borrowing base availability of $50.0 million and increased the maximum leverage ratio from 60% to 75% for the first four quarters following the Acquisition, among other changes.

The Revolver contains customary events of default, subject to cure periods in certain circumstances, that would result in the termination of the commitment and permit the lenders to accelerate payment on outstanding borrowings and require cash collateralization of letters of credit, including: nonpayment of principal, interest and fees or other amounts; violation of covenants; inaccuracy of representations and warranties; cross default to certain other indebtedness; unpaid judgments; and certain bankruptcy and other insolvency events. If a change in control of the Company occurs, the lenders may terminate the commitment and require that California Lyon repay outstanding borrowings under the Revolver and cash collateralize letters of credit. Interest rates on borrowings generally will be based on either LIBOR or a base rate, plus the applicable spread. The commitment fee on the unused portion of the Facility currently accrues at an annual rate of 0.50%.

Borrowings under the Revolver, the availability of which is subject to a borrowing base formula, are required to be guaranteed by Parent and certain of Parent’s wholly-owned subsidiaries, are secured by a pledge of all equity interests held by such guarantors, and may be used for general corporate purposes. As of September 30, 2014, the Revolver was undrawn, other than a letter of credit for $4.0 million, reducing the amount available under the Revolver.

GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS

The following consolidating financial information includes:

(1) Consolidating balance sheets as of September 30, 2014 and December 31, 2013; consolidating statements of operations for the three and nine months ended September 30, 2014 and 2013; and consolidating statements of cash flows for the nine month periods ended September 30, 2014 and 2013, of (a) William Lyon Homes, as the parent, or “Delaware Lyon”, (b) William Lyon Homes, Inc., as the subsidiary issuer, or “California Lyon”, (c) the guarantor subsidiaries, (d) the non-guarantor subsidiaries and (e) William Lyon Homes, Inc. on a consolidated basis; and

(2) Elimination entries necessary to consolidate Delaware Lyon, with William Lyon Homes, Inc. and its guarantor and non-guarantor subsidiaries.

Delaware Lyon owns 100% of all of its guarantor subsidiaries and all guarantees are full and unconditional, joint and several. As a result, in accordance with Rule 3-10 (d) of Regulation S-X promulgated by the SEC, no separate financial statements are required for these subsidiaries as of September 30, 2014 and December 31, 2013, and for the three and nine month periods ended September 30, 2014 and 2013.

CONDENSED CONSOLIDATING BALANCE SHEET

(Unaudited)

As of September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	25,918		$	195		$	9,006		$	—		$	35,119
Restricted cash	—		504			—			—			—			504
Receivables	—		16,267			367			3,206			—			19,840
Escrow proceeds receivable	—		13,064			1,506			36			—			14,606
Real estate inventories
Owned	—		748,429			553,977			76,026			—			1,378,432
Deferred loan costs, net	—		25,975			—			—			—			25,975
Goodwill	—		14,209			48,919			—			—			63,128
Intangibles, net	—		1,477			5,900			—			—			7,377
Deferred income taxes, net	—		91,055			—			—			—			91,055
Other assets, net	—		14,943			2,301			369			—			17,613
Investments in subsidiaries	456,296		(35,547		)	(599,212		)	—			178,463			—
Intercompany receivables	—		—			231,084			—			(231,084		)	—
Total assets	$	456,296	$	916,294		$	245,037		$	88,643		$	(52,621	)	$	1,653,649
LIABILITIES AND EQUITY
Accounts payable	$	—	$	35,965		$	5,363		$	6,570		$	—		$	47,898
Accrued expenses	—		88,080			5,460			102			—			93,642
Notes payable	—		3,077			647			37,540			—			41,264
Senior unsecured facility	—		120,000			—			—			—			120,000
5 3/4% Senior Notes	—		150,000			—			—			—			150,000
8  1/2% Senior Notes	—		430,443			—			—			—			430,443
7% Senior Notes	—		300,000			—			—			—			300,000
Intercompany payables	—		165,211			—			65,873			(231,084		)	—
Total liabilities	—		1,292,776			11,470			110,085			(231,084		)	1,183,247
Equity
William Lyon Homes stockholders’ equity	456,296		(376,482		)	233,567			(35,547		)	178,463			456,297
Noncontrolling interests	—		—			—			14,105			—			14,105
Total liabilities and equity	$	456,296	$	916,294		$	245,037		$	88,643		$	(52,621	)	$	1,653,649

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
ASSETS
Cash and cash equivalents	$	—	$	166,516	$	28	$	5,128		$	—		$	171,672
Restricted cash	—		854		—		—			—			854
Receivables	—		11,429		5		5,025			—			16,459
Escrow proceeds receivable	—		4,313		67		—			—			4,380
Real estate inventories
Owned	—		608,965		3,761		59,064			—			671,790
Not owned	—		12,960		—		—			—			12,960
Deferred loan costs, net	—		9,575		—		—			—			9,575
Goodwill	—		14,209		—		—			—			14,209
Intangibles, net	—		2,766		—		—			—			2,766
Deferred income taxes, net	—		95,580		—		—			—			95,580
Other assets, net	—		9,100		723		343			—			10,166
Investments in subsidiaries	428,179		9,975		—		—			(438,154		)	—
Intercompany receivables	—		—		225,056		(15		)	(225,041		)	—
Total assets	$	428,179	$	946,242	$	229,640	$	69,545		$	(663,195	)	$	1,010,411
LIABILITIES AND EQUITY
Accounts payable	$	—	$	12,489	$	1,959	$	2,651		$	—		$	17,099
Accrued expenses	—		59,376		744		83			—			60,203
Liabilities from inventories not owned	—		12,960		—		—			—			12,960
Notes payable	—		12,281		1,762		24,017			—			38,060
8 1/2% Senior Notes	—		431,295		—		—			—			431,295
Intercompany payables	—		214,837		—		10,204			(225,041		)	—
Total liabilities	—		743,238		4,465		36,955			(225,041		)	559,617
Equity
William Lyon Homes stockholders’ equity	428,179		203,004		225,175		9,975			(438,154		)	428,179
Noncontrolling interests	—		—		—		22,615			—			22,615
Total liabilities and equity	$	428,179	$	946,242	$	229,640	$	69,545		$	(663,195	)	$	1,010,411

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	113,716		$	64,656		$	17,933		$	—		$	196,305
Construction services	—		10,593			—			—			—			10,593
Management fees	—		455			—			—			(455		)	—
	—		124,764			64,656			17,933			(455		)	206,898
Operating costs
Cost of sales	—		(88,778		)	(54,828		)	(14,623		)	455			(157,774		)
Construction services	—		(8,262		)	—			—			—			(8,262		)
Sales and marketing	—		(7,636		)	(3,856		)	(984		)	—			(12,476		)
General and administrative	—		(11,532		)	(1,194		)	—			—			(12,726		)
Transaction expenses	—		(5,768		)	—			—			—			(5,768		)
Amortization of intangible assets	—		(174		)	—			—			—			(174		)
Other	—		(620		)	164			2			—			(454		)
	—		(122,770		)	(59,714		)	(15,605		)	455			(197,634		)
Income from subsidiaries	5,638		907			—			—			(6,545		)	—
Operating income	5,638		2,901			4,942			2,328			(6,545		)	9,264
Other income (expense), net	—		685			(4		)	(324		)	—			357
Income before provision for income taxes	5,638		3,586			4,938			2,004			(6,545		)	9,621
Provision for income taxes	—		(1,999		)	—			—			—			(1,999		)
Net income	5,638		1,587			4,938			2,004			(6,545		)	7,622
Less: Net income attributable to noncontrolling interests	—		483			—			(2,467		)	—			(1,984		)
Net income (loss) attributable to William Lyon Homes	5,638		2,070			4,938			(463		)	(6,545		)	5,638
Net income (loss) available to common stockholders	$	5,638	$	2,070		$	4,938		$	(463	)	$	(6,545	)	$	5,638

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	76,178		$	48,487		$	16,687		$	—		$	141,352
Construction services	—		9,478			—			—			—			9,478
Management fees	—		456			—			—			(456		)	—
	—		86,112			48,487			16,687			(456		)	150,830
Operating costs
Cost of sales	—		(55,968		)	(40,519		)	(11,926		)	456			(107,957		)
Construction services	—		(8,135		)	—			—			—			(8,135		)
Sales and marketing	—		(4,108		)	(2,256		)	(315		)	—			(6,679		)
General and administrative	—		(9,473		)	(726		)	(1		)	—			(10,200		)
Amortization of intangible assets	—		(191		)	—			—			—			(191		)
Other	—		(695		)	—			—			—			(695		)
	—		(78,570		)	(43,501		)	(12,242		)	456			(133,857		)
Income from subsidiaries	12,716		5,804			—			—			(18,520		)	—
Operating income	12,716		13,346			4,986			4,445			(18,520		)	16,973
Interest expense, net of amounts capitalized	—		(51		)	—			—			—			(51		)
Other income (expense), net	—		423			(9		)	(300		)	—			114
Income before provision for income taxes	12,716		13,718			4,977			4,145			(18,520		)	17,036
Provision for income taxes	—		(6,356		)	—			—			—			(6,356		)
Net (loss) income	12,716		7,362			4,977			4,145			(18,520		)	10,680
Less: Net income attributable to noncontrolling interests	—		—			—			(3,118		)	—			(3,118		)
Net (loss) income attributable to William Lyon Homes	12,716		7,362			4,977			1,027			(18,520		)	7,562
Preferred stock dividends	—		—			—			—			—			—
Net (loss) income available to common stockholders	$	12,716	$	7,362		$	4,977		$	1,027		$	(18,520	)	$	7,562

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—	$	343,449		$	107,093		$	55,930		$	—		$	506,472
Construction services	—		30,186			—			—			—			30,186
Management fees	—		1,672			—			—			(1,672		)	—
	—		375,307			107,093			55,930			(1,672		)	536,658
Operating costs
Cost of sales	—		(262,360		)	(89,351		)	(43,573		)	1,672			(393,612		)
Construction services	—		(24,735		)	—			—			—			(24,735		)
Sales and marketing	—		(18,526		)	(6,671		)	(2,761		)	—			(27,958		)
General and administrative	—		(33,030		)	(2,849		)	(2		)	—			(35,881		)
Transaction expenses	—		(5,768		)	—			—			—			(5,768		)
Amortization of intangible assets	—		(1,294		)	—			—			—			(1,294		)
Other	—		(1,917		)	182			(10		)	—			(1,745		)
	—		(347,630		)	(98,689		)	(46,346		)	1,672			(490,993		)
Income from subsidiaries	26,620		7,730			—			—			(34,350		)	—
Operating income	26,620		35,407			8,404			9,584			(34,350		)	45,665
Interest expense, net of amounts capitalized	—		—			—			—			—			—
Other income (expense), net	—		1,550			(15		)	(705		)	—			830
Income before provision for income taxes	26,620		36,957			8,389			8,879			(34,350		)	46,495
Provision for income taxes	—		(12,779		)	—			—			—			(12,779		)
Net income	26,620		24,178			8,389			8,879			(34,350		)	33,716
Less: Net income attributable to noncontrolling interests	—		—			—			(7,096		)	—			(7,096		)
Net income attributable to William Lyon Homes	26,620		24,178			8,389			1,783			(34,350		)	26,620
Net income available to common stockholders	$	26,620	$	24,178		$	8,389		$	1,783		$	(34,350	)	$	26,620

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

Nine Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating revenue
Sales	$	—		$	173,032		$	142,105		$	26,545		$	—		$	341,682
Construction services	—			21,439			—			—			—			21,439
Management fees	—			(727		)	—			—			727			—
	—			193,744			142,105			26,545			727			363,121
Operating costs
Cost of sales	—			(132,270		)	(119,051		)	(18,722		)	(727		)	(270,770		)
Construction services	—			(17,472		)	—			—			—			(17,472		)
Sales and marketing	—			(9,826		)	(6,867		)	(789		)	—			(17,482		)
General and administrative	—			(26,162		)	(1,835		)	(19		)	—			(28,016		)
Amortization of intangible assets	—			(1,173		)	—			—			—			(1,173		)
Other	—			(1,744		)	(2		)	—			—			(1,746		)
	—			(188,647		)	(127,755		)	(19,530		)	(727		)	(336,659		)
Income from subsidiaries	17,562			13,800			—			—			(31,362		)	—
Operating income	17,562			18,897			14,350			7,015			(31,362		)	26,462
Interest expense, net of amounts capitalized	—			(2,476		)	(126		)	—			—			(2,602		)
Other income (expense), net	—			1,184			(20		)	(907		)	—			257
Income before reorganization items and provision for income taxes	17,562			17,605			14,204			6,108			(31,362		)	24,117
Reorganization items, net	—			(464		)	—			—			—			(464		)
Income before provision for income taxes	17,562			17,141			14,204			6,108			(31,362		)	23,653
Provision for income taxes	—			(6,366		)	—			—			—			(6,366		)
Net income	17,562			10,775			14,204			6,108			(31,362		)	17,287
Less: Net income attributable to noncontrolling interests	—			—			—			(4,879		)	—			(4,879		)
Net income attributable to William Lyon Homes	17,562			10,775			14,204			1,229			(31,362		)	12,408
Preferred stock dividends	(1,528		)	—			—			—			—			(1,528		)
Net income available to common stockholders	$	16,034		$	10,775		$	14,204		$	1,229		$	(31,362	)	$	10,880

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2014

(in thousands)

	Unconsolidated
	Delaware Lyon			California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash (used in) provided by operating activities	$	(1,496	)	$	358,000		$	(536,794	)	$	(2,396	)	$	1,496		$	(181,190	)
Investing activities
Distributions from unconsolidated joint ventures	—			146			—			—			—			146
Cash paid for acquisitions, net	—			(437,599		)	(51,186		)	—			—			(488,785		)
Purchases of property and equipment	—			(1,447		)	(288		)	8			—			(1,727		)
Investments in subsidiaries	—			56,889			595,575			—			(652,464		)	—
Net cash provided by (used in) investing activities	—			(382,011		)	544,101			8			(652,464		)	(490,366		)
Financing activities
Proceeds from borrowings on notes payable	—			1,113			(1,114		)	57,948			—			57,947
Principal payments on notes payable	—			(12,730		)	—			(44,425		)	—			(57,155		)
Proceeds from issuance of 5 3/4% notes	—			150,000			—			—			—			150,000
Proceeds from issuance of 7% senior notes	—			300,000			—			—			—			300,000
Borrowings on senior unsecured facility	—			120,000			—			—			—			120,000
Payment of deferred loan costs	—			(18,909		)	—			—			—			(18,909		)
Proceeds from exercise of stock options	—			285			—			—			—			285
Shares remitted to Company for employee tax withholding	—			(1,454		)	—			—			—			(1,454		)
Offering costs related to secondary sale of common stock	—			(105		)	—			—			—			(105		)
Noncontrolling interests contributions	—			—			—			9,641			—			9,641
Noncontrolling interests distributions	—			—			—			(25,247		)	—			(25,247		)
Advances to affiliates	—			—			2			(47,305		)	47,303			—
Intercompany receivables/payables	1,496			(654,787		)	(6,028		)	55,654			603,665			—
Net cash provided by (used in)financing activities	1,496			(116,587		)	(7,140		)	6,266			650,968			535,003
Net (decrease) increase in cash and cash equivalents	—			(140,598		)	167			3,878			—			(136,553		)
Cash and cash equivalents at beginning of period	—			166,516			28			5,128			—			171,672
Cash and cash equivalents at end of period	$	—		$	25,918		$	195		$	9,006		$	—		$	35,119

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2013

(in thousands)

	Unconsolidated
	Delaware Lyon		California Lyon			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated Company
Operating activities
Net cash used in operating activities	$	—	$	(142,959	)	$	12,221		$	(34,181	)	$	—		$	(164,919	)
Investing activities
Purchases of property and equipment	—		(3,299		)	(57		)	(3		)	—			(3,359		)
Investments in subsidiaries	—		4,804			—			—			(4,804		)	—
Net cash (used in) provided by investing activities	—		1,505			(57		)	(3		)	(4,804		)	(3,359		)
Financing activities
Proceeds on borrowings on notes payable	—		16,790			1,762			32,892			—			51,444
Principal payments on notes payable	—		(26,360		)	—			(19,099		)	—			(45,459		)
Payment of deferred loan costs	—		(1,792		)	—			—			—			(1,792		)
Proceeds from issuance of common stock	—		179,438			—			—			—			179,438
Offering costs related to issuance of common stock	—		(15,655		)	—			—			—			(15,655		)
Payment of preferred stock dividends	—		(2,550		)	—			—			—			(2,550		)
Noncontrolling interests contributions	—		—			—			35,399			—			35,399
Noncontrolling interests distributions	—		—			—			(21,700		)	—			(21,700		)
Intercompany receivables/payables	—		183			(12,902		)	923			11,796			—
Advances to affiliates	—		—			(776		)	7,768			(6,992		)	—
Net cash provided by (used in) financing activities	—		150,054			(11,916		)	36,183			4,804			179,125
Net increase (decrease) in cash and cash equivalents	—		8,600			248			1,999			—			10,847
Cash and cash equivalents at beginning of period	—		69,376			65			1,634			—			71,075
Cash and cash equivalents at end of period	$	—	$	77,976		$	313		$	3,633		$	—		$	81,922

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Real Estate Inventories (Notes)

9 Months Ended

Sep. 30, 2014

Real Estate [Abstract]

Real Estate Inventories

Real Estate Inventories

Real estate inventories consist of the following (in thousands):

	September 30, 2014		December 31, 2013
Real estate inventories owned:
Land deposits	$	70,961	$	46,632
Land and land under development	963,964		458,437
Homes completed and under construction	291,083		144,736
Model homes	52,424		21,985
Total	$	1,378,432	$	671,790
Real estate inventories not owned: (1)
Other land options contracts — land banking arrangement	$	—	$	12,960

(1) Represents the consolidation of a land banking arrangement, net of deposits. The final lots attributable to this amount were purchased in April 2014.

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Financial Information Relating to Operations

Segment financial information relating to the Company’s operations was as follows (in thousands):

	Three   Months   Ended    September 30,   2014			Three   Months   Ended   September 30,   2013			Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Operating revenue:
Southern California	$	76,628		$	49,681		$	307,090		$	105,231
Northern California	29,073			27,790			48,683			56,115
Arizona	16,750			31,253			46,459			86,431
Nevada	36,540			23,920			72,081			56,421
Colorado	9,005			18,186			23,443			58,923
Washington	19,994			—			19,994			—
Oregon	18,908			—			18,908			—
Total operating revenue	$	206,898		$	150,830		$	536,658		$	363,121
	Three   Months   Ended    September 30,   2014			Three   Months   Ended   September 30,   2013			Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Income before provision for income taxes
Southern California	$	9,901		$	10,027		$	46,923		$	15,453
Northern California	3,395			4,706			10,204			8,740
Arizona	1,590			4,224			5,262			9,032
Nevada	2,709			3,355			5,738			5,881
Colorado	(386		)	209			(1,498		)	1,654
Washington	2,256			—			2,256			—
Oregon	1,701			—			1,701			—
Corporate	(11,545		)	(5,485		)	(24,091		)	(17,107		)
Income before provision for income taxes	$	9,621		$	17,036		$	46,495		$	23,653

Segment Schedule of Homebuilding Assets

	September 30, 2014		December 31, 2013
Homebuilding assets:
Southern California	$	340,317	$	275,975
Northern California	228,156		143,693
Arizona	175,950		157,892
Nevada	130,758		85,695
Colorado	126,959		60,233
Washington	281,675		—
Oregon	204,349		—
Corporate (1)	165,485		286,923
Total homebuilding assets	$	1,653,649	$	1,010,411

(1) Comprised primarily of cash and cash equivalents, deferred income taxes, receivables, deferred loan costs, and other assets.

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Subsequent Events (Notes)

9 Months Ended

Sep. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

No events have occurred subsequent to September 30, 2014, that would require recognition or disclosure in the Company’s financial statements.

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Income Taxes (Notes)

9 Months Ended

Sep. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Since inception, the Company has operated solely within the United States. The Company’s effective income tax rate was 20.8% and 27.5%, and 37.3% and 26.9% for the three and nine months ended September 30, 2014 and 2013, respectively. The significant drivers of the effective tax rate are allocation of income to noncontrolling interests, related party loss recapture, domestic production activities deduction, and release of valuation allowance.

Management assesses its deferred tax assets quarterly to determine whether all or any portion of the asset is more likely than not unrealizable under ASC 740. The Company is required to establish a valuation allowance for any portion of the asset that management concludes is more likely than not to be unrealizable. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company's assessment considers all evidence, both positive and negative, including the nature, frequency and severity of any current and cumulative losses, taxable income in carry back years, the scheduled reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income in making this assessment. At September 30, 2014 the Company’s valuation allowance was $3.2 million due to projected excess realized built-in-losses and state net operating losses which may expire unused. In the fourth quarter of the year ended December 31, 2013, the Company recognized a $95.6 million income tax benefit that resulted from the reversal of all but $4.0 million of our deferred tax asset valuation allowance.

At September 30, 2014, the Company had no remaining federal net operating loss carryforwards and $77.6 million remaining state net operating loss carryforwards. State net operating loss carryforwards begin to expire in 2014. In addition, as of September 30, 2014, the Company had unused federal and state built-in losses of $71.4 million and $38.4 million, respectively. The 5 year testing period for built-in losses expires in 2017 and the unused built-in loss carryforwards begin to expire in 2033. The Company had AMT credit carryovers of $1.4 million at September 30, 2014, which have an indefinite life.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”) which is now codified as FASB ASC Topic 740, Income Taxes (“ASC 740”). ASC 740 prescribes a recognition threshold and a measurement criterion for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered more likely than not to be sustained upon examination by taxing authorities. The Company records interest and penalties related to uncertain tax positions as a component of the provision for income taxes. The Company has no unrecognized tax benefits.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal income tax examination for calendar tax years ended 2011 through 2013 and forward. The Company is subject to various state income tax examinations for calendar tax years ended 2009 through 2013 and forward. The Company does not have any tax examinations currently in progress.

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Commitments and Contingencies - Future Minimum Payments Under Non-Cancelable Operating Leases (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014
Commitments and Contingencies Disclosure [Abstract]
2014	$ 577
2015	1,648
2016	1,233
2017	910
2018	897
Thereafter	2,832
Total	$ 8,097

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Fair Value of Financial Instruments (Notes)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

In accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosure (“ASC 820”), the Company is required to disclose the estimated fair value of financial instruments. As of September 30, 2014 and December 31, 2013, the Company used the following assumptions to estimate the fair value of each type of financial instrument for which it is practicable to estimate:

• Notes payable—The carrying amount is a reasonable estimate of fair value of the notes payable because market rates are unchanged and/or the outstanding balance at quarter end is expected to be repaid within one year.

• Senior unsecured facility—The carrying amount is a reasonable estimate of fair value of the Senior unsecured facility as the facility was issued during the current period and the rate has not changed since issuance.

•     5 ³/₄% Senior Notes due April 15, 2019 —The 5 ³/4% Senior Notes are traded over the counter and their fair values were based upon quotes from industry sources.

• 8 ¹/2% Senior Notes due November 15, 2020 —The 8 ¹/2% Senior Notes are traded over the counter and their fair values were based upon quotes from industry sources.

• 7% Senior Notes due August 15, 2022 —The 7% Senior Notes were issued during the current quarter, and their fair values were based upon quotes from industry sources.

The following table excludes cash and cash equivalents, restricted cash, receivables and accounts payable, which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments. The estimated fair values of financial instruments are as follows (in thousands):

	September 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	41,264	$	41,264	$	38,060	$	38,060
Senior unsecured facility	$	120,000	$	120,000	$	—	$	—
5 3/4% Senior Notes due 2019	$	150,000	$	148,125	$	—	$	—
8 1/2% Senior Notes due 2020	$	430,443	$	460,063	$	431,295	$	466,877
7% Senior Notes due 2022	$	300,000	$	306,750	$	—	$	—

ASC 820 establishes a framework for measuring fair value, expands disclosures regarding fair value measurements and defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires the Company to maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. The Company used Level 3 to measure the fair value of its Notes payable and Senior unsecured facility, and Level 2 to measure the fair value of its Senior notes. The ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. The three levels of the hierarchy are as follows:

• Level 1—quoted prices for identical assets or liabilities in active markets;

• Level 2—quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3—valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table represents a reconciliation of the beginning and ending balance for the Company’s Level 3 fair value measurements:

	Notes
	Payable
	(in thousands)
Fair value at December 31, 2013	$	38,060
Repayments of principal (1)	(57,156		)
Borrowings of principal (2)	60,360
Increase in value during the period	—
Fair value at September 30, 2014	$	41,264

(1) Represents the actual amount of principal repaid

(2) Represents the actual amount of principal borrowed

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Related Party Transactions (Notes)

9 Months Ended

Sep. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

On September 3, 2009, Presley CMR, Inc., a California corporation (“Presley CMR”) and a wholly owned subsidiary of California Lyon, entered into an Aircraft Purchase and Sale Agreement (“PSA”) with an affiliate of General William Lyon to sell an aircraft (the “Aircraft”). The PSA provided for an aggregate purchase price for the Aircraft of $8.3 million, (which value was the appraised fair market value of the Aircraft), which consisted of: (i) cash in the amount of $2.1 million to be paid at closing and (ii) a promissory note from the affiliate in the amount of $6.2 million. The note is secured by the Aircraft. As part of the Company’s fresh start accounting, the note was adjusted to its fair value of $5.2 million. The discount on the fresh start adjustment is amortized over the remaining life of the note. The note requires semiannual interest payments to California Lyon of approximately $0.1 million. The note is due in September 2016.

For the nine months ended September 30, 2013, the Company incurred charges of $0.2 million related to rent on its corporate office, from a trust of which William H. Lyon is the sole beneficiary. The lease expired in March 2013 and the Company relocated its corporate office upon expiration of the lease. The Company has entered into a lease for the new location with an unrelated third party.

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Income Per Common Share (Notes)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Income Per Common Share

Income Per Common Share

Basic and diluted income per common share for the three and nine months ended September 30, 2014 and 2013 were calculated as follows (in thousands, except number of shares and per share amounts):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Basic weighted average number of common shares outstanding	31,232,655		30,975,160		31,184,101		22,569,810
Effect of dilutive securities:
Stock options, unvested common shares, and warrants	1,528,091		920,654		1,541,063		877,144
Diluted average shares outstanding	32,760,746		31,895,814		32,725,164		23,446,954
Net income available to common stockholders	$	5,638	$	7,562	$	26,620	$	10,880
Basic income per common share	$	0.18	$	0.24	$	0.85	$	0.48
Dilutive income per common share	$	0.17	$	0.24	$	0.81	$	0.46

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Acquisition of Polygon Northwest Homes - Summary of Acquired Assets and Liabilities Recorded at Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013	Aug. 12, 2014 Polygon Northwest Homes
Assets Acquired
Real estate inventories			$ 439,628
Goodwill	63,128	14,209	48,919
Intangible asset - brand name			5,900
Joint venture in mortgage business			2,000
Other			545
Total Assets			496,992
Liabilities Assumed
Accounts payable			603
Accrued Liabilities			3,971
Total liabilities			4,574
Assets, Net			$ 492,418

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Senior Notes, Secured, and Unsecured Indebtedness - Condensed Consolidating Statement of Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Operating revenue
Sales	$ 196,305		$ 141,352	$ 506,472	$ 341,682
Construction services	10,593		9,478	30,186	21,439
Management fees	0		0	0	0
Operating revenue	206,898		150,830	536,658	363,121
Operating costs
Cost of sales	(157,774)		(107,957)	(393,612)	(270,770)
Construction services	(8,262)		(8,135)	(24,735)	(17,472)
Sales and marketing	(12,476)		(6,679)	(27,958)	(17,482)
General and administrative	(12,726)		(10,200)	(35,881)	(28,016)
Transaction expenses	(5,768)		0	(5,768)	0
Amortization of intangible assets	(174)		(191)	(1,294)	(1,173)
Other	(454)		(695)	(1,745)	(1,746)
Total operating costs	(197,634)		(133,857)	(490,993)	(336,659)
Income from subsidiaries	0		0	0	0
Operating income	9,264		16,973	45,665	26,462
Interest expense, net of amounts capitalized	0		(51)	0	(2,602)
Other income (expense), net	357		114	830	257
Income before reorganization items	9,621		17,036	46,495	24,117
Reorganization items, net	0		0	0	(464)
Income before provision for income taxes	9,621		17,036	46,495	23,653
Provision for income taxes	(1,999)	95,600	(6,356)	(12,779)	(6,366)
Net income	7,622		10,680	33,716	17,287
Less: Net income attributable to noncontrolling interests	(1,984)		(3,118)	(7,096)	(4,879)
Net income (loss) attributable to William Lyon Homes	5,638		7,562	26,620	12,408
Preferred stock dividends	0		0	0	(1,528)
Net income (loss) available to common stockholders	5,638		7,562	26,620	10,880
Delaware Lyon
Operating revenue
Sales	0		0	0	0
Construction services	0		0	0	0
Management fees	0		0	0	0
Operating revenue	0		0	0	0
Operating costs
Cost of sales	0		0	0	0
Construction services	0		0	0	0
Sales and marketing	0		0	0	0
General and administrative	0		0	0	0
Transaction expenses	0			0
Amortization of intangible assets	0		0	0	0
Other	0		0	0	0
Total operating costs	0		0	0	0
Income from subsidiaries	5,638		12,716	26,620	17,562
Operating income	5,638		12,716	26,620	17,562
Interest expense, net of amounts capitalized			0	0	0
Other income (expense), net	0		0	0	0
Income before reorganization items					17,562
Reorganization items, net					0
Income before provision for income taxes	5,638		12,716	26,620	17,562
Provision for income taxes	0		0	0	0
Net income	5,638		12,716	26,620	17,562
Less: Net income attributable to noncontrolling interests	0		0	0	0
Net income (loss) attributable to William Lyon Homes	5,638		12,716	26,620	17,562
Preferred stock dividends			0		(1,528)
Net income (loss) available to common stockholders	5,638		12,716	26,620	16,034
California Lyon
Operating revenue
Sales	113,716		76,178	343,449	173,032
Construction services	10,593		9,478	30,186	21,439
Management fees	455		456	1,672	(727)
Operating revenue	124,764		86,112	375,307	193,744
Operating costs
Cost of sales	(88,778)		(55,968)	(262,360)	(132,270)
Construction services	(8,262)		(8,135)	(24,735)	(17,472)
Sales and marketing	(7,636)		(4,108)	(18,526)	(9,826)
General and administrative	(11,532)		(9,473)	(33,030)	(26,162)
Transaction expenses	(5,768)			(5,768)
Amortization of intangible assets	(174)		(191)	(1,294)	(1,173)
Other	(620)		(695)	(1,917)	(1,744)
Total operating costs	(122,770)		(78,570)	(347,630)	(188,647)
Income from subsidiaries	907		5,804	7,730	13,800
Operating income	2,901		13,346	35,407	18,897
Interest expense, net of amounts capitalized			(51)	0	(2,476)
Other income (expense), net	685		423	1,550	1,184
Income before reorganization items					17,605
Reorganization items, net					(464)
Income before provision for income taxes	3,586		13,718	36,957	17,141
Provision for income taxes	(1,999)		(6,356)	(12,779)	(6,366)
Net income	1,587		7,362	24,178	10,775
Less: Net income attributable to noncontrolling interests	483		0	0	0
Net income (loss) attributable to William Lyon Homes	2,070		7,362	24,178	10,775
Preferred stock dividends			0		0
Net income (loss) available to common stockholders	2,070		7,362	24,178	10,775
Guarantor Subsidiaries
Operating revenue
Sales	64,656		48,487	107,093	142,105
Construction services	0		0	0	0
Management fees	0		0	0	0
Operating revenue	64,656		48,487	107,093	142,105
Operating costs
Cost of sales	(54,828)		(40,519)	(89,351)	(119,051)
Construction services	0		0	0	0
Sales and marketing	(3,856)		(2,256)	(6,671)	(6,867)
General and administrative	(1,194)		(726)	(2,849)	(1,835)
Transaction expenses	0			0
Amortization of intangible assets	0		0	0	0
Other	164		0	182	(2)
Total operating costs	(59,714)		(43,501)	(98,689)	(127,755)
Income from subsidiaries	0		0	0	0
Operating income	4,942		4,986	8,404	14,350
Interest expense, net of amounts capitalized			0	0	(126)
Other income (expense), net	(4)		(9)	(15)	(20)
Income before reorganization items					14,204
Reorganization items, net					0
Income before provision for income taxes	4,938		4,977	8,389	14,204
Provision for income taxes	0		0	0	0
Net income	4,938		4,977	8,389	14,204
Less: Net income attributable to noncontrolling interests	0		0	0	0
Net income (loss) attributable to William Lyon Homes	4,938		4,977	8,389	14,204
Preferred stock dividends			0		0
Net income (loss) available to common stockholders	4,938		4,977	8,389	14,204
Non-Guarantor Subsidiaries
Operating revenue
Sales	17,933		16,687	55,930	26,545
Construction services	0		0	0	0
Management fees	0		0	0	0
Operating revenue	17,933		16,687	55,930	26,545
Operating costs
Cost of sales	(14,623)		(11,926)	(43,573)	(18,722)
Construction services	0		0	0	0
Sales and marketing	(984)		(315)	(2,761)	(789)
General and administrative	0		(1)	(2)	(19)
Transaction expenses	0			0
Amortization of intangible assets	0		0	0	0
Other	2		0	(10)	0
Total operating costs	(15,605)		(12,242)	(46,346)	(19,530)
Income from subsidiaries	0		0	0	0
Operating income	2,328		4,445	9,584	7,015
Interest expense, net of amounts capitalized			0	0	0
Other income (expense), net	(324)		(300)	(705)	(907)
Income before reorganization items					6,108
Reorganization items, net					0
Income before provision for income taxes	2,004		4,145	8,879	6,108
Provision for income taxes	0		0	0	0
Net income	2,004		4,145	8,879	6,108
Less: Net income attributable to noncontrolling interests	(2,467)		(3,118)	(7,096)	(4,879)
Net income (loss) attributable to William Lyon Homes	(463)		1,027	1,783	1,229
Preferred stock dividends			0		0
Net income (loss) available to common stockholders	(463)		1,027	1,783	1,229
Eliminations
Operating revenue
Sales	0		0	0	0
Construction services	0		0	0	0
Management fees	(455)		(456)	(1,672)	727
Operating revenue	(455)		(456)	(1,672)	727
Operating costs
Cost of sales	455		456	1,672	(727)
Construction services	0		0	0	0
Sales and marketing	0		0	0	0
General and administrative	0		0	0	0
Transaction expenses	0			0
Amortization of intangible assets	0		0	0	0
Other	0		0	0	0
Total operating costs	455		456	1,672	(727)
Income from subsidiaries	(6,545)		(18,520)	(34,350)	(31,362)
Operating income	(6,545)		(18,520)	(34,350)	(31,362)
Interest expense, net of amounts capitalized			0	0	0
Other income (expense), net	0		0	0	0
Income before reorganization items					(31,362)
Reorganization items, net					0
Income before provision for income taxes	(6,545)		(18,520)	(34,350)	(31,362)
Provision for income taxes	0		0	0	0
Net income	(6,545)		(18,520)	(34,350)	(31,362)
Less: Net income attributable to noncontrolling interests	0		0	0	0
Net income (loss) attributable to William Lyon Homes	(6,545)		(18,520)	(34,350)	(31,362)
Preferred stock dividends			0		0
Net income (loss) available to common stockholders	$ (6,545)		$ (18,520)	$ (34,350)	$ (31,362)

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Basis of Presentation and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Summary of Changes in Warranty Liability

Changes in the Company’s warranty liability for the nine months ended September 30, 2014 and 2013, are as follows (in thousands):

	Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Warranty liability, beginning of period	$	14,935		$	14,317
Warranty provision during period	5,343			3,131
Warranty payments during period	(4,997		)	(3,900		)
Warranty charges related to pre-existing warranties during period	341			354
Warranty charges related to construction services projects	591			267
Warranty liability, end of period	$	16,213		$	14,169

Schedule of Interest Incurred under Company's Debt Obligations

Interest activity for the three months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Interest incurred	$	17,504	$	7,511	$	38,818	$	22,511
Less: Interest capitalized	17,504		7,460		38,818		19,909
Interest expense, net of amounts capitalized	$	—	$	51	$	—	$	2,602
Cash paid for interest	$	2,925	$	283	$	22,596	$	14,854

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Estimated Fair Values of Financial Instruments

The estimated fair values of financial instruments are as follows (in thousands):

	September 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	41,264	$	41,264	$	38,060	$	38,060
Senior unsecured facility	$	120,000	$	120,000	$	—	$	—
5 3/4% Senior Notes due 2019	$	150,000	$	148,125	$	—	$	—
8 1/2% Senior Notes due 2020	$	430,443	$	460,063	$	431,295	$	466,877
7% Senior Notes due 2022	$	300,000	$	306,750	$	—	$	—

Fair Value of Debt

The following table represents a reconciliation of the beginning and ending balance for the Company’s Level 3 fair value measurements:

	Notes
	Payable
	(in thousands)
Fair value at December 31, 2013	$	38,060
Repayments of principal (1)	(57,156		)
Borrowings of principal (2)	60,360
Increase in value during the period	—
Fair value at September 30, 2014	$	41,264

(1) Represents the actual amount of principal repaid

(2) Represents the actual amount of principal borrowed

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Senior Notes, Secured, and Unsecured Indebtedness - Guarantor and Non-Guarantor Financial Statements - Narrative (Details) (Parent)	Sep. 30, 2014
Parent
Debt Instrument [Line Items]
Ownership percentage	100.00%

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Senior Notes, Secured, and Unsecured Indebtedness - Details of Notes Payable and Senior Notes (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Aug. 12, 2014	Dec. 31, 2013
Notes payable:
Total notes payable	$ 41,264		$ 38,060
Senior notes:
Total senior notes	880,443		431,295
Total notes payable and senior notes	1,041,707		469,355
Senior unsecured loan facility
Senior notes:
Total senior notes		120,000
Total notes payable and senior notes	120,000		0
5 3/4% Senior notes due April 15, 2019
Senior notes:
Total notes payable and senior notes	150,000		0
8 1/2% Senior notes due November 15, 2020
Senior notes:
Total notes payable and senior notes	430,443		431,295
7% Senior notes due August 15, 2022
Senior notes:
Total notes payable and senior notes	300,000		0
Construction Loan Payable
Notes payable:
Total notes payable	37,540		24,198
Seller financing
Notes payable:
Total notes payable	3,724		13,862
Revolving Credit Facility
Notes payable:
Total notes payable	$ 0		$ 0

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CONDENSED CONSOLIDATED STATEMENT OF EQUITY (USD $) In Thousands, unless otherwise specified		Total	Common Stock	Additional Paid-In	Retained Earnings	Non- Controlling Interests
Beginning Balance at Dec. 31, 2013		$ 450,794	$ 314	$ 311,863	$ 116,002	$ 22,615
Beginning Balance (in shares) at Dec. 31, 2013			31,436
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		33,716			26,620	7,096
Noncontrolling interests contributions		9,641				9,641
Noncontrolling interests distributions		(25,247)				(25,247)
Exercise of stock options		285	1	284
Exercise of stock options (in shares)			158
Shares remitted to Company	[1]	(1,454)		(1,454)
Shares remitted to Company (in shares)	[1]		(94)
Offering costs related to secondary sale of common stock		(105)		(105)
Stock based compensation		2,772	4	2,768
Stock based compensation (in shares)			392
Ending Balance at Sep. 30, 2014		$ 470,402	$ 319	$ 313,356	$ 142,622	$ 14,105
Ending Balance (in shares) at Sep. 30, 2014			31,892

[1] Represents shares remitted to the Company by employees to satisfy personal income tax liabilities resulting from share based compensation plans.

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Segment Information (Notes)

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company operates one principal homebuilding business. In accordance with FASB ASC Topic 280, Segment Reporting ("ASC 280"), the Company has determined that each of its operating divisions is an operating segment.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company’s Executive Chairman, Chief Executive Officer and Chief Operating Officer have been identified as the chief operating decision makers. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability and cash flows of each respective segment.

The Company’s homebuilding operations design, construct and sell a wide range of homes designed to meet the specific needs in each of its markets. In accordance with ASC 280, prior to the acquisition of Polygon Northwest Homes (see Note 2), the Company's homebuilding operations had been grouped into five operating segments: Southern California, consisting of an operating division with operations in Orange, Los Angeles, Riverside, San Bernardino and San Diego counties; Northern California, consisting of an operating division with operations in Alameda, Contra Costa, San Joaquin, and Santa Clara counties; Arizona, consisting of operations in the Phoenix, Arizona metropolitan area; Nevada, consisting of operations in the Las Vegas, Nevada metropolitan area; and Colorado, consisting of operations in the Fort Collins and Granby, Colorado markets. During the three months ended September 30, 2014, the Company added two additional operating segments as a result of the Polygon Northwest Homes Acquisition: Oregon, with operations in the Portland, Oregon metropolitan area; and Washington, consisting of operations in the Seattle, Washington metropolitan area.

Corporate develops and implements strategic initiatives and supports the Company’s operating divisions by centralizing key administrative functions such as finance and treasury, information technology, risk management and litigation and human resources.

Segment financial information relating to the Company’s operations was as follows (in thousands):

	Three   Months   Ended    September 30,   2014			Three   Months   Ended   September 30,   2013			Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Operating revenue:
Southern California	$	76,628		$	49,681		$	307,090		$	105,231
Northern California	29,073			27,790			48,683			56,115
Arizona	16,750			31,253			46,459			86,431
Nevada	36,540			23,920			72,081			56,421
Colorado	9,005			18,186			23,443			58,923
Washington	19,994			—			19,994			—
Oregon	18,908			—			18,908			—
Total operating revenue	$	206,898		$	150,830		$	536,658		$	363,121
	Three   Months   Ended    September 30,   2014			Three   Months   Ended   September 30,   2013			Nine   Months   Ended   September 30,   2014			Nine   Months   Ended   September 30,   2013
Income before provision for income taxes
Southern California	$	9,901		$	10,027		$	46,923		$	15,453
Northern California	3,395			4,706			10,204			8,740
Arizona	1,590			4,224			5,262			9,032
Nevada	2,709			3,355			5,738			5,881
Colorado	(386		)	209			(1,498		)	1,654
Washington	2,256			—			2,256			—
Oregon	1,701			—			1,701			—
Corporate	(11,545		)	(5,485		)	(24,091		)	(17,107		)
Income before provision for income taxes	$	9,621		$	17,036		$	46,495		$	23,653

	September 30, 2014		December 31, 2013
Homebuilding assets:
Southern California	$	340,317	$	275,975
Northern California	228,156		143,693
Arizona	175,950		157,892
Nevada	130,758		85,695
Colorado	126,959		60,233
Washington	281,675		—
Oregon	204,349		—
Corporate (1)	165,485		286,923
Total homebuilding assets	$	1,653,649	$	1,010,411

(1) Comprised primarily of cash and cash equivalents, deferred income taxes, receivables, deferred loan costs, and other assets.

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Stock Based Compensation - Narrative (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	$ 900	$ 900	$ 2,772	$ 2,207
Performance Based Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of stock (in shares)	24,812		312,551
Stock awards, vesting percentage			33.33%
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of stock (in shares)	31,013		79,575
Restricted stock | Other Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of stock (in shares)	31,013		57,147
Number of award type not vesting on first and second anniversary of grant date			2
Restricted stock | Non Employee Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of stock (in shares)	0		22,428
Stock awards, vesting percentage			25.00%
First and Second Anniversary of Grant Date | Restricted stock | Other Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock awards, vesting percentage			50.00%
Second Anniversary of Grant Date | Restricted stock | Other Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of award type			2
Stock awards, vesting percentage			100.00%

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Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Basic and Diluted Income (Loss) Per Common Share

Basic and diluted income per common share for the three and nine months ended September 30, 2014 and 2013 were calculated as follows (in thousands, except number of shares and per share amounts):

	Three   Months   Ended    September 30,   2014		Three   Months   Ended   September 30,   2013		Nine   Months   Ended   September 30,   2014		Nine   Months   Ended   September 30,   2013
Basic weighted average number of common shares outstanding	31,232,655		30,975,160		31,184,101		22,569,810
Effect of dilutive securities:
Stock options, unvested common shares, and warrants	1,528,091		920,654		1,541,063		877,144
Diluted average shares outstanding	32,760,746		31,895,814		32,725,164		23,446,954
Net income available to common stockholders	$	5,638	$	7,562	$	26,620	$	10,880
Basic income per common share	$	0.18	$	0.24	$	0.85	$	0.48
Dilutive income per common share	$	0.17	$	0.24	$	0.81	$	0.46

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Segment Information - Segment Financial Information Relating to Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Operating revenue
Total operating revenue	$ 206,898	$ 150,830	$ 536,658	$ 363,121
Income before provision for income taxes
Income before provision for income taxes	9,621	17,036	46,495	23,653
Reportable Geographical Components | Southern California
Operating revenue
Total operating revenue	76,628	49,681	307,090	105,231
Income before provision for income taxes
Income before provision for income taxes	9,901	10,027	46,923	15,453
Reportable Geographical Components | Northern California
Operating revenue
Total operating revenue	29,073	27,790	48,683	56,115
Income before provision for income taxes
Income before provision for income taxes	3,395	4,706	10,204	8,740
Reportable Geographical Components | Arizona
Operating revenue
Total operating revenue	16,750	31,253	46,459	86,431
Income before provision for income taxes
Income before provision for income taxes	1,590	4,224	5,262	9,032
Reportable Geographical Components | Nevada
Operating revenue
Total operating revenue	36,540	23,920	72,081	56,421
Income before provision for income taxes
Income before provision for income taxes	2,709	3,355	5,738	5,881
Reportable Geographical Components | Colorado
Operating revenue
Total operating revenue	9,005	18,186	23,443	58,923
Income before provision for income taxes
Income before provision for income taxes	(386)	209	(1,498)	1,654
Reportable Geographical Components | Washington
Operating revenue
Total operating revenue	19,994	0	19,994	0
Income before provision for income taxes
Income before provision for income taxes	2,256	0	2,256	0
Reportable Geographical Components | Oregon
Operating revenue
Total operating revenue	18,908	0	18,908	0
Income before provision for income taxes
Income before provision for income taxes	1,701	0	1,701	0
Reportable Geographical Components | Corporate
Income before provision for income taxes
Income before provision for income taxes	$ (11,545)	$ (5,485)	$ (24,091)	$ (17,107)

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Basis of Presentation and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Operations

Operations

William Lyon Homes, a Delaware corporation (“Parent” and together with its subsidiaries, the “Company”), is primarily engaged in designing, constructing, marketing and selling single-family detached and attached homes in California, Arizona, Nevada, Colorado (under the Village Homes brand), Washington and Oregon (each under the Polygon Northwest Homes brand).

Basis of Presentation

Basis of Presentation

The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities as of September 30, 2014 and December 31, 2013 and revenues and expenses for the three and nine month periods ended September 30, 2014 and 2013. Accordingly, actual results could differ from those estimates. The significant accounting policies using estimates include real estate inventories and cost of sales, impairment of real estate inventories, warranty reserves, loss contingencies, sales and profit recognition, accounting for variable interest entities, business combinations, and valuation of deferred tax assets. The current economic environment increases the uncertainty inherent in these estimates and assumptions.

The condensed consolidated financial statements include the accounts of the Company and all majority-owned and controlled subsidiaries and joint ventures, and certain joint ventures and other entities which have been determined to be variable interest entities ("VIEs") in which the Company is considered the primary beneficiary (see Note 3). The accounting policies of the joint ventures are substantially the same as those of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated financial statements were prepared from our books and records without audit and include all adjustments (consisting of only normal recurring accruals) necessary to present a fair statement of results for the interim periods presented. Readers of this quarterly report should refer to our audited consolidated financial statements as of and for the year ended December 31, 2013, which are included in our 2013 Annual Report on Form 10-K, as certain disclosures that would substantially duplicate those contained in the audited financial statements have not been included in this report.

Real Estate Inventories

Real Estate Inventories

Real estate inventories are carried at cost net of impairment losses, if any. Real estate inventories consist primarily of land deposits, land and land under development, homes completed and under construction, and model homes. All direct and indirect land costs, offsite and onsite improvements and applicable interest and other carrying charges are capitalized to real estate projects during periods when the project is under development. Land, offsite costs and all other common costs are allocated to land parcels benefited based upon relative fair values before construction. Onsite construction costs and related carrying charges (principally interest and property taxes) are allocated to the individual homes within a phase based upon the relative sales value of the homes. The Company relieves its real estate inventories through cost of sales for the estimated cost of homes sold. Selling expenses and other marketing costs are expensed in the period incurred.

A provision for warranty costs relating to the Company’s limited warranty plans is included in cost of sales and accrued expenses at the time the sale of a home is recorded. The Company generally reserves either approximately one to one and one quarter percent of the sales price of its homes, or a set amount per home closed depending on operating division, against the possibility of future charges relating to its one-year limited warranty and similar potential claims. Factors that affect the Company’s warranty liability include the number of homes under warranty, historical and anticipated rates of warranty claims, and cost per claim. The Company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

Construction Services

Construction Services

The Company accounts for construction management agreements using the Percentage of Completion Method in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605 Revenue Recognition (“ASC 605”). Under ASC 605, the Company records revenues and expenses as a contracted project progresses, and based on the percentage of costs incurred to date compared to the total estimated costs of the contract.

The Company entered into construction management agreements to build, sell and market homes in certain communities. For such services, the Company will receive fees (generally 3 to 5 percent of the sales price, as defined) and may, under certain circumstances, receive additional compensation if certain financial thresholds are achieved.

Financial Instruments

Financial Instruments

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, restricted cash, receivables, and deposits. The Company typically places its cash and cash equivalents in investment grade short-term instruments. Deposits, included in other assets, are due from municipalities or utility companies and are generally collected from such entities through fees assessed to other developers. The Company is an issuer of, or subject to, financial instruments with off-balance sheet risk in the normal course of business which exposes it to credit risks. These financial instruments include letters of credit and obligations in connection with assessment district bonds. These off-balance sheet financial instruments are described in more detail in Note 12.

Cash and Cash Equivalents

Cash and Cash Equivalents

Short-term investments with a maturity of three months or less when purchased are considered cash equivalents. The Company’s cash and cash equivalents balance exceeds federally insurable limits as of September 30, 2014 and December 31, 2013. The Company monitors the cash balances in its operating accounts and adjusts the cash balances between accounts based on operational needs; however, these cash balances could be negatively impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.

Restricted Cash

Restricted Cash

Restricted cash consists of deposits made by the Company to a bank account as collateral for the use of letters of credit to guarantee the Company’s financial obligations under certain other contractual arrangements in the normal course of business.

Deferred Loan Costs

Deferred Loan Costs

Deferred loan costs represent debt issuance costs and are primarily amortized to interest incurred using the straight line method which approximates the effective interest method.

Goodwill

Goodwill

In accordance with the provisions of ASC 350, Intangibles, Goodwill and Other, goodwill amounts are not amortized, but rather are analyzed for impairment at the reporting segment level. Goodwill is analyzed on an annual basis, or when indicators of impairment exist. We have determined that we have seven reporting segments, as discussed in Note 4, and we perform an annual goodwill impairment analysis during the fourth quarter of each fiscal year.

Intangible Assets

Intangible Assets

Recorded intangible assets primarily relate to brand names of acquired entities, construction management contracts, homes in backlog, and joint venture management fee contracts recorded in conjunction with FASB ASC Topic 852, Reorganizations ("ASC 852"), or FASB ASC Topic 805, Business Combinations ("ASC 805"). All Intangible assets with the exception of those relating to brand names were valued based on expected cash flows related to home closings, and the asset is amortized on a per unit basis, as homes under the contracts close. Our brand name intangible assets are deemed to have an indefinite useful life.

Income (loss) per common share

Income (loss) per common share

The Company computes income (loss) per common share in accordance with FASB ASC Topic 260, Earnings per Share, which requires income (loss) per common share for each class of stock to be calculated using the two-class method. The two-class method is an allocation of income (loss) between the holders of common stock and a company’s participating security holders.

Basic income (loss) per common share is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of determining diluted income (loss) per common share, basic income (loss) per common share is further adjusted to include the effect of potential dilutive common shares.

Income Taxes

Income Taxes

Income taxes are accounted for under the provisions of Financial Accounting Standards Board ASC 740, Income Taxes, using an asset and liability approach. Deferred income taxes reflect the net effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards measured by applying currently enacted tax laws. A valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized. ASC 740 prescribes a recognition threshold and a measurement criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered “more-likely-than-not” to be sustained upon examination by taxing authorities. In addition, the Company has elected to recognize interest and penalties related to uncertain tax positions in the income tax provision.