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UPDATE: Hovnanian, GoldenTree Form Florida, Chicago Venture

   (Adds background on investor concerns about Hovnanian).

   By Dawn Wotapka
   Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Builder Hovnanian Enterprises Inc. (HOV) Monday announced a joint-venture agreement with investment adviser GoldenTree InSite Partners to build homes in 11 Chicago and Palm Beach County, Fla., communities.

New Jersey-based Hovnanian invested 20% of the equity capital in venture, with GoldenTree providing the balance of the undisclosed total amount. Hovnanian, the nation's sixth-largest builder by homes closed last year, will manage the day- to-day operations of the venture, which will design, sell, and deliver homes in the targeted markets.

Investors have worried that Hovnanian took on more debt and made more acquisitions near the top of the housing bubble than competitors, leaving it with less flexibility to acquire land as the battered sector preps for a market upturn. The company has been quite open that it was seeking financial partners to help reduce the business model's risk, though that limits potential profits.

"The venture allows us to take advantage of attractive land opportunities with limited capital investment, thereby preserving our cash position, and, at the same time, afford the potential for enhanced returns," said Ara Hovnanian, Hovnanian's chairman and chief executive, in the announcement.

Hovnanian wasn't immediately available for further comment.

Robert Vahradian, managing director of GoldenTree, added: "This investment is highly indicative of the tremendous opportunities we see in the residential space, as many housing markets have sold off by as much as 50% and are showing strong signs of cyclically being at or very near the bottom."

Shares of Hovnanian rose three cents Monday to close at $4.19.

-By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; dawn.wotapka@dowjones.com

  (END) Dow Jones Newswires
  11-09-091734ET
  Copyright (c) 2009 Dow Jones & Company, Inc.