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Thursday, Mar 28, 2024
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Irvine Co., Standard Offer Industry Hope

The local homebuilding industry has something to cheer about with news this month from the county’s dominant developer and the largest homebuilder based here.

Newport Beach-based Irvine Company said the opening of two Irvine housing developments in late January and early February brought in 70 sales totaling close to $50 million.

The Woodbury and Woodbury East developments saw the largest number of sales at an opening for the company since 2006, according to Dan Young, president of Irvine Co.’s community development division, which plans and directs the development of homes, parks and shopping centers on company land.

“Demand for housing is definitely back” in Irvine, Young said.

Also earlier this month, Irvine-based homebuilder Standard Pacific Corp. said it returned to something unseen in some time: profitability.

Standard Pacific, the largest homebuilder based in Orange County, said that it posted a fourth-quarter profit of $82.7 million, marking the first time the company has been in the black in three years.

Profits were aided by a $94 million tax benefit that extended the carryback of net operating loses from two years to five years.

But without the tax benefit and $11 million of asset impairments, $5 million in debt refinancing and other charges, Standard Pacific still posted a $4 million profit for the quarter.

“We managed to get our nose above water,” said Standard Pacific Chief Executive Ken Campbell, a turnaround specialist who joined Standard Pacific about a year ago from its dominant shareholder, New York-based MatlinPatterson Global Advisers LLC.

Restructuring

Since he joined, Campbell has led a big restructuring at the company, which posted a staggering $1.2 billion loss in 2008. For all of 2009, that loss was reduced to $13.8 million.

Standard Pacific’s and Irvine Co.’s results are a far cry from the go-go days of 2005 and 2006 but are welcome news for a homebuilding industry looking for any sign of revival.

The largest homebuilders here sold about 1,500 homes locally last year, according to this week’s Business Journal list (see list, page 20, story, page 24). It was the lowest amount of sales on record and marked the fourth consecutive year of declining sales.

What’s next is the question for Standard Pacific and Irvine Co.

With nearly $600 million in cash, more than 50 mothballed projects waiting to move ahead and few short-term debt issues, Standard Pacific can ramp up operations and acquisitions if the market shows sustained improvement, Campbell said.

“If the market gets better, I think we’re extraordinarily well positioned relative to our peers to participate in that growth,” he said during the company’s quarterly conference call earlier this month.

Standard Pacific, which counted a market value of about $400 million last week, could look to buy more land this year if lenders opt to unload, Campbell said.

Irvine Co., which builds on land it owns and doesn’t have to worry about lenders or invest-ors, is looking to speed up additional phases at Woodbury and Woodbury East, in addition to “thinking about some new programs,” Young said.

The company put an additional 56 homes up for sale after the opening weekend. Prices, which started at $300,000 for the first two phases, are likely to go up in the next phases. How much still is being figured out.

“It’s a great problem to have,” Young said Irvine Co. financed a majority of the new homes that were sold this month in Woodbury under its “executive builder” program. Builders working under the program are being paid to put up homes on a fee basis.

Builders working with Irvine Co. said that they are seeing the highest interest for their most expensive homes.

Of the three models up for sale by Irvine-based New Home Co., most demand came for the priciest model, which starts at more than $900,000, Chief Executive Larry Webb said.

“At a different time in the market, we’d be raising the prices” of the homes because of that, Webb said.

New Home said it planned to “take a deep breath” after the first phase of sales, before deciding on prices and the pace of sales at its next phases.

Other Projects

There’s a limit to how much buyers are willing to pay for an OC home. At the high-end Tides development in Newport Coast, Standard Pacific has opted to cut prices at six unsold homes by about $1 million each. They had been listed for as much as $8 million each.

“We promise not to start any new $8 million per house projects this year,” Campbell told analysts.

Other local builders are encouraged by Irvine Co.’s sales. Lennar Corp. last week said it would begin sales this spring for its Central Park West development in Irvine. The project had been mothballed for nearly two years by the Miami-based builder.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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