Irvine-based homebuilder Standard Pacific Corp. appears to have its own house in order after a year of balance sheet restructuring and corporate downsizing.
Now Chief Executive Ken Campbell, a turnaround specialist who took over the top spot about a year ago, is thinking about building again.
“It’s a whole different ballgame now,” Campbell said. “But it gets a little trickier.”
In the third quarter, Standard Pacific spent about $22 million buying land to build homes on, much of it local.
It spent close to $7 million to buy land at San Clemente’s Talega development. Bankrupt Irvine homebuilder John Laing Homes reportedly gave the lots back to the lender.
Standard Pacific has letters of intent to buy an additional $300 million worth of land, much of it local, according to the company.
It’s an about-face for Standard Pacific, which early this year looked at acquiring other homebuilders but opted to conserve cash instead amid a still volatile market.
Analysts at Cleveland-based housing market tracker Zelman & Associates describe Standard Pacific’s recent land buying as “shifting from defense to offense.”
Campbell took over as chief executive in late 2008, joining from the company’s largest shareholder, New York-based MatlinPatterson Global Advisors LLC.
Earlier in 2008, MatlinPatterson struck an investment and debt retirement deal with Standard Pacific that turned out to be a lifesaver for the homebuilder.
Standard Pacific has been restructuring since then, downsizing into a smaller office, slowing construction, writing down the value of land and unsold homes and improving the company’s short-term debt.
Restructuring “was less foreign to me,” said Campbell, whose previous turnaround stints include New York-based Railworks Corp., a transit construction company.
Now “there’s the question of ‘What are we going to do now?’” he said.
Executives aren’t convinced the housing downturn is over. But Campbell told analysts and investors on a late October conference call that the company now should be able to ride out what’s left of the downturn while basically breaking even.
“I’m not planning on massive growth in 2010—I’ll tell you that,” Campbell said.
Campbell signed off the conference call by telling listeners to “go buy a home.”
Standard Pacific lost $23.8 million in the third quarter and has lost about $96 million so far in 2009, much of it on accounting for lower prices on land and unsold homes and restructuring charges.
“At the end of the day, if you exclude all the noise, land sales, impairments and restructuring, we lost a little bit of money instead of making a little bit of money (in the third quarter),” Campbell said.
This year’s losses are a big improvement from 2008, when Standard Pacific lost $1.2 billion.
“We were losing money like it was going out of style,” Campbell said.
Along with a lower loss, Standard Pacific’s biggest accomplishment last quarter was an easing of its near-term debt.
Through a series of moves, the company reduced its debt by about $80 million, while pushing back some payments from 2013 to 2016.
The amount of debt now due by 2013 is $180 million, down from $528 million.
“We don’t really see (debt) as an issue anymore” given the company’s current cash flow, Campbell said.
Standard Pacific has come a long way. A year and a half ago, many expected the indebted company to file for bankruptcy.
Standard Pacific’s shares were up more than 400% last week since the company’s low point in March with a market value of $360 million.
Standard Pacific “is out there getting unsecured money,” said Doug Bauer, founder of upstart builder Tri Pointe Homes Inc. of Newport Beach and the former president of Newport Beach-based William Lyon Homes Inc., referring to a recent debt offering.
“That’s incredible to me,” said Bauer, speaking on a panel at last month’s University of California, Los Angeles, Anderson Forecast in Irvine.
Standard Pacific now is “stepping up efforts” to buy land, although it’s doing so cautiously, Campbell said. “A lot of my time now (is) being spent on trying to see if we can find some (land) to buy with the returns that meet our threshold,” Campbell said.
The company expects land buys to bring returns of 20% or more, he said.
It’s largely looking at Southern and Northern California for land buys.
“The opportunity for doing well (there) is greater,” Campbell said.
For land the company already owns that is mothballed because of the slow market, Standard Pacific would like to start building on it if it feels it can earn a 15% or higher return.
It might take a few years for some projects to move ahead, according to the company. Standard Pacific owns or controls about 20,000 lots, with 7,700 of those in California.
The company reported 921 new home orders, or contracts to buy a Standard Pacific home, in the third quarter. It has a backlog of another 1,248 homes valued at about $396 million.
“After I’ve been here a while, I might (finally) learn how to be a homebuilder,” Campbell said.
