Standard Pacific Corp. officials say the Irvine-based homebuilder is on track for growth this year and in 2012 despite investor worries that started before last week’s sell-off on Wall Street and have pushed the company’s shares to their lowest levels in the past 12 months.
“I’m a little more upbeat than most,” said Chief Executive Ken Campbell, following a recent quarterly earnings report that fell short of analysts’ expectations.
A growing count of new home orders, projects in the works, strong pricing trends in a majority of the company’s divisions and a healthy inventory of land has the company in good shape, according to Campbell and other company officials.
The latest earnings report indicates the company still is looking to turn near-term prospects into profits amid the ongoing struggles of the housing market and recent concerns about a stall in the overall economy.
Standard Pacific, the largest homebuilder based in Orange County, reported a $10.5 million loss in the second quarter. The loss included $6 million of impairments and another $2.2 million of costs related to management changes.
Analysts were expecting the builder to break even for the quarter, factoring out those one-time charges.
The company, which targets move-up and higher-end homebuyers, made a $10.7 million profit in the second quarter of 2010.
Revenue Drop
Falling revenue took a toll on the company’s latest earnings. The company posted about $204 million in sales last quarter, a 36% drop from a year earlier. It delivered 616 homes in the quarter, a 32% year-over-year drop.
The quarterly loss and lingering questions about the pace of a housing rebound have taken a toll on Standard Pacific’s stock over in the last two weeks.
The company’s shares are down nearly 30% since mid-July, nearing a 52-week low.
Standard Pacific now counts a market value of about $500 million, not factoring in preferred shares held by the company’s largest investor, New York-based MatlinPatterson Global Advisors LLC.
The company was valued closer to $1 billion in January, the high point of its stock over the past year.
Campbell, a turnaround expert who’s been with Standard Pacific for more than two years, told analysts that he was “surprised” by the recent dip in the company’s stock, noting that many of the company’s largest investors have increased their stakes in the past six months.
Besides MatlinPatterson, other large investors in Standard Pacific include New York’s BlackRock Inc. and Porter Orlin LLC.
“I get it that we’ve lost money, and that’s not good,” Campbell said.
The upside is that “it will be pretty hard not to make money in the third quarter,” he said.
A larger number of sales are expected this quarter, thanks to an increasing backlog and new developments coming to market at higher prices than the company has been averaging of late. That should push the company into the black, officials said.
Expectations
Irvine Business: homebuilder
Market value: $495 million
Q2 revenue: $204.2 million
Q2 earnings: ($10.5 million)
Backlog: $294 million
While closed sales were down, the backlog of homes under contract that have yet to close totaled 781 at the end of the quarter. That’s a 20% increase from a year ago, and a 25% jump from the first quarter. Those homes should bring a total of about $294 million in revenue, a 24% boost in value from a year earlier.
The company also increased the number of developments it has opened. It was selling homes at 157 developments at the end of June, up from 134 at the end of 2010. It plans to open another 20 by year’s end.
The company sells the bulk of its homes in California, Texas, Florida and the Carolinas.
A slowdown in the rollout of new residential developments last year resulted from a decision to redesign many of the company’s homes rather than a sluggish market, according to Campbell.
Standard Pacific appears to have taken a page from Newport Beach-based Irvine Company’s playbook in the redesigns.
The builder now is emphasizing “great rooms” that extend a traditional living room to include the kitchen and dining room areas.
It also is using larger windows and doors to give a more functional feel to patios and other outdoor space.
The changes help “people get more house for their dollar,” Campbell said.
The changes are similar to much of what Irvine Co. has been offering at its newer batch of homes in its Stonegate, Woodbury and Laguna Altura communities of Irvine since early last year. Irvine Co. calls its open downstairs areas “California rooms.”
Irvine Co. has reported selling about 1,500 homes since the start of last year. It’s currently the second best-selling master-planned residential development in the U.S., according to data from Irvine-based John Burns Real Estate Consult-ing Inc.
Home Designs
The changes to home designs appear to be working well in some of Standard Pacific’s local projects, which are among the company’s better-selling right now, officials said.
In Brea’s Blackstone development, which opened earlier this year, Standard Pacific has sold close to 30 of its high-end Castilian homes, according to President Scott Stowell.
The largest Castilian homes can be as much as 5,000 square feet and cost about $1.2 million.
Blackstone—an 800-acre project in the hills between Brea and Fullerton that’s expected to hold nearly 360 homes—is a joint venture of Standard Pacific and Walnut’s Shea Homes.
Despite plenty of problems in the local housing market, Standard Pacific is seeing “pretty good success” in Southern California, according to Stowell. The company remains on the hunt for land in the area to buy.
Standard Pacific said it approved deals for $98.5 million worth of land buys in the second quarter, much of that in California. That was down from $121.5 million in the first quarter.
Land prices have veered toward “unreasonable” lately, Campbell said.
“It’s getting harder to find that land,” due in large part to differences in opinion about the value of land, Campbell said.
