Irvine-based Standard Pacific Corp. has benefited as much as any homebuilder from the hot real estate market during the past few years,especially in Southern California.
Standard Pacific’s profits jumped 40% last year. The company for the first time broke onto the Fortune 500 list at No. 493 with a record $4 billion in revenue.
Getting there may turn out to be the easy part. With signs of a slowdown in the housing market, it stands to be a challenge for Standard Pacific Chairman and Chief Executive Stephen Scarborough to keep his company on the fast track.
Scarborough and other Standard Pacific executives are making it clear that the housing market is undergoing a big shift,though they aren’t calling it a “slowdown.”
The company recently described the changes as “a return to normal levels,” after the unsustainable sales pace of the past few years.
“We’re transitioning to a new market dynamic,” Scarborough said during his company’s first quarter conference call in late April.
For the quarter, the company reported that profits rose about 17% from a year ago. New-home orders fell 8%.
Higher mortgage rates, and rising home prices shut out more potential new homebuyers, the company said.
The company isn’t close to pushing the panic button, but a change in sales and development strategy is under way.
Standard Pacific still is projecting strong results for the rest of the year. It plans to finish 12,300 homes and post revenue of $4.8 billion, up 8% and 20% from a year earlier, respectively.
The company plans to keep growing profits by increasing the number of housing projects it opens, offering a more diverse mix of homes and being more selective than its competitors about the types of incentives it offers buyers and brokers.
It won’t be easy to pull off.
Standard Pacific said that it’s seeing excess supply in many of its markets, and buyers are showing uncertainty about the value of their current homes.
It could take about nine months for the housing market to reach stability, where there isn’t an excess amount of existing properties for sale, Scarborough said during the conference call with analysts.
Not as many home sales are closing because buyers aren’t able to sell their current houses at the prices they expect, he said.
Besides California, Standard Pacific has units in Florida, the Carolinas, Arizona, Texas, and most recently, Las Vegas. It now builds homes in 31 markets.
One analyst said the company still is best known for “building mansions in Orange County.” The company is trying to change that perception.
It’s moving to build more affordable housing such as townhomes, especially in the Los Angeles and San Diego markets, Scarborough said.
Standard Pacific is putting up attached housing priced at about $400,000 in San Diego, where it is also building its more typical homes in the $1.5 million range.
For Standard Pacific’s coastal markets, the company is looking to increase the number of urban projects where 40 to 50 condominiums or townhomes can be built per acre.
That development won’t come at the expense of projects already planned, Scarborough said. The company is not interested in getting existing land it owns re-entitled for higher density, he said.
Colliers International Inc. hired local real estate veteran Glen Esnard as president of its U.S. brokerage services division.
Esnard will be based out of Colliers’ Irvine office, even though the brokerage’s North American operations are in Los Angeles.
Esnard will lead brokerage and sales development, and will work with Colliers’ North American Operating Committee, which sets policy in the region, the company said. He starts in June.
He most recently was vice president of real estate for Los Angeles-based Fort Properties Inc., an investment company that focuses on 1031 exchange and tenant in common deals.
Esnard also was a senior managing director with CB Richard Ellis Group Inc., where he helped create the company’s private client group.
Koll Looks to Ontario
With sales of its industrial and office properties at the Irvine Spectrum’s Koll Center 2 nearing completion, Newport Beach’s Koll Co. is turning to Ontario for a new project.
The company recently bought 14 acres of land in Ontario where it plans to build a $30 million industrial and research and development business park.
Koll Center Ontario is set for a former Sunkist Growers facility. There are four buildings at the site.
One building will be demolished while the others, which total about 73,000 square feet, will be resold, the company said.
Koll also plans to build 12 small to midsize industrial buildings at the center. Those buildings will total 160,000 square feet.
About 10% to 15% of the development will be office space. The buildings will be offered for sale or lease, according to Alan Airth, a managing principal with Koll.
Koll Center Ontario will be marketed by Walt Arrington and John Oien of CB Richard Ellis Group Inc. in Ontario.
