A bleak outlook for the housing industry has forced Irvine-based Standard Pacific Corp. to back off from plans to expand through acquisitions.
This year “is definitely going to be worse than 2008, both in terms of volumes and prices,” said Ken Campbell, who took over as chief executive of the homebuilder in December.
Standard Pacific is projecting drops in housing prices of as much as 10% this year. 2010 prices will remain flat, at best, the company said.
For the time being, the company needs to stockpile its cash, rather than focus on buying other builders, Campbell said.
Campbell spoke last week in a quarterly call with analysts and investors after the company reported a fourth-quarter net loss of $397 million, largely due to a $350 million write-down of unsold land and homes.
It was the ninth straight quarterly loss for the homebuilder, though it was an improvement from a year earlier, when it lost $441 million for the quarter.
The news sent Standard Pacific’s stock to its lowest level in more than five years last week, giving the company a recent market value of about $90 million. The company was worth more than $3 billion at the peak of the housing market in 2005.
Campbell’s Pedigree
Campbell, a turnaround specialist, joined Standard Pacific from the homebuilder’s dominant shareholder, New York-based MatlinPatterson Global Advisors LLC.
The hedge fund infused some $530 million into Standard Pacific, with the expectation that some of that cash could be used to buy struggling competitors at discounts this year.
Now that plan is being shelved,at least for the near term.
“The market has gotten worse since last June,” Campbell said. “We expected it to get worse at MatlinPatterson. (But) it’s gotten worse that we expected.”
Standard Pacific has enough money to cover debts and operations, according to Campbell.
“The bad news it that it means we have less money available to take advantage of acquisition opportunities,” he said.
One opportunity that looks to have passed is bankrupt builder TOUSA Inc. of Hollywood, Fla.
Standard Pacific was in talks to buy part of the builder. But the deal fell apart a few weeks ago after Standard Pacific lowered what it was willing to pay.
The TOUSA deal “is kind of dead,” Campbell said.
Standard Pacific spent a few million dollars in preparing for a deal. But company officials said they weren’t concerned about passing it up.
The focus now “is on operating structure and the business model,” Campbell said.
The company had about $625 million in cash as of Dec. 31. It also expects to get a tax refund of about $114 million this year, thanks to recent losses.
About $165 million in debt needs to be paid off this year.
“Given where the market is today, I think we need to conserve our cash,” Campbell said.
It’s unclear when Standard Pacific will look at buying again, he said.
“We think there are acquisition opportunities out there, maybe in the second half of this year and the first half of next,” Campbell said. “But it’s not clear at this point how much money Standard Pacific has available to spend on those.”
Standard’s Stats
The company’s $350 million write-down on assets last quarter was larger in scope than what other builders have written off in recent quarters.
Standard Pacific owns about 19,000 lots for building homes. About half of them
saw lower valuations in the fourth quarter. Of the $350 million in write-downs, $204 million was for California land.
The company should be one of those that stands most to gain when the market turns, Campbell said, given its cash on hand and expected tax refund.
“Not many (homebuilders) have $700 million,” he said.
