Ken Campbell, the turnaround specialist tapped last month to take over Irvine-based Standard Pacific Corp., wants the company to be one of the five largest U.S. homebuilders once the housing market recovers.
Standard Pacific was the country’s 11th largest homebuilder at the peak of the housing market in 2005.
But there’s likely a couple more years of pain in store for Standard Pacific and other homebuilders, according to Campbell, who joined as chief executive last month from New York-based MatlinPatterson Global Advisors LLC, the company’s largest shareholder.
MatlinPatterson “likes to invest in cyclical business at the bottom of the cycle,” Campbell said.
“I can guarantee you this (market) will come back,” he said. “It’s going to take a while to recover,two, three or four years. But it will come back.”
The private equity firm started looking at homebuilders in the summer of 2007, according to Campbell. It waited until last June before making a $530 million investment in Standard Pacific.
The deal,a combination of stock and debt retirement,was a life preserver for Standard Pacific, which was facing a crippling debt load, a collapsed housing market and rumors of bankruptcy.
MatlinPatterson now owns two-thirds of Standard Pacific but is capped at a 49% voting stake.
The firm is willing to wait for a turnaround, according to Campbell.
“This is a six- to eight-year kind of investment, not just for two or three years,” he said. “We’re fine with that.”
Standard Pacific is considering buying the assets of Hollywood, Fla.-based homebuilder TOUSA Inc., which filed for bankruptcy a year ago.
MatlinPatterson is one of TOUSA’s larger debt holders.
TOUSA, which builds in Florida, the Southwest and the Mid-Atlantic, had debt of $1.8 billion at the time of its bankruptcy.
Standard and TOUSA confirmed they were in talks for a possible deal in mid-December.
Deal This Month?
A preliminary deal could be reached by the end of January, according to TOUSA officials. At the housing boom three years ago, the combined companies sold nearly 20,000 homes a year.
Campbell isn’t predicting a return to that level of building if a deal goes through. But a combination of Standard Pacific and TOUSA,or other builders,should vault Standard Pacific to the top tier of national builders.
“Homebuilders aren’t too expensive, but they have a lot of debt,” Campbell said. “Our problem now is (figuring out) how much asset buying we want to do.”
Irvine HQ
If a deal with TOUSA or another builder is struck, the combined company would be based in Irvine, according to Campbell, who has relocated here from the East Coast.
Besides acquisitions, Campbell said much of his time is spent figuring out how to make Standard Pacific more efficient.
Campbell joined Standard Pacific’s board in July and is the third chief executive in less than a year. He took over from Jeffrey Peterson, who remains a director and replaced longtime boss Stephen Scarborough in March.
“We tend to be an active investor, not a passive one,” Campbell said.
A partner at MatlinPatterson, Campbell has made his mark as a turnaround specialist.
Restructuring jobs include running Hannibal, Ohio-based Ormet Corp., an aluminum maker that “everyone had written off,” he said, and serving as financial chief at New York-based Railworks Corp., a transit construction company.
Turning around a homebuilder isn’t that different than turning around other companies, Campbell said.
“We have to adjust our business model to deal with reality,” he said. “We’re not selling 12,000 homes a year anymore,we’re selling 4,000 homes or so.”
The company’s output is back to what it was around 2002. The plan is to further scale back offices, spending and personnel to levels seen around that period, according to Campbell.
Like other builders, Standard Pacific is seeking lower costs from suppliers and contractors, he said.
“It’s not terribly complicated,what we have to do at Standard Pacific,but it can be painful,” Campbell said.
