The largest homebuilder based in Orange County got a lot larger on Scott Stowell’s watch last year.
The chief executive of Irvine-based Standard Pacific Corp. helped engineer last year’s mega merger between the company and another California-based homebuilder, Westlake Village-based Ryland Group Inc.
The result of what the two companies have called “a merger of equals” is CalAtlantic Group Inc., an Irvine-based builder with a $4.7 billion market value.
The deal created the fourth largest U.S. builder by revenue, with about $5.2 billion in combined annual sales and 76,000 home lots under its control.
CalAtlantic now is one of Orange County’s five largest public companies based on market value.
Stowell is our Business Person of the Year in the real estate category (see related stories, pages 1, 4, 6, 10, and 12). He took over the executive chairman role, and Ryland Chief Executive Larry Nicholson is assuming the chief executive role at the newly organized company and will work out of a new East Coast office and company co-headquarters.
Ryland is shuttering its Westlake Village offices as a result of the merger, leaving Irvine as CalAtlantic’s West Coast operations hub.
“It was the right time to do it,” Stowell said of the merger, which was announced in June and completed in late September. “It was a real opportunity for Standard Pacific to move up.”
He said more big mergers between public and private builders are anticipated in the next few years.
“Our view was that there was going to be (a wave) of consolidation … this was our opportunity to lead the consolidation.
“It didn’t occur because there was distress (in either company),” he said. “It was very opportunistic. Each side has some very unique capabilities.”
Presence
Stowell said the deal gives the Ryland team a much stronger presence in California’s improving housing market and gives Standard Pacific’s team entree into a number of regions, such as Indianapolis, among other benefits.
“Both companies are very complementary in terms of markets. We’re not going to cannibalize each other.”
Standard Pacific and Ryland sell homes in 17 states, California being the largest market, with about 27% of sales. The state was responsible for about 46% of Standard Pacific’s revenue prior to the merger.
The two companies also share similar financial traits: Ryland provided the highest return on equity of any major public builder, and Standard Pacific brought the highest gross margins at the time of the merger, according to Stowell.
A deal of its type was unthinkable for Standard Pacific during the last economic downturn, when the company—which has a 50-year history in Orange County—was swimming in debt and on the brink of bankruptcy and possible liquidation.
The company instead brought in turnaround specialist Ken Campbell in 2008 to fix its balance sheet and tapped Stowell—then acting as president—for his homebuilding expertise during a multiyear restructuring period.
‘On the Offense’
The company turned from survivalist to opportunistic buyer earlier than most other big builders.
In 2009 “we went on the offense,” Stowell said. “It was a little counter to (the prevailing wisdom). We bought land early, and some people criticized us.”
Those land buys included several large-scale projects, or what the company calls “market-makers,” giving it a big presence in key areas.
“It was a very thoughtful strategy,” said Stowell, who took over as chief executive about four years ago.
The shift to the executive chairman position at CalAtlantic marks another move up at the company for Stowell, who has worked there for more than 25 years.
He got his start as project manager for Orange County, was promoted to OC division president, and then put in charge of Southern California.
“I never envisioned this when I started (at the company) at age 39,” he said. “It’s been a remarkable journey.”
Local Work
His local background still plays a big part in the company’s operations.
Standard Pacific is leading development of Greenwood, a 375-home project at Tustin Legacy that opened last summer.
Standard Pacific and Ryland also are building homes at the 960-home Beacon Park, the second community at Great Park Neighborhoods in Irvine, as well as Esencia, the second village at the Rancho Mission Viejo ranch community.
Orange County “is our flagship market,” Stowell said. “It’s the market I know best.”
Stowell describes the current housing market in OC as “vibrant.”
More work involving the merged companies is planned for this year.
“Integration is the first priority,” Stowell said. “Stabilizing the company and rallying the company around the new brand” will be key focus areas.
“Then we can pursue some other (growth opportunities).”
