Irvine-based homebuilder Standard Pacific Corp. remains interested in buying land once controlled by master developer SunCal Cos.―including the Marblehead Residential site in San Clemente―now that the coastal project and 13 others saw a long-expected change in ownership.
Lehman Brothers Holdings Inc. last week said it has taken control of 14 former SunCal projects in California on which the New York-based firm had been providing financing.
The crown jewel of those projects—247-acre Marblehead—runs just west of the San Diego (I-5) Freeway and overlooks the ocean.
The San Clemente site is one of OC’s last remaining stretches of undeveloped coastal land. Its ownership has been in limbo for almost four years after the project went bankrupt, along with others run by Irvine-based SunCal.
Marblehead is slated for 310 high-end homes and other development. The site once was valued at more than $300 million, though more recent appraisals set it closer to $100 million.
A deal between SunCal and Lehman, which had financed more than $2 billion of land buys for the developer prior to the last recession, was first announced last October.
Legal issues kept Lehman—which is being liquidated as part of its own 2008 bankruptcy—from taking title to the 14 financially distressed properties until the end of April.
“Our strategy for the SunCal portfolio has been to gain control over the assets, so that we could position them in a way that would provide the best result possible for Lehman creditors,” Jeff Fitts, Lehman’s head of real estate, said in a statement. “It has been a long and complex process, and this is a major milestone.”
The plan now is for Lehman to line up joint-venture partners to finish early-stage work at the projects and then sell the land to homebuilders, according to real estate sources.
Standard Pacific, the largest homebuilder based in Orange County, confirmed its continued interest last week.
“We’re tracking [the former SunCal portfolio],” Standard Pacific Chief Executive Scott Stowell told analysts in a conference call. “We have strong interest.”
Executives at the builder previously said Marblehead was “a very high priority” among potential acquisitions.
Standard Pacific posted a relatively quiet first quarter for land buys and development. The company—which last week reported its strongest first-quarter earnings in six years—spent $66 million on land buys and development in the first three months of 2012, its lowest land-related spending since late 2010.
A year ago the builder spent $124 million on first-quarter land-related costs, with a bulk of that money going toward land acquisitions.
• Headquarters: Irvine
• Business: homebuilder
• Founded: 1965
• Ticker symbol: SPF (NYSE)
• Market value: About $1.07 billion
• Notable: targets “move up” buyers
Nearly half of the $66 million spent last quarter went toward land development, according to the builder, whose development expenditures have run from $31 million and $34 million for each of the last five quarters.
Last quarter’s decline in land buys is more an issue of timing, officials said last week.
“It’s not a change in strategy,” Chief Financial Officer Jeff McCall said.
The company expects to spend $400 million or more on land-related costs this year.
Standard Pacific has tended to buy partially developed or undeveloped properties—such as Marblehead—of late. A few years ago a bulk of the builder’s buys was for finished land sites.
Fits Mold
Marblehead’s high-end orientation also fits the Standard Pacific mold. About 75% of the builder’s sales last quarter were to “move-up” buyers.
“It’s what we’re good at,” Stowell said.
Standard Pacific reported closing 642 home sales in the quarter for an $8.5 million profit. That compared with a $14.8 million loss a year earlier.
The first quarter of the year is traditionally slow for sales and the toughest time for builders to turn a profit. This year marked the first time Standard Pacific was able to post a profit in the quarter since 2006.
After a strong end to 2011, “the positive momentum has continued into the first quarter,” Stowell said.
Another sign of a possible improvement in the market was reduced reliance on purchase incentives, which officials said are at their lowest levels in three years.
“You won’t find a single incentive on our website,” Stowell said.
Pricing has climbed an average of 1% to 2% at the company’s 160 active communities, according to the builder.
Some higher-end projects are seeing pricing boosts in the 8% range, officials said.
An unspecified community in Southern California has seen pricing upped by nearly $140,000 from earlier levels, according to the company.
Standard Pacific’s website lists eight active projects in OC, including homes in San Clemente, Irvine, Brea and Buena Park.
