An update on the "Is Standard Pacific for Sale?" Post

I blogged earlier this week about a story in the L.A. Times theorizing that builder Standard Pacific might be for sale. Last night at a networking event, I got an update: there was a conference call on the company's most recent earnings, and as part of that call, management discussed that a sale was one of many possibilities available to the company, but that there were no plans to do so. The Times article made it seem like they were moving in that direction, but my source said it was stated simply because public companies are obligated to divulge all possibilities to their shareholders.

Homebuilder Standard Pacific for sale?

According to Peter Hong in the L.A. Times, Irvine-based homebuilder Standard Pacific may be considering putting itself up for sale after a sixth straight quarterly loss. I personally have always liked Standard Pacific's designs and quality (my cousins have owned an SP home in Corona for over 10 years and seem very happy with it), so it'd be interesting to see which builders have the financial strength to make such a purchase, and even if such a match would make sense:

Irvine home builder Standard Pacific Corp. raised the prospect of selling itself Monday as it reported its sixth straight quarterly loss. Its shares plunged 21%.

Standard Pacific Chief Executive Jeffrey V. Peterson told analysts in a conference call that falling house prices accounted for much of the company's losses and will continue to dog the builder for the rest of the year.

In a regulatory filing, the firm said a sale of the company was among six options it was considering, including a merger or sales of non-core assets...

The company delivered 42% fewer new homes in Southern California in the three months ended March 31 than it did in the same period last year. In all of California, new-home deliveries for the quarter were down 30% from a year earlier.

The company's average home price for California was down 19% in the first quarter of 2008 from a year earlier. In Southern California, the average home price fell 10% for the quarter compared with a year earlier.

The truth about new home price guarantees

A couple of weeks ago at a building industry function, I asked a panel of homebuilders including reps from Centex, Standard Pacific and John Laing why weren't offering price guarantee programs along the lines of those offered by KBHome and Ryland.

Their answer: most builders will refund money to a potential buyer still in escrow if the value of their home falls in between the time they sign the contract and closing, but you have to ASK for it. The fact that KBHome and Ryland are promoting the program has more to do with their ad strategies and creating higher comfort levels among potential buyers than a totally unique program. Although the fact that they have announced these programs would certainly make it easier for a home buyer to benefit, it's probably good advice to simply ask all builders what they plan to do should prices fall before homes close escrow.

CEO of homebuilder Standard Pacific retires

Home builder Standard Pacific, based in Orange County, has announced that CEO Steven Scarborough will be retiring, effectively immediately. The imperiled builder, which reported losses of $767 million last year, will be temporarily led by a member of the board of directors. From the Lansner on Real Estate blog at the Orange County Register:

The longtime chairman and CEO of Standard Pacific Corp. has retired — effective immediately — with a member of the board taking over the reins of the Irvine-based homebuilder in the midst of a housing slump that threatens the survival of many development firms.

Stephen J. Scarborough, the highest paid Orange County executive in 2004, is leaving the company after 27 years. He is being replaced by Jeffrey Peterson, a board member since 2001 and a former managing director at Trust Company of the West and Kidder, Peabody & Co.

In a conference call, Peterson declined to say whether the company is contemplating the filing of bankruptcy or to explain why Scarborough abruptly retired after seven years at the helm...

Although Peterson said the board has ordered management to act with “a sense of urgency,” company officials declined to say what, if any, conditions have changed to make such urgency necessary. Management could not have done a better job in addressing the challenges of the housing slump, said company chief financial officer Andy Parnes. But Parnes and Peterson would not say if conditions for Standard Pacific have deteriorated.