The Housing Chronicles Blog: Builder Standard Pacific provides a mixed bag of news

Tuesday, February 5, 2008

Builder Standard Pacific provides a mixed bag of news

Although it reported a loss of $767 million for 2007, homebuilder Standard Pacific provided a mixed bag of news in its recent report. Viewed as one of the industry's more fragile builders, a combination of expected tax refunds, layoff and geographic retrenchments has the company arguing that it's much better-positioned than it was previously to ride out the current downturn. From a BuilderOnline article:

The Irvine, Calif.-based company generated more than $219 million in homebuilding cash, and reduced its revolving credit by more than $163 million, to $90 million.

But StanPac also lost $767.3 million, versus a gain of $123.7 million in 2006, on sales of homes and land (excluding its joint ventures) that slipped by 23 percent to $2.89 billion. For the year, deliveries (again, excluding JVs) were off 26 percent to 6,918 units, and new orders fell 5 percent to 5,697. The value of the builder's 1,279 units in backlog plummeted 50 percent to $442.7 million. For the year, StanPac's average selling price softened by 6 percent to $377,000, and the availability of mortgages resulted in some "softening" in the sales of higher-priced homes, particularly in California...

Steve Scarborough, the company's chairman and CEO, told analysts during StanPac's webcast this morning that profit would continue to be a "challenge" over "the next year or two," especially given the lower absorption rates that StanPac is projecting for 2008 (1.5 to 2 homes per month per community, versus an average of 2.3 homes during 2007)...

Meanwhile, the builder continues to scale back its operations and production. It reduced headcount by 27 percent in 2007, saving $40 million in payroll expenses. The number of homes it had under construction as of Dec. 31, 2007 was down 37 percent to 2,085 units from the same day a year earlier. Of that total, spec homes under construction fell by 21 percent to 1,089 units. (Scarborough pointed out that a certain number of standing inventory is needed to accommodate buyers who are asking for shorter escrows.) StanPac also reduced its land position by lowering the number of lots it owns by 32 percent (excluding JVs) to 21,371, and land controlled under options by 39 percent to 5,619 lots...

Looking ahead, the company expects to receive a $235 million tax refund in February, which would further bolster its cash position. Deliveries will be off in 2008 (by how much neither official would speculate), and StanPac expects to reduce its community count to below 200 this year, from 226 at the end of 2007. Parnes estimates that land investment would be around one-third what it was in 2007. (About 80 percent of the builder's lots under development are already finished.) Scarborough and Parnes also expect the company to generate sufficient cash flow to pay off the $150 million that comes due on a senior note on October 1.

Also, from a blog entry today from Lansner on Real Estate regarding the same conference call:

To keep sales moving, concessions are required. But price erosion varies by region. Scarborough noted that San Diego prices were down in the fourth quarter of 2007 by about 5% to 15% from the year before, a sign of price stabilization. But in the East San Francisco Bay Area and Northern California, prices were off by 25% to 30% year over year.

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