Andrew Parnes, CFO for the Irvine, Calif.-based builder, told investors at the Banc of America Securities Credit Conference this morning that his company generated $190 million from the sale of more than 4,400 lots in the third quarter and expects to sell another $50 million in lots by the end of its fiscal year. "We are budgeting for more land sales for 2008," says Parnes, although probably not as much as this year.
He says Standard Pacific is finding that real estate on the periphery of urban centers often requires the deepest price cuts to sell. "The further out you go, the heavier the discounting [because] as markets have dropped, people have more opportunities to move closer in." He points specifically to towns around Phoenix as examples of where land is being sold at significantly reduced prices. Conversely, he says that Standard Pacific has been able to sell land it owns in coastal California markets at book value or "at a slight premium." Parnes also notes that in some Florida markets where his company has owned land for several years, the land being sold "has better value being rezoned for nonresidential use."
The bright side of land sales is tax benefits: Standard Pacific expects to garner at least $50 million in tax refunds from land sales, which Parnes says will help the company achieve one of its primary goals of strengthening its cash flow.
However, he says the company is girding for another "challenging" year in 2008, when it expects buyer demand "to be even slower." Standard Pacific continues to reduce its speculative inventory and is focusing "on maintaining a competitive pricing strategy" that Parnes says is under constant review. However, he felt compelled to assuage nervous investors about Standard Pacific's financial condition when he reiterated "we are not in the process, or is it our intention, to file Chapter 11." When asked whether Standard Pacific would consider selling itself, in whole or in part, to private equity investors, Parnes says that while it is his company's "preference" to remain an independent entity, it is obligated to seek maximum value for its shareholders, and therefore "we are keeping our options open."
Learn more about markets featured in this article: Los Angeles, CA.