Standard Pac Corp New (NYSE:SPF)

CAPS Rating: 3 out of 5

The Company is a geographically diversified builder of single-family attached and detached homes and constructs homes within a range of price and size targeting a range of homebuyers.


Player Avatar floridabuilder2 (99.32) Submitted: 2/6/2009 4:00:48 PM : Underperform Start Price: $1.75 SPF Score: -86.52

SPF had the opportunity to buy TOA assets for nothing... zilcho... through the bankruptcy courts... yet it appears this isn't going to come to fruition....

you cannot buy assets cheaper than through bankruptcy... this is a big tell....

and why aren't the other publics buying the assets of TOA? Because they weren't positioned to do it like SPF/MP... plus, the other publics will buy assets piecemeal.. so there is an unwillingness to take all the assets of TOA

One cannot equate other publics inability and unwillingness to buying all of TOAs assets the same way as SPF.....

I would close this pick to an outperform if SPF closed on TOA

Report this Post 17 Replies
Member Avatar anchak (99.86) Submitted: 2/6/2009 8:43:03 PM
Recs: 0

I was wondering when you would do it.....but the rationalization is very very interesting. I remember you mentioning their positioning on TOA before.

Member Avatar floridabuilder2 (99.32) Submitted: 2/7/2009 11:47:37 AM
Recs: 1

anchak, there are a couple builders that would have taken the deal that SPF was getting.. mainly the builders with land positions under 2.5 years.... they are not going to be able to piecemeal pricing lower than this

Member Avatar TDRH (99.49) Submitted: 2/8/2009 8:23:53 PM
Recs: 0

Ty again fb.

Member Avatar cubswin08 (31.54) Submitted: 2/9/2009 11:57:56 AM
Recs: 0

Ok, I'm in....or make that out. Was watching Tousa a bit back in the day.I'll buy your argument and go red. Did ok on BAC since Thursday. Got out this am. Any other longs now?Cubs

Member Avatar floridabuilder2 (99.32) Submitted: 2/10/2009 9:29:01 AM
Recs: 0

tdrh... can't see how i am wrong here longs right now cubswin.... my first long was mth and that is up 100% already... i like all my green thumbs right now it is all about buying at the right price... and looking at the individual charts and the overall market dynamics

Member Avatar TDRH (99.49) Submitted: 2/10/2009 10:54:09 AM
Recs: 0

ty = Thank you for individuals with fat fingers and a small phone. I ended my green thumb on your recommendation.

Member Avatar floridabuilder2 (99.32) Submitted: 2/12/2009 9:39:46 PM
Recs: 0

tdrh.... SPF had a chance to actually turn things around 180 degrees when they rec'd the cash infusion (PIPE) last year..... but they have done nothing different strategically since the infusion.... you don't get many chances to screw up in a bear market... giving someone money and not making sure they actively change course is a no no in this business

Member Avatar cubswin08 (31.54) Submitted: 2/16/2009 11:26:22 AM
Recs: 0

I'm "banking" on some good news tomorrow. Held BAC and C through the wkd. (skin)Prob short term good for Builders too. Watching PHM though. 7 still magic? Cubs

Member Avatar floridabuilder2 (99.32) Submitted: 2/16/2009 11:34:06 PM
Recs: 0

cubs I would buy phm below 7.... the futures look pretty ugly, but I am not following the market that closely... I'm pretty busy to say the least. right now I only follow the debt market, who is buying what and at what price. I got a lot of balls in the air, but I guess that is better than having no balls in the air...the builders have held up pretty well in this last retracement which is kind of suprising... the builders traded as a group for the last several years, but I think I mentioned some time in the middle of last year that there would be major divergence in this industry group.

Member Avatar DemonDoug (32.31) Submitted: 2/23/2009 5:55:02 PM
Recs: 0

I am more convinced than ever that all homebuilders should go to zero, likely could go to zero, but there are only 3 I see possibly surviving, MDC, NVR, and TOL, and even then they are all 50/50 at best for even surviving, you can forget about ITB and XHB. 20 million vacant homes and counting as more people lose their home. What happened to "all bets are off" if we go into a deep recession florida? Our spirited debates oftentimes came down to that, where I was basically bearish on everything real estate related, and basically you'd be saying about how I'm much more bearish on the economy, but if I was right, all bets were off.Well, I was right. I take no joy in that, believe me, I've lost money too like many others (but not as much as many others). Real estate is dead, new "inventory" comes online every day without a single home being built, home builders are dead dead dead. Just like wall street broker-dealers are dead - a couple of them morphed into banks, but that business is dead. Just like large-scale national homebuilders. It's a dead business model, no different than building steam locomotives or typewriters.

Member Avatar MLGtrader (96.80) Submitted: 2/25/2009 12:22:03 PM
Recs: 0

Its opinions like that which will help get builders to a cheap enough price to actually buy them. They have been bought up over the last several months, outperforming the market by a good margin. I am still with FB that builders will be a great long term play once panic returns to the sector. They surviving builders will be able to load up on finished lots from bankrupted builders for next to nothing because no one else wants lots. You should add MTH to that list of surviving builders because their notes come due 2017, which is plenty of time for an economic recovery. If home prices are still sliding in 2017, then we will all have bigger problems than our builder stocks going bankrupt. The fewer builders that survive, the more spoils for the victors. So I hope that all other builders do go bankrupt so that I can get MTH or some of the other survivors with almost all the market share and a fresh load of cheap inventory.

Member Avatar floridabuilder2 (99.32) Submitted: 2/28/2009 7:25:23 PM
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demon,believe it or not there are deals in bankruptcy that can be bought that produce 18% gross margins and positive cash flow... in 2009 there will probably be built between 200,000 to 300,000 housing units.... most of the publics will do about 5,000 units so that is trying to capture 2.5% marketshare... at the end of the day homes will be built where people are moving to... i know a number of people who are packing up and leaving michigan because of zero job prospects.. and they are looking at DC, FL and TX.... in migration and demographics will allow a number of cities to prosper....I agree things are more dire than what I predicted, but at the end of the day the deeper the pit the bigger the rewards coming out of the pit on the other side.... Look at OHB and CHCI.. they are still not in bankruptcy... which shows you how many life lines these builders really get.. CHCI's CEO is personally negotiating with the banks many types of deals to extinguish debt, debt for equity, etc... and they have no cash..... At the end of the day only a couple of the public builders went under... I think given the circumstances 50 of the top 100 will go under and I think off the top of my head we are at around 15...A significant amount of wealth will be created during this downturn for those who are opportunistic whatever their investment vehicle... on a side note, I started a consignment business for children's clothes because there is no inventory buy and the landlord gave the first two months free rent... I think some people might see me as optimistic, but as I said I am more opportunistic... When I see things get ugly I know that it is the time to sharpen the knives... I will take economic upheavels any day, its the militaristic ones that are bad news...You can't claim being right yet on the bankruptcies in the public homebuilders... only 3 are bankrupt, 1 went private and there are 17 more operating.... It will be interesting to see how this thing turns out in the end... and of course I will love to discuss the outcome and our positions towards the end of 2009

Member Avatar floridabuilder2 (99.32) Submitted: 2/28/2009 7:30:59 PM
Recs: 0

mlgtrader... obviously you and I are on the same page... if all the publics went under the US would have bigger problems than any of us could imagine and like you said, basically any investment that you are in will be worthless...The US, although Obama is still stumbling along, will do whatever it takes to sell out a lot of things like our future to get homebuilding stabilized....Tampa is a fricking disaster, yet I can buy finished lots there (don't want to discuss the means/avenue of doing this) for less than half the development cost of the lots.. raw land zero and development cost at 50%.... I can build homes in one community in New Tampa for 90 a square foot and still make 18% margins... and in this particular community if you are at 90 a square foot you are pacing 2 a month all day long in 2009..... Circuit City goes under, big deal... now Best Buy is worth that much more down the road.... basically all companies in the US are working off inventory levels to just in time and they are going to have to start placing orders in Q2 of 2009....Like I said to Demon, you have to look at economic upheavels as pits... the deeper you go in one side, the bigger the rewards coming out the other side and the longer that bull run will be

Member Avatar Crimsonpm (51.24) Submitted: 3/6/2009 8:57:02 AM
Recs: 0

I didn't see a commentary on KB, but I guess it's a bad day to be an Ex-KB CEO. Something like 415 years in prison if convicted. Hopefully the real estate market will improve by the time he gets out. I've certainly enjoyed the discussion back and forth between you and Demon. I think each of you have been right in your own ways. I'm still with Florida on the resiliance of the RE market but I think Demon has been more accurate in just how bad things would get. Though I wouldn't argue that all homebuilders will go to zero. The one thing I like about markets (when they aren't tinkered with) is that they have a way to recover built into the system, this is by a drop in the cost basis. I dabble in tax liens here in Central Florida and basically if someone doesn't pay their taxes, then I get their property at a very low cost basis. Does this put downward pressure on prices? Absolutely, but I'm still going to make a fantastic return. The downside, is that someone else is eating their shorts. All this land, and vacant housing will one day belong to someone, whether it's the current companies or owners, I doubt it, but someone will have it at a lower cost basis that allows them to sell for a profit. Frankly I'm terrified at the drop in the market but grateful that I'm so poor I didn't have much to lose in the first place. It will be interesting to watch and learn from the recovery coming out of this. Thanks to both of you for all your input over the years.

Member Avatar floridabuilder2 (99.32) Submitted: 3/8/2009 11:42:41 PM
Recs: 0

crimson...I think one of the keys that people might be missing is that a builder (especially a well capped national) has the ability to move into and out of markets).... i know people are leaving MI in droves and moving to the smile states... I expect to see population increases in Florida much sooner than other states... demographics drives homebuilding as does employment growth.... My focus is getting in assets in Florida, but I know enough other markets that I would be willing to commute if the deal were right...the second point you hit on the head... cost basis... we are attempting to close deals now with finished lots at 7,000 a piece... anyone that understands development costs knows this is a FRACTION of the development cost... in other words, no one going forward can develop a lot cheaper than what can be bought now... why? because most deals have no bids and when there are no bids you get a good price. If you build a 1,300 square foot house at 50 square foot that is 65,000 plus 7,000 for the lot.... or 82,000 plus low low overheads.... do people really think I can't compete against other homebuilders that survive or the foreclosure market? Foreclosures won't last forever and we are penciling deals today at a pace of one....If people understood the history of the RTC they would understand that an all equity deal buying in the worst residential housing market of our lifetime with no other bidders (why because a lot of money is lining up to bid mortgages and commercial at low ball offers) no one wants to take on a vertical operation... i could go on and on, but I am comfortable that I will make money and that people will be shocked when they see the publics that survive and thrive down the road

Member Avatar Crimsonpm (51.24) Submitted: 3/10/2009 4:03:46 PM
Recs: 0

Florida,If you don't mind my asking are you essentially forming your own small residential builder, acquiring low cost developed land and building homes? I know you're here in florida but I'm not familiar with the area you're operating in? Sorry for asking over an open forum but it's the only way I know how to communicate with other caps players.

Member Avatar floridabuilder2 (99.32) Submitted: 3/11/2009 6:03:50 PM
Recs: 1 partner and I are real estate operators... plus on the periperal we have surrounded ourselves with people that did big deals during the RTC.... we do a 90-10 with private equity in order to get a waterfall promote structure. we only work in the bankruptcy courts or buy distressed debt that is senior in the capital stack. we know all the major restructuring players in the business... we don't necessarily have to buy in florida and have looked in all the smile states.... at this point in time it only makes sense to buy finished lots and build them out... contrary to what some bears on caps will tell you... I know of several very successful liquidations of wip that produced a 2x return in less than one year...long term the plan is to grow the business through acquisition and then sell the whole entity 7 years down the road....last year most deals were 2x, but today you can find 6x to 10x deals... this is why i don't post / blog anymore... I only have one life and very few opportunities to hit a homerun.... I have better things to do than argue with people.... I'll get my ROE because we get paid a salary and fees for running an operation... based on current lot costs and building costs we can compete with foreclosures and still make money... deflation works both ways.... we'll close something this year for sure... it was just a waiting game for me (capitulation to occur)

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