From the U-T:
Barratt American, headed by Michael D. “Mick” Pattinson, filed for bankruptcy in 2008 when it lost its $125 million line of credit for numerous housing projects, including some in San Diego County. Pattinson and his partners have restarted the Carlsbad company as The Barratt Group with the goal of acquiring uncompleted projects and putting them back on the market.
The first offering is The Villas at Montecito, a 28-unit townhome project in Atascadero in San Luis Obispo County. The U-T asked Pattinson about Barratt’s past and future. Here are excerpts from his answers.
Q: How have you spent your time since filing for bankruptcy?
A: First of all, making a living with the purchase, fix-up and sale of foreclosed properties. Second, dealing with some of the cleanup and fallout of the bankruptcy. And third, helping to create the Building Industry Coalition for Economic Recovery (BICER), which is a group of private, distressed-home builders who have been affected by the actions of their lenders. This group was created at PCBC (Pacific Coast Builders Conference) in June 2008 with the intention of alerting homebuilders about the actions of lenders.
Q: What is the state of San Diego’s housing market?
A: San Diego’s housing market can only be described as weak. The best we can say, in my opinion, is that we are at the bottom and we may be poised to enter into a slow recovery period. That would be better than many other California markets. I think it may take a decade to see prices recover to the 2005-06 peak, which would be no bad thing. After bouncing along the bottom for a period, gradual price appreciation would allow builders to deliver well-priced housing to consumers who will need to be convinced of the safety of purchase through attractive prices and gimmick-free loans.
The key for local builders is to drive down costs to compete with today’s and tomorrow’s foreclosure-led pricing. Builders are already doing a good job of lowering “hard” costs — sticks and bricks etc. — but have not yet seen any matching of cost reductions from their government “partners” in their fees or regulations.
Q: What are the lessons from this downturn for the construction industry?
A: Home builders are used to recessions. This one is my fourth. The lessons learned from past recessions teach a builder to be ready to face tough times through the construction of smaller, cheaper homes in smaller phases to reduce cash outlays and sell off any assets they can to raise money. Reduce debt as much as possible as well as overhead. Be lean and mean and hunker down for a while. Work closely with your lender to get the best result for all parties. This recession was different because it wasn’t the builders who were crippled, it was the banks. … So we learned a new lesson this time. Know what your bank is getting up to, and just because they are big and powerful don’t think they can’t fail, because they can.