The Barratt American housing developement on Paxton Way in Leucadia on Tuesday. Photo Hayne Palmour IV, staff photographer Sell
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HOUSING: Carlsbad-based home builder in financial trouble
By ZACH FOX - Staff Writer | ∞
The Barratt American housing developement on Paxton Way in Leucadia on Tuesday. Photo Hayne Palmour IV, staff photographer 
Barratt American new home projects. One of North County's largest home builders is struggling to raise enough money in bank loans to pay its bills, forcing it to search for new investors, the company president said Tuesday.
The housing recession appears to have damaged the financial standing of Barratt American, a private builder based in Carlsbad. More than 40 civil lawsuits, many from subcontractors suing over failure to pay, have been filed against the company in the last six months.
Barratt American cannot afford to pay off the subcontractors, which include drywall and concrete companies, because of a credit crunch that has left banks unwilling to make loans ---- especially to companies with significant exposure to the housing downturn, said Michael Pattinson, president and one of the company's owners.
Barratt American is forced to turn to London in hopes of securing foreign investment so it can pay off the outstanding bills, Pattinson said. The builder was originally a British company, starting an American division in California 28 years ago. Barratt American is now an independent entity.
"The story here is that the U.S.-regulated banks are basically getting out of home building as quickly as they can, and to the maximum extent that they can," Pattinson said. "And so we're getting proposals for capital not only for U.S., non-bank sources, but from overseas as well."
The company expects to secure enough cash to be able to pay off its outstanding bills within the next 30 days, said Pattinson in a phone interview Tuesday. He was in Atlanta Tuesday speaking as a panelist to members of the Federal Reserve, the nation's central bank, about the effects of the credit crunch.
Civil suits regarding contract and payment disputes are fairly common in the home building industry. However, about as many lawsuits have been filed against Barratt American in the last seven months as were filed in the seven years previous.
Housing weakness has hurt home builders across the board.
Goldman Sachs, a global investment firm, expects most of the nation's largest builders, including KB Homes and Lennar, to post losses this year and has applied a "sell" recommendation on Lennar's stock, according to a report released by Goldman Sachs Monday.
"This is, by far, the toughest time for home builders since World War II," said James Hamilton, an economics professor with UC San Diego. "It's really a phenomenal collapse in the market these past two years. So it's serious times for anyone trying to make a living by selling homes."
Some building analysts acknowledge rough waters for home builders. But one does not expect Barratt American is in danger of bankruptcy.
"There are some builders that are in trouble. Cash is king right now and those companies that have a lot of cash are sitting in a better position. Companies that are a little bit more leveraged are having a little rougher time," said Russ Valone, president of MarketPointe Realty Advisors, a San Diego research firm that tracks new home sales. "I don't expect to see Barratt American go away."
Valone has not seen Barratt American's financials. Because Barratt American is a private company, it does not publicly release revenue or liability numbers.
The Carlsbad builder typically builds and sells about 500 homes a year but sold only about 125 homes in 2007, Pattinson said.
Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.
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Is this Karma wrote on Apr 30, 2008 7:36 AM:For years we have read Mr. Pattison's diatribes in this paper against state and local government, environmentalists, and NIMBYs for infringing on his right to put tract homes on any avialable dirt he wishes. Go read them. The continuing theme is that govt. regulation is evil, and if govt. just got out of the way, we'd all be able to enjoy cheap housing in California. (It's funny how builders complain and complain about CA regulation, but would rather build nowhere else). The great irony here is that a lack of regulation is exactly what caused this problem. It would be interesting to learn if Barratt American Mortage - its lending arm - was offering subprime loans to unworthy borrowers in order to sell its product. NC Times, do that story.
Real Problem wrote on Apr 30, 2008 7:59 AM:
"effects of the credit crunch": Mr Pattinson is personally a very very wealthy man and he made his profit during the reverse of the credit crunch, the credit flood. Credit will not return until prices meet fundamentals and that is a long ways off. High prices were not a result of regulation, speculation driven by realtor and building industry shills brought us high prices. There are a lot of working folk who need Pattinson to pay them so that they can pay their mortgages. It is interesting that we don't see Pattinson having any problem paying his mortgage on his huge ESTATE.
Ryan wrote on Apr 30, 2008 11:08 AM:How in the world can Russ Valone know that Barret is not going to "go away: without seeing their financials. Does he have a crystal ball? You have to be kidding. Any credible analysis knowns not to comment on the financial strength and capacity of an entity without seeing financials. He sounds lik a cheerleader for the building industry to me. I wish the folks down at Barrett the best, but it doesn't look too good. Too much debt will eat you alive.
Randy wrote on Apr 30, 2008 11:39 AM:When will the NCT publish Michael Pattinson's latest diatribe blaming tree-huggers for the bankruptcy of home builders?
Al wrote on Apr 30, 2008 12:28 PM:No sympathy whatsoever for any home builder in Southeren California! The product they offer these days is ridiculously priced for what you get. It is scandalous.
$600,000 for a basic cookie-cutter tract home on a lot so small you can barely walk in the space between your neighbors tract house is insane. I have written several develops over the years asking them why they are so money greedy by building their houses on top of each other but not a single one ever had the balls to write me back. Again, no sympaththy for poor little Mr.Pattison.
esteban wrote on Apr 30, 2008 12:46 PM:these builders can't sell their houses but they still keep building them.
John wrote on Apr 30, 2008 1:17 PM:I had wondered what happened to Pattinson's column. Guess he's got his hands full.
gordon wrote on Apr 30, 2008 2:03 PM:The homebuilders, using Senator Dodd, are trying to get a bailout allowing them to carry losses for 2006-now back 4 years, instead of the usual 2, meaning they will get MASSIVE TAX REFUNDS FOR ALL TAXES PAID IN 2004-5, can we do that? Today, they were talking about a tax credit over $10K to buy a new home, too. That could be SCAMMED by agents or insiders, those rich enough to game the system. They should have saved for a rainy day, housing is always cyclical.
They should wrote on Apr 30, 2008 3:40 PM:have pocketed the money from the houses they were raising prices on daily during the boom. They didn't occur any added costs on a day to day basis yet they raised the prices per the market. Real hard to feel sorry for them now. Like feeling sorry for all the realitors and mortgage brokers.
Eric wrote on Apr 30, 2008 5:21 PM:Our economy drives from the success of local businesses so it is unfortunate to hear about another victim to the volatile market. Let's face it; there are no loans for people to buy houses. The feds should do something about it.
Doctor X wrote on Apr 30, 2008 5:34 PM:Interesting to read folks are happy for a local business to be in trouble. Envy when homebuilders were doing well, and now gloating. Shallow, sad & shortsighted...
Carlsbad wrote on Apr 30, 2008 5:57 PM:What's with the huge project being built on Robertson Ranch, on the corner of El Camino and Canon? Are they crazy?
Wheres My Violin wrote on Apr 30, 2008 6:59 PM:Where's my violin? I need to play a little sad song for "Mick" Pattinson!! It would go something like this: "Ohhhh, Booooo Hoooo. The bill collectors are coming to get poor Mick. Poor Mick robbed Peter to pay Paul and has left everyone feeling sick. Ohh, Boooo Hoooo. The citizens of America dreams of homeownership are is the dust. Poor Mick and his greed have left the economy bust! Ohh, Booo Hooo, noone feels sorry for Poor Mick". P.S. If you love life - HUG A TREE!
Webster wrote on Apr 30, 2008 8:14 PM:Here's to hoping all those that are happy about this companies problem experience the same with their employer.
Umm.. wrote on Apr 30, 2008 8:25 PM:it's all about priorities. Poor babies, jamming every inch of available land with houses and then crying fowl when the banks blew it, It's very simple. Stop building and sell what you have, don' t buy more materials for more houses to go unsold at your desired fat profit rates - instead sell what you have completed and pay the bills. If you can't pay your vendors who made you what you are, then you shouldn't pay yourself either.
Priority wrote on Apr 30, 2008 9:01 PM:Mr. Pattinson should use some of the cash that he is using to invest in Luton Town Football Club, to pay the people he owes here in the USA!!!!! If I were in his position, I would make sure that the people who have invested all their time and money for me to be able to invest in a dream, get everything that is owed to them first.. What would your priority be?????
Ha Ha from Santee wrote on May 1, 2008 6:33 PM:Mick Patterson is a short pug dog of a man who has bullied every community he has entered and payed off venal politicians with campaign contributions. The chickens are coming home to roost. Perhaps Santee will survive his vicious attack.
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