Retailers respond to SoCal fires
SAN DIEGO —When homes started burning all over San Diego County on the night of Oct. 21, people who work in the local home improvement industry expected to play a role in the rebuilding effort. But they figured it wouldn’t start until the flames were put out.
Instead, they found themselves hiding from the cops so they could keep their stores open or setting up makeshift camps for evacuated families. Several lumberyards had to close their doors when the fires got too close or the smoke too thick. Although there were no reports of damage, business was certainly disrupted for several days. And contractors may have to pull some all-nighters to open a Home Depot on schedule in the city of El Cajon.
Andy Martin, a sales associate at the new Home Depot store, was home listening to radio reports when he heard that evacuees with horses were being sent to the Home Depot under construction across from the Westfield shopping center. “I thought I better get down there,” Martin said.
Kat Weissenburger, an assistant manager at the new store, was already there, tending to a stressed-out horse covered in hives. She didn’t have a lot of experience with livestock, but that would change over the next 36 hours, as people just kept showing up with their animals.
“People called their friends who were at other evacuation centers,” Weissenburger said. “Word got out to come to Home Depot because it was quieter here.”
Within hours, restaurants and supermarkets started sending over food. Anonymous citizens dropped off bedding, cots, clothes and toys. Home Depot shipped more than $1,000 worth of canopies, chairs, flashlights and other supplies.
Martin and Weissenburger stayed there all night, taking turns sleeping in their cars, so someone could receive new evacuees. Altogether, the camp took in 50 people, 35 horses, 10 dogs, and assorted guinea pigs, hamsters and snakes. The only ones turned away were a dozen ducks and the contractor who showed up on Tuesday to stripe the parking lot.
Over the next four days, Home Depot employees worked inside the store, getting it ready for its Nov. 15 opening, and volunteered in the parking lot, walking the horses and the dogs. Most of the evacuees were able to go home by the end of the week. Weissenburger was left with 40 cases of mouthwash, two trailers of pet food and other donated goods that were rerouted to another charity.
The outpouring of money and goods to San Diego’s fire victims was substantial. The Wal-Mart Foundation donated $1 million to Red Cross relief efforts, and local Wal-Marts and Sam’s Clubs made deliveries of water, blankets and other supplies totaling $400,000. Lowe’s also sent goods to shelters and set up donation sites in company stores with an offer to match funds up to $50,000.
But many Southern Californians, particularly those who live in the rural communities like Ramona, are an independent sort not accustomed to handouts. When disaster looms they fire up their generators and head down to the hardware store for supplies. That’s why Mark Dickman knew he had to stay open.
The manager of Ramona Ace Hardware got his evacuation orders like everyone else in town on the night of Oct. 21. But Dickman kept dodging the police, at one point ducking into a 7-Eleven to keep out of sight. Eventually he made it back to his family’s hardware store, where he spent the night with co-worker Ryan Carter.
Other Ramona residents who had stayed behind started coming in the next day, looking for dust masks, goggles, generators and plumbing and electrical supplies. As the fires continued to burn, eventually destroying 196 structures in and around the town, store employees Byron Haggard, Jon Grace, and Evelyn May came in and worked 12-hour shifts.
Ace Hardware sent a resupply truck from its distribution center in Prescott, Ariz., on the first day of the fires, only to have it turned back at a roadblock. Then a high-ranking sheriff department official walked into the store, heard about the aborted shipment and gave Dickman his cell phone number. Daily deliveries from Prescott got through after that.
Several lumberyards were forced to evacuate, as well as a few Home Depot locations, but none were in any imminent danger. Dixieline’s Poway location closed half a day on Monday, and than again on Tuesday, as winds shifted the fires. Although most contractors seemed to be taking the week off, the store was doing a brisk business in face masks, respirators, brooms, generators, chainsaws and reciprocating saws, according to sales manager Robert Shiflet. Residents were using the power tools to clear trees and other debris from roads and long driveways, he explained.
ECONOMIC IMPACT: AFTER THE FIRES, WORK
Depending on how you look at it, the aftermath of the Southern California fires will either be a shot in the arm for the local home-building industry or a drop in the housing recession bucket.
Although it could be both.
More than 1,400 structures were lost in the fires that swept through the region last month; an estimated 1,200 of them were homes. The majority of these were in San Diego County, which is experiencing one of its worst housing slumps in decades.
Housing starts dropped 48 percent in September, according to the California Building Industry Association. New home sales are at their lowest level since 1988, as measured by DataQuick Information Services.
Rebuilding the damaged or destroyed homes will bring jobs back to the local construction industry, which lost 5,600 jobs since June 2006, according to estimates by the San Diego Institute for Policy Research. The number would be even larger if migrant laborers were included in the count.
“We’ll see some federal and state dollars coming into the state, as well as insurance money,” said Kelly Cunningham, an economist for the institute. In addition to paying for building materials, that money will be spent to replace home furnishings lost in the fires, he pointed out.
Christopher Thornberg, an expert in regional economies for Beacon Economics, takes a more macro view of the incoming funds.
“It will give a boost [to the local economy], but it’s small relative to the downturn here,” he said. “You’re not going to be able to see it.”
Using words like “dismal” and “glum,” Thornberg doesn’t have a bright prognosis for the housing industry. But for the victims of the October fires, Thornberg offers words of encouragement: “These people are going to get pretty good deals rebuilding their houses.”
In 2003, when wildfires destroyed 2,600 homes in San Diego County, most large home-building companies weren’t interested in doing rebuilds for fire victims. But several production home builders in the area have said they’re exploring the idea this time around. Barratt American, a privately-held company that builds everything from luxury homes to urban town-houses, has set up a special division with architects, engineers and homeowner association liaisons and calling it the “reconstruction task force.”
“This is a significant amount of business,” said Barratt American president Michael Pattinson. “The housing market is pretty weak, and it’s a way for us to keep people employed.”
At the same time, Pattinson noted that big builders like Barratt American “have the capacity to help. We can get people back in their houses within a year or two.”
The Carlsbad-based company will approach each project “like a custom home,” Pattinson said, although in some instances it will try to group rebuilds together. “We prepared to go through the learning curve and the extra effort,” he added.
Hallmark Communities has already been through the fires of reconstruction, having built more than 50 homes destroyed by the 2003 wildfires. “We were busy at the time, but we took on the work because we’re a San Diego company and it was the right thing to do,” said owner Mike Hall.
Hallmark’s original plan, to build homes in large groups to realize economies of scale, proved difficult. “People had different desires and needs and schedules. So mostly it turned into one-on-one, custom jobs,” recalled Hall.
Although Hall wasn’t able to offer production-level pricing for the homes, he did keep the costs down. “People got larger houses with all the bells and whistles,” he said. “We didn’t make any money, but we learned a lot.”
Like Barratt American, Hallmark Communities isn’t about to turn down work in the current home-building climate. But this time, Hall will approach each project as a custom home, although he’ll offer a choice of 25 house plans used in previous subdivisions. This will save fire victims a substantial amount of money on architectural and design fees, he said. Customers will also be able to visit existing homes in Hallmark Communities to see the interior layout.
Hall also set up a separate division for the 2003 rebuilds. Recently, he received calls from three people who worked with him then; they want to come back.
“Working with [fire victims] is very emotional,” said Hall. “But it’s also very gratifying.”
Lumber Liquidators closes IPO
Toano, Va.-based specialty hardwood flooring retailer Lumber Liquidators has closed its initial public offering.
The company offered 10 million shares of common stock at a price of $11 per share, including 3.8 million shares offered by the company and 6.2 million shares offered by selling stockholders.
The company intends to use the net proceeds of approximately $36.4 million from the offering to repay outstanding debt and support the growth of the business, which includes plans for 25 stores in 2007, followed by 30 to 40 new stores per year until 2011.
Goldman Sachs and Merrill Lynch acted as joint book-running managers with Lehman Brothers, Banc of America Securities and Piper Jaffray serving as co-managers for the offering.
Lumber Liquidators has seen same-store sales growth of 8.5 percent to 9 percent each quarter this year. According to the company’s S-1 filing with the Securities and Exchange Commission, in 2006 Lumber Liquidators had sales of $332 million, up 35 percent from sales of $245 million in 2005.
The retailer currently operates 111 small-format stores in the United States. The company is traded on the New York Stock Exchange under the symbol “LL.”
NKT Holdings withdraws initial public offering
Providence, R.I.-based HVAC company NTK Holdings has canceled its initial public offering according to a Securities and Exchange Commission filing this week.
The company said that the application was withdrawn “due to the unsettled market conditions.” The company had planned to use the IPO proceeds to repay debt.
The announcement was part of Nortek’s third-quarter earnings statement. Nortek, which reported a 4 percent increase in sales, is a subsidiary of NKT.
The company reported net earnings of $37.6 million for the period ended Sept. 29, down 44.9 percent from last year’s earnings of $67.7 million in the same period last year. Nortek also reported net sales of $602 million, up 4 percent from $579 million last year.
NTK Holdings manufactures air conditioning, heating ventilation and home environmental control technology products.