PICO Breaks UCP – Expands Board, Nominates PICO’s Locker, Supports 5 PICO Proposals. Homebuilder M&A Heats Up.

On March 30, 2017, the defenses were breached. In response to PICO‘s frontal assault, UCP took a seat at the bargaining table and negotiated a target date surrender. UCP did not surrender in real time. It will persist a little while longer. UCP, as it is currently conceived, will survive either another 7 months if the debt maturity goes sideways or another year (barring a surprise offer or other unanticipated transaction). Either way, value destruction at UCP will end sometime soon and shareowners may finally realize an acceptable return on their investment.

UCP produced the bold headline: “UCP Announces Expansion Of Board And Strengthened Corporate Governance.”

We find UCP’s tone amusing – as if UCP sought to improve corporate governance all along. The potential corporate governance improvements at UCP were not self-imposed. They are the result of PICO taking off the kid gloves.

But what should investors expect from UCP? The last few months have seen numerous dishonest communications from Chairman Michael Cortney, CEO Dustin Bogue and CFO James Pirrello.

5352124832_b3013f06e5_bMichael Cortney, Dustin Bogue & James Pirrello

The potential corporate governance improvements are warranted. Corporate governance – and shareholder returns – at UCP have been pure disappointment under Chairman Cortney and CEO Bogue. PICO had to do something.

Director Actions

UCP will expand the Board from 6 to 7 Directors. Kathleen Wade, incumbent Director up for reelection this year, will keep her seat. Filling the open slot will be PICO’s nominee Keith Locker.

The result is guaranteed as Director election at UCP requires a majority of votes, which PICO, with its almost 57% voting power, will meet by itself.

We got this one wrong in a few different posts. We didn’t envision a scenario in which Mrs. Wade kept her seat. This unfortunate result means that one of 4 UCP Directors focused on entrenchment and destruction of shareholder value gets more time to do more of the same.

stock-photo-colorful-female-clown-actress-speaking-out-having-fun-circus-entertainer-161080637Kathleen Wade

Mr. Locker will be named to the UCP Corporate Governance and Nominating Committee. Eric Speron will be appointed to the Compensation Committee, an addition that is long, long overdue.

In corporate governance impropriety that brings back John Hartian memories, the UCP Comp Committee, comprised only of Mr. Cortney and UCP Director Peter H. Lori, has been guilty of several offenses against shareowners. This dubiously configured Comp Committee without any explanation, removed the Officer Stock Ownership Guidelines from the Proxy Statement. CEO Bogue received the most undeserved salary increase in the homebuilder industry. And Mr. Bogue received Golden Parachute fortification as PICO sought to earn an adequate return on its investment.

Now that all the dubious and abusive compensation machinations are complete, Messrs. Cortney and Lori are willing to accept a non-corrupt additional member. The rotten Cortney and Lori apples don’t fall far from the diseased Juicerian tree.

As we said earlier, PICO now likely has a maturity date on its UCP investment. Assuming no unexpected transactions, UCP will likely cease to exist in its current form either in October 2017 or by the 2018 Annual Meeting. Both dates are a long way away. This incompetent UCP crew is capable of destroying a lot of value in the interim.

Messrs. Cortney, Bogue, Lori and Mrs. Wade occupy a shameful place in corporate America. These four value-destroying charlatans continue to hold two shareholder bases hostage. Despite the fact that UCP has destroyed millions of dollars in value since its July 2013 IPO, these self-interested Directors refuse to maximize value for two sets of owners and sell the firm.

We understand this unethical choice. As we have said, Messrs. Cortney, Bogue and Mrs. Wade will never occupy their respective positions ever again. Therefore, they cling to the prestige and compensation of their current positions as if they were drowning men and women reaching for a life raft.

Corporate Governance Actions

According to the Settlement Agreement with PICO, UCP agrees to include 5 Proposals, along with its positive recommendation, in its 2017 Proxy Statement.

First, UCP will pursue hard declassification, starting at the 2018 Annual meeting. All Directors and potential Directors with terms expiring after 2018 have signed resignation letters to facilitate the hard declassification next year.

Second, shareholders with 25% or more voting power of UCP Common Stock may call a Special Meeting. This provision pertains only to UCP holders of Common Stock, which thereby excludes PICO, which owns Class B Common Stock and Series A Units. PICO had sought a 10% threshold.

Third, stockholders will be allowed to act by written consent.

Fourth, Directors may be removed without cause, the size of the Board may be changed and vacancies on the Board may be filled by a 75% supermajority vote (for as long as PICO or another shareholder owns 35% or more voting power). In other words, PICO plus 18.4%. PICO had sought a 66 2/3% threshold.

Fifth, Stockholders may amend the Bylaws by a 75% supermajority vote (for as long as PICO or another shareholder owns 35% or more voting power). In other words, PICO plus 18.4%. PICO had sought a 66 2/3% threshold.

UCP refused to honor PICO’s request to adopt cumulative voting for Directors.

To pass, each proposal needs a “For” vote from a majority of the roughly 8 million Class A shares (about 4 million “For” votes).

PICO agrees to vote “For” all 5 Proposals. Going forward, PICO agrees to vote its securities in such a manner that at least 3 UCP Directors at all times will be “Independent.”

The passage of both the Director changes and the 5 Proposals is all but guaranteed. All independent UCP shareowners who can stand vertically and maintain a pulse will vote “For” each of these items. With UCP’s formal recommendation behind all measures, passive investors will also vote “For.”

Don’t use that as an excuse to go fishing instead of voting your UCP shares! No voting result is written in stone, so your “For” vote will count. Like a baseball pitcher that can hit, sometimes shareholders have to help themselves out.

UCP Subscale

We have been saying for some time that 200 homes per market, per year is the minimum efficient scale for a builder. UCP CFO Mr. Pirrello admits as much in the Q3 earnings call. Here is what he said in response to an insightful question from Alan Ratner, of Zelman & Associates:

As far as lots that are optioned, we have said in the past that we see opportunities in all of our markets but especially in those divisions where we are not operating at full kind of efficiency. And those would be in the Southeast and even in the Pacific Northwest where we are doing somewhere around 100 units per year. And the real focus there is to get the land supply up so that we can get them to be performing at a level similar to our Bay area in the Central Valley doing over 200. So that’s the low hanging fruit that we see.”

UCP is nowhere near 200 homes per market, per year, except in Monterey County, California, at the East Garrison project. This is probably why UCP has some of the worst operating margins in the builder industry.

UCP Should Sell Now

On March 15, Builder Magazine Editor John McManus wrote a provocative piece on homebuilder acquisitions.  Referring to builders that choose to be acquired, Mr. McManus writes:

“They face hard facts of real estate life, one of which is that paying high prices now to put future home sites on the balance sheet can be perilous to future returns on that upfront investment. Companies that, because of their lesser heft have to pay more per lot expose themselves to greater risk than deeper-pocketed companies who wield lots of cash and cheaper capital in the land game.”

We suggest you click the link above to read the post in full.

Homebuilder M&A Red Hot

We have said for some time that now is a great time to sell a homebuilder. Market participants concur. Several buyers and sellers have shaken hands on a bid/ask spread to close transactions. Given UCP’s pathetic valuation of about 85% of net equity and little hope for improvement, a sale remains the only way for these hapless Directors and Executives to maximize value for owners. Here is a summary of the latest transactions, in reverse chronological order:

  1. AV Homes buys Savvy Homes — On March 3, 2017, publicly traded AV Homes (AVHI) announced it will pay $50 million for Raleigh, NC based Savvy Homes. The seller has over 20 active communities and delivered more than 250 homes in 2016. Savvy owns 230 residential lots and controls over 1,900 lots. The transaction is scheduled to close in Q2 2017.
  2. Sekisui House buys Woodside Homes — On February 22, 2017, Sekisui House of Osaka, Japan, announced its acquisition of Utah-based Woodside Homes. The price tag for Woodside, the country’s 27th largest builder, is estimated at $468 million. Woodside has a presence in California, Nevada, Utah and Arizona. In 2015, Woodside delivered 1,644 homes worth $603 million in revenue.
  3. Daiwa House Group buys Stanley Martin Communities — On February 14, 2017, Daiwa House completed its purchase of 82% of Stanley Martin Communities. The target is based in Virginia and has a presence in  Washington, DC., Richmond and Charlottesville, Virginia, and Raleigh, North Carolina. Stanley Martin owned/controlled 8,700 lots and recorded $500 million in revenues in 2016. Toll Brothers paid $82.5 million for Coleman.
  4. Toll Brothers acquires Coleman Homes — On November 7, 2016, Toll Brothers announced its purchase of Boise, Idaho-based Coleman Homes. The seller owned/controlled 1,750 lots and had 135 homes in backlog worth $40.8 million. Toll Brothers paid $82.5 million for Coleman.
  5. Clayton Homes acquires Summit Homes — On November 3, 2016,  Clayton Homes bought Summit Custom Homes. The seller was founded in 2002, is headquartered in Kansas City, Missouri, and boasts 1,200 lots. Summit was ranked No. 129 by Builder Magazine, with 2015 revenue of $86 million. Fred Delibero is CEO of Summit. Financial terms were not disclosed.

It sounds like there are more potential buyers for UCP than ever. Did we mention that it is a great time to sell a homebuilder?

In October 2016, Mr. McManus, editor of Builder Magazine, wrote an insightful piece on the arrival of Japanese acquirers to the US homebuilder industry. Among several astute observations, Mr. McManus notes:

“Motivating Japanese home building organizations in their pursuit of beachheads here in the U.S. are two strongly related forces: a need for yield on invested capital and diminishing opportunity to produce that yield in Japan, where the population is shrinking and household formation has stagnated.”

In the final paragraph, Mr. McManus made an accurate prediction:

“[W]ith two Japanese organizations–and other international players also seeking safe-haven residential real estate plays in the United States–as new bidders in the mix, it may serve to stir the pot on public-private merger and acquisition activity in the months ahead.

The buyer pool for UCP is now deeper than ever.  Self-serving UCP management is the only impediment to maximizing value for all UCP shareholders.

UCP Cash Earnings 2016

Many RPN readers enjoyed our expose’ of UCP’s Q4 earnings presentation. We entertained them by uncovering the dishonesty and desperation of Messrs. Bogue and Pirrello, both of whom futilely attempted to inflate UCP’s earnings to the investing public.

A few readers asked us about economic earnings, so we provide our version. First, a few notes. UCP does not disclose cash interest paid. We use interest incurred, which is likely higher, but not by much.

Like all builders, UCP capitalizes and expenses interest on debt, provided that real estate inventory balance exceeds debt balance. When capitalized interest is expensed, it is lumped in with cost of goods sold. Our “Incremental Interest Expense” figure is the interest incurred above and beyond what UCP expensed in cost of goods sold.

We always include routine depreciation and amortization, stock options and other forms of noncash employee compensation in our calculation of economic earnings. Although such P&L debits do not have immediate cash consequences, assets wear out and must be replaced. Equity equivalents granted to managers have an economic cost to owners. This inclusion may skew from cash earnings, but it is perfectly coherent with economic earnings.

Recall that Messrs. Bogue and Pirrello told UCP owners, with straight faces, that “Core Earnings” were $.84 cents per share and “Core ROE” was 6.5%. We laughed at their desperate attempt to artificially inflate UCP’s results in order to compensate for dismal performance, as measured by any and all relevant metrics. These men have a tendency to communicate dishonesty to owners and they are incompetent managers in the extreme. Below we show UCP’s economic earnings and compare it with the deceptive figures futilely championed by Messrs. Bogue and Pirrello:

   Item                               RPN Economic Earnings  
   ----                               ---------------------
Reported Pretax Earnings                            $9,163
Add:
  Goodwill Writedown                                $4,223
  Abandonment/Impairment                            $3,112
Less:
  Contingent Consideration                         ($2,347)
  Valuation Allowance                                   --
  Cash Tax Payment to PICO                         ($4,830)
  Incremental Interest Expense                     ($4,385)
                                      ---------------------
Total UCP Economic Income                           $4,936
Earnings Per Share                                    $.26
Return on Avg. Equity ($222M)                          2.2%

 Messrs. Bogue and Pirrello deceptively claimed credit for $.84 cents per share in earnings. Recall that they conveniently “forgot” to adjust for the contingent commission reduction and the cash tax payment to PICO.

We calculate $.26 cents per share, or 69% less that the dubious figure provided by Messrs. Bogue and Pirrello. Recall that Messrs. Bogue and Pirrello disingenuously told us that “Core ROE” was 6.5%, while we calculate an economic ROE of 2.2%, which is less than a 10-year Treasury bond.

Conclusion

Monetization of PICO’s stake in UCP is now in sight. But it could be a long way off. In the meantime, both shareholder bases of UCP and PICO will incur significant risk and value destruction as 4 Directors – Messrs. Cortney, Bogue and Lori and Mrs. Wade – whom we characterize as dishonest and inept, continue their pursuit of self-interest in the extreme.

25 responses to “PICO Breaks UCP – Expands Board, Nominates PICO’s Locker, Supports 5 PICO Proposals. Homebuilder M&A Heats Up.

  1. What a cesspool is this whole PICO/UCP mess. Full of putrid fart after putrid fart of malfeasance and self dealing. For UCP to blatantly protect its fiefdom and play blocker against its majority owner for no well stated reason is deplorable. And as you’ve mentioned, they’ve just locked in insane sweetheart golden parachutes for themselves. I hope the family and friends of these UCP dirt bag executives and board members read this blog so they know about this disgraceful legal stealing of innocent people’s money. Disgusting.

    • Thanks for your comments, Roger. We agree with your assessment. It is unfortunate that the UCP Directors pursue self interest and value destruction with no shame. Our readership is wider than ever, so word is getting out that Directors Cortney, Bogue, Lori and Wade are unworthy of their positions. We would not bet on the professional future of these individuals; as John Hart, Kenneth Slepicka, Carlos Campbell and others had to learn the hard way, eventually the unethical suffer for their wrongs.

  2. allforfunnplay

    I’ve said before and I’ll say again, I still don’t understand how you believe that UCP is desirable acquisition target.

    I’ve said before that they’re only value is in their land holdings (they’re homebuilding operations isn’t much that couldn’t be easily and possibly more efficiently replicated).

    RPN has stated that UCP’s primary value is their land holdings.

    UCP is a land company that has dangled a home building operation to the public to raise capital.

    You say that the UCP executives and directors are protecting their “fiefdom”. And that’s true. But real estate development is all about “fiefdoms” and spheres of influence (and not just the kind that expand city limits which allow developers to entitle raw land in city jurisdiction).

    I believe UCP’s primary land holdings are in California’s Central Valley and in the Monterey Bay/San Benito area (and I would not be surprised if they were in the CA outer East Bay/Stockton/Tracy areas.).

    In these areas that Mr. Dustin Lee Bogue is a big fish in a small pond. There are dozens of players in the East Bay/Stockton/Tracey area and even more in the Central Valley. Bogue is a player and knows the right people and how to get things done so from a land development stand point he’s an excellent operator. But it’s in the Monterey area where Bogue is the king big fish in the Monterey/San Benito area local market small pond. (this area I’d include: Gilroy, Hollister, Salinas, Gonzales, Chular, Greenfield, Soledad, King City…the little towns down highway 101; which btw. there are some nice little wineries near these towns…and obviously Marina and Seaside). It’s not easy to develop in these areas. It takes lots of political clout and connections and patience.

    Where am I going with this big fish in a little pond theme in relation to the bigger corporate governance and M&A picture? It’s that given the that UCP’s primary value is in it’s land holdings and it’s ability to build (meager as it is) in such a difficult area; that any owner (like the current stock holders) or a new buyer would have to consider keeping Bogue on as the operator. The guy unfortunately has entrenched himself. There really aren’t that many powerful players in that specific region UCP is operating in. I mean sure all the builders have some foothold there to some degree (mostly in the interior areas near 101) but not like UCP.

    The best scenario I can see for UCP is to sell off their lots by region to various homebuilders (as is their primary goal anyway) and to sell off their Monterey/San Benito lots and Mr. Bogue to a company that wants a presence in the Monterey Bay area (the Japanese have always liked that area; so who knows?). Keep the homebuilding operation going as only a way to keep up the minimal cash flow needed for operations as well as to better market their land assets.

    Here’s the thing; if I had to guess, I’d say this is what UCP is already doing to some degree (minus overtly shopping Bogue). They’re a land company, they’re probably aggressively trying to sell off their inventory. The question is if their developed land “cookies” are done baking yet from and entitlement stand point (and that’s the key to the whole thing). Development hits market, political and environmental roadblocks all the time (and even more so in the Monterrey area) that slows down project timeline projections. I’m guessing UCP doesn’t have a development pipeline report of their land assets available?

    Anyway, again I hate to say this but you may be stuck with Bogue and selling UCP in one easy M&A transaction may not be on the table. But who knows, maybe those inflated numbers reports from UCP will impress someone. And hey Monterey is a beautiful place. So maybe someone (the Japanese?) will fall in love with the idea of developing out there (despite it’s limitations as a primary home buying market).

    • Thanks for your insights, allforfunnplay. We enjoy your detailed commentary on the intricacies of UCP.

      As Mr. McManus, editor of Builder Magazine, noted in two of his posts, a foreign buyer is more likely to keep an executive team intact. The acquirer pool for UCP is deep as ever.

  3. The only thing keeping Bogue entrenched at UCP is his egregious comp package. I respectfully reject the notion that he is somehow a unicorn manager with exclusive skill sets and connections. Here’s the comp table on a much larger land entitlement company, HomeFed (HOFD) of Carlsbad, CA:
    https://www.sec.gov/Archives/edgar/data/833795/000114036117001712/ex10_1.htm
    This group opportunistically buys distressed masterplanned communities and transfers their knowledge and skill set to the locale and its politics. There are certainly numerous capable people who could handle UCP’s land holdings just the same as Bogue but for far less. HOFD’s rockstar operator Aden costs $500k per year. HOFD’s CEO made $650k run 2016. Unlike UCP, HOFD has a sharp 70% owner in Leucadia National Corp (LUK). The land entitlement and development process is a cumbersome one for sure, but any buyer of UCP or its assets could readily put the requisite assets on the ground to administer entitlements, permitting, development, etc.

    I do agree that a liquidation and asset sale scenario is possibly the best path and that the homebuilder side of UCP could be a wind down expense liability rather than an asset for sale. I think both PICO and minority UCP holders are racing against the clock here. However monetization occurs, this collection of assets would need to move in a liquid and healthy market – we have one right now. It is very possible we could see a turn in the cycle leaving UCP in a precarious situation or worse – definitely a situation where selling assets a decent prices becomes doubtful. Worse than that, with UCP’s debt and overhead, sales into a doubtful and illiquid market could become FORCED. Ouch. That would be a disaster for shareholders. UCP is worth more dead than alive, which reminds me of this classic Larry the Liquidator (Danny Devito) scene from “Other People’s Money:”
    https://www.youtube.com/watch?v=62kxPyNZF3Q
    Or let UCP or PICO communicate a wise path forward that will best the outcomes for shareholders – I don’t see it and I know we have not heard it.

    All this is just one opinion (and one from definite peanut gallery!). Good luck to us all.

    • Thanks for your observations, Roger. We agree with your analysis wholeheartedly. The window in which to monetize UCP is not of unlimited duration. We also doubt that Mr. Bogue would be vital to any acquirer. He has proven himself dishonest and unethical on several occasions. Most purchasers would disqualify his continued employment on that basis alone.

    • allforfunnplay

      you know what they say about real estate: “Location, Location, Location”. That goes for land development. Doubly so for developing in California. And triply so in Monterey County. Developers are not just plug and play. You can’t just go and get somebody from somewhere else (like Southern California) and just assume they can operate elsewhere. Developing takes politicking with local government officials (usually city managers and council people on the planning commission.), local real estate professionals (brokers, engineers and contractors) and local community and neighborhood organizations and leaders. This is why builders usually buy local real estate firms (smaller development and engineering firms) to operate in specific markets.

      East Garrison is an unincorporated community which means it falls under Monterey County jurisdiction and has a community services district in place where the community and the county may have agreements with either the cities of Salinas or Marina for services (water, sewer, electrical, police, fire, etc..). East Garrison was on the ex military base Fort Ord. So a developer is likely having to also work with the Army Corp of Engineers and possibly the coastal commission.

      So yeah, that’s god damn Unicorn politicking. There are only a few people that can pull that off in Monterey County. Bogue maybe crooked but the guy usually knows the right people in his business (though I don’t know what the hell he was thinking with those east coast acquisitions. I always figured it was the big fish trying to expand out of his little pool and drowning). Bogue’s shady dealings have usually been on the corporate governance side of things and not as much as an operator on the business side of things (acquisition and entitlement).

      One thing I’m curious about is UCP’s land development pipeline. As of June 30th 2016 per equities.com; UCP had 5,547 lots in it’s inventory. Are those all fully approved lots? ie..legally subdivided? Or is it property with proposed lots that are still under the entitlement process? Do some of the lots have physical improvements like basic roads, sewer and electrical? Are some or all of the lots finished? The development of the lots goes a long way in telling how valuable (beyond the general market value) the land holdings are and the land’s degree of liquidity. Builders don’t like to swallow too much land (just enough to keep their homebuilding pipeline financially and operationally efficient) and definitely don’t like raw land (no entitlements). A large sale of land assets would do a lot to alleviate the debt burden UCP is carrying.

  4. I can’t wait for my money

  5. UCP….What a shame this was the best we could get from them. Shareholders will have to wait and see how bad they rape us of value over the next 6 months to year.
    These parasites have such a corrupt sense of personal value, status and accomplishment. Self-esteem so low they could trip over it. Theirs, John Hart, and the old cronies from Pico must make their families proud.

    Now to the vote again. I see no buyback, and if Pico shareholders were to see anything in the next couple weeks, it would be very slim. All Pico shareholders should be nervous about their vote, it could take away what little power we have. PLEASE REMEMBER it has been 9 nine years of value destruction, and disrespect. We have been dismissed, and I still hear more today about compensation,bonuses, and what the directors need, more so than what the shareholders need. It has been a short time with the new directors and many good things have happened, though Max Webb is still there and that makes me very nervous!!! He really should be gone! He is a “I want, I want, I want” guy, along with Perri . Very offensive those two. They make more than enough money, they should focus on their job, do it right and then worry about bonuses. That culture of entitlement has been going on so long it becomes normal…”Its not normal” it is wrong!
    VOTE NO!!!! to 3)Compensation 4)_Frequency Of Compensation 6)Reincorporation To Delaware 7) To Adjourn The Annual Meeting
    Waiting another year to see some major turnaround will harm no one, but it will have shareholders feel more secure. The stock price has been dropping again, let’s see it head to $20 plus and then we can applaud the directors and their efforts. Then we can talk about some bonuses, which would be greatly deserved.
    And once again Thank You,Thank You Pico Reform for allowing shareholders to have a platform and with keeping us up on all the information you bring to us!

    • ReformPICONow

      Thanks for your comments, mmm. Many shareowners and PICO observers agree with you. We agree that the commentary from the PICO Board has been dominated by compensation and very little has been said about return of capital to owners. We are also concerned about potential executive compensation for the monetization of UCP. We find this possibility repulsive.

      The Annual Meeting is less than a month away. We hope the PICO Board understands that favorable votes are not guaranteed. The Board can make life easier on itself by implementing some shareholder oriented measures in the meantime. We have given our preliminary blessing to the proposal slate – but not by much. Supporting the Board will be more difficult if we only have radio silence between now and May 4. Time will tell.

  6. I have to agree with 3m here. We’ve heard some nice talk from this new board. They sold Mendell which went right out he door to Hart. They’ve sold a few water rights. But, we’ve received very little information on other key parts of the business including:

    UCP – What is the plan? What rights does Pico have to make changes? Why the hazy information on a bonus plan for that asset? What’s the reasoning for UCP board members not owning enough stock or the waiver of the responsibility? Why agree to keep Wade? What does she bring to the table that’s worth her track record? I personally would like much more information from management and the board.

    Management – Why keep 2 members of management that were complicit, or at least passively ineffective, in the mismanagement over the past 10 years? How about some justification or information on the story there.

    Asset Sales – What work has been undertaken to ascertain third party valuations for any assets? Have bankers been contacted on any assets? Competitors? If our assets are so valuable as management has stated in the past, why aren’t buyers clammoring for them? Or are they? How is it that all assets are in a bubble but water rights and UCP? Investors would like more information. I truly doubt the board and management understand the anger of investors. We’re not interested in maximizing Fish Creek’s theoretical value over a 10-20 year horizon. We’ve lost a lot of money while Webb and Perri have gotten paid nicely to mismanage our asset base. We’re owed more information than we get quarterly from Webb’s 10 minute calls.

    • ReformPICONow

      Thanks for your insights, Jim. We agree with you 100% on your UCP comments. PICO has two representatives on the UCP Board. Diplomatically, PICO may not want to comment on UCP’s corporate governance. But our panel tells us that legally, PICO is free to provide its honest assessment. We would appreciate hearing PICO’s thoughts on the worsening disaster with the consistently declining stock price that trades under the ticker symbol UCP.

      We also agree that the PICO Board could provide more detail regarding asset sale progress. Thus far, they have provided minimal detail. And they have not returned capital to owners. Last, we agree that Messrs. Webb and Perri are well-paid. Under certain scenarios both men could earn many millions of dollars in bonuses. We are shocked and repulsed that they also seek compensation for selling UCP. We hope the Board reconsiders this ill-conceived inanity.

  7. I am not trying to be contrarian here as I agree there are still a lot matters on which we can criticize the new PICO board members for. That being said I believe that looking at the volume of shares traded over the last four weeks or so that the company was in the market buying back stock. I do remain disappointed at slowness of selling assets as well as the approach with UCP particularly the incentives for selling of UCP. That’s nothing less than robbery. Long PICO, but getting impatient.

  8. Stock cash deal for ucp to century communities. 5.32 cash. Stock and cash combined equals 11.35 per share.

  9. Crucial question. How long will pico have to hold onto its equity stake after merger? Pico will own 9 percent of company post merger. But how long is it locked in?

  10. UCP has been acquired. People are finally doing their jobs. Yes, this is good. But we still need more transparency. How will monetizations be returned to shareholders and when. What is the end game? How will PICO ultimately cease to exist once all monetizations are complete? Now that it simply owns one private asset, what will it do to right size it’s cost structure? PICO needs a custodian or administrator to assist the board in any tasks or maintenance related to babysitting Vidler while it sells itself not an executive team and staff. The simple path forward for PICO does not need to be treated like a national secret. Shareholders deserve clear and transparent information from PICO.

    • allforfunnplay

      they’re calling it a “merger”. but Century is the financial side of the deal so I’m thinking it’s an acquisition at least in terms of corporate legal structure and finance. It will be interesting to find out how the management structure shakes out. Pico’s share of the new company is said to be 9%. How or when they’re able to liquidate it will be interesting too…or if it’s still in their best interest at the time (3rd or 4th quarter?).

      • Hopefully, today’s post answers your musings, allforfunnplay. We agree, although it is called a merger, Century is clearly buying UCP. The best evidence of that is Dustin Bogue’s marked demotion. We feel that eliminating UCP’s personnel is best for all parties. This Board of Directors has been awful and the Executive team is guilty of many transgressions against owners.

    • Thanks for your observations, Thomas P. We agree. Ideally, the infrastructure to monetize the PICO portfolio would be smaller and cost less to owners. It is unfortunate that we have so many mouths to feed. We agree that greater transparency would be helpful to owners.

  11. Hopefully it simply boils down to using the most tax efficient structure. Ideally the cash can pass straight through to PICO holders and the same with the new shares via a dividend or spin off. Either way, as per my previous comment, there’s no reason for PICO to be secretive.

    • We agree, Thomas P. At today’s price, PICO would not utilize any NOLs pursuant to the UCP sale. It is below the tax basis, we believe. So the UCP sale might actually create more tax losses. We did not expect this outcome. Hopefully, a higher bid will emerge and PICO will realize a premium, which will take advantage of the NOLs, among other benefits to shareowners.

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