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City Ventures to Take Homebuilding Public

City Ventures Inc. plans to separate homebuilding operations from its aggressive land-buying business as part of a $150 million initial public offering in the works for the Newport Beach-based company.

City Ventures, created at the start of 2009, filed IPO plans with the Securities and Exchange Commission last week. It will join a trio of other Orange County homebuilders on the IPO trail, including two that went public earlier this and another with recently filed plans.

The four area builders—newly public Irvine-based TRI Pointe Homes Inc. and William Lyon Homes in Newport Beach, along with City Ventures and Aliso Viejo-based The New Home Co. (see story, page 1)—look set to raise nearly $775 million in total from their respective IPOs.

TRI Pointe, William Lyon Homes and New Home Co. expect to use the bulk of their IPO proceeds to acquire land in California from a variety of developers, cities and other sources.

City Ventures has a different plan. The company expects to use most of its IPO proceeds to buy land directly from a newly created affiliate, which the SEC registration statement lists as CV LandCo.

City Ventures currently owns or has access to 8,858 home lots in coastal urban infill and suburban California markets, the company’s registration statement said. About 75% of those lots will be owned by CV LandCo following the IPO.

By comparison, TRI Pointe owned or controlled about 2,162 lots as of March, while William Lyon Homes has about 13,200 lots under its control, and New Home Co. owns or controls 3,730 lots.

Deals

Deals are currently in place for City Ventures to buy 2,304 lots from CV LandCo for $363 million in a series of three transactions whose options run through September 2014.

Those three deals include nearly 900 home lots in Buena Park, Costa Mesa, Fullerton, Santa Ana and Yorba Linda, according to SEC filings.

The company’s relationship with CV LandCo means that the builder will be able to buy land “at prices that will enable us to maintain our existing margin structure, assuming modest increases in housing prices and construction costs in our markets,” City Ventures said in its registration statement.

The relationship “provides us with a strong pipeline of land at low risk, while enabling us to be selective and opportunistic in pursuing land acquisition opportunities from third parties,” the company said.

Atkins and Buckland

Craig Atkins and Mark Buckland, who founded City Ventures, own substantially all of the outstanding equity interests of CV LandCo, which has amassed about $400 million in debt since its formation to acquire its land holdings, according to SEC filings.

The company has gained a reputation since its formation for being an aggressive land buyer that’s willing to take on more entitlement risk—particularly for infill locations—than more traditional builders.

Other investors in City Ventures and its land-buying operations include Imperial Capital Group LLC and Ares Management LLC, both based in Los Angeles.

Buckland will remain president and chief executive of City Ventures following the IPO, while Atkins will remain chairman of the company’s board.

Herb Gardner, who like Buckland and several other company officials, comes from Seal Beach-based builder The Olson Co., is president of the City Ventures’ homebuilding division, with August Belmont president of the company’s suburban division.

Time Frame, Ticker

A time frame for the $150 million IPO becoming effective has not been announced. The company plans to list its shares on the New York Stock Exchange under the “CTYV” ticker.

The IPO is being underwritten by a group led by Deutsche Bank Securities and Goldman, Sachs & Co.

The company said it earned $96.4 million from home sales in 2012 and another $19.2 million in the first three months of this year.

It had 13 active home projects as of March and expects to have 22 communities open by year-end. Home prices at those projects range from about $360,000 for a townhome community in Signal Hill to nearly $1.7 million for a development at Pasadena’s former Ambassador College campus.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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