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Homebuilders Stage Local IPO Resurgence

Wall Street cash is making its way back to Orange County’s homebuilding industry after a brief hiatus.

The Jan. 31 initial public offering of Aliso Viejo-based The New Home Co. was the first IPO for a U.S. homebuilder in 2014 and the third for an OC-based builder in just over a year.

IPOs in any industry had been a rarity in OC since the last recession until the local surge of builders began last year.

The three homebuilders are the only OC-based companies to go public via a traditional IPO on a major exchange in the past four years, except for Irvine-based clothing chain Tilly’s Inc.

New Home Co. raised about $86 million in its offering, joining TRI Pointe Homes Inc. in Irvine and Newport Beach-based William Lyon Homes—each of which went public in the first half of 2013—among the seven U.S. builders that tapped the IPO market over the past 13 months.

TRI Pointe, the first U.S. builder to go public in nearly eight years, raised $233 million in its January 2013 IPO. William Lyon Homes raised $250 million last May.

Lyon also raised an additional $100 million through a bond offering last October, putting the three companies’ recent fundraising at a combined $670 million.

A fourth offering could be coming. Newport Beach-based builder City Ventures Inc.

last year filed paperwork for a potential $150 million IPO but has yet to move ahead on the deal.

New Identity

Each of the three companies that have taken the plunge into the world of public companies has different strategies on how to use their stock and spend their IPO proceeds.

TRI Pointe has reinvented itself since its IPO as a builder with a national presence by signing a deal last November to buy the homebuilding division of Federal Way, Wash.-based timber conglomerate Weyerhaeuser Co. for $2.7 billion.

The purchase is slated to close in the second quarter. It will give a coast-to-coast homebuilding base to TRI Pointe, which to date has built homes only in California and Colorado and has six OC projects under way.

Weyerhaeuser’s homebuilding operations—located in Arizona, California, Texas, Washington, Nevada and Washington, D.C.—sold about 2,300 homes in 2012 for nearly $1.1 billion in revenue.

The deal is being financed with stock and a $700 million cash payment and is expected to vault TRI Pointe into the top 10 of U.S. builders in terms of total sales. It should also result in the builder achieving a market value close to $2.7 billion, roughly five times its current valuation of about $540 million.

Keeping It Local

William Lyon Homes, which returned to the public markets last year after a seven-year stint as a private company, is focusing more on the local market.

“Our mission is to be the premier Western regional homebuilder,” said Bill Lyon, the company’s chief executive and son of the builder’s founder and namesake, Gen. William Lyon.

The builder’s goal, Lyon told analysts this month, is to build communities that “have close proximity to job centers that offer highly sought-after lifestyle characteristics and strong school systems.”

In OC, the builder has found success building projects in a handful of older communities in Irvine and has also been part of larger new home developments at the Great Park Neighborhoods and Rancho Mission Viejo.

William Lyon Homes also recently announced the opening of a 36-home project in the Talega community in San Clemente called Alora, which is slated to open in the spring.

Choosing where to open projects of late hasn’t been too difficult, the company said.

Last year, “all of our markets were strong,” said Lyon, whose company also builds in Colorado, Arizona and Nevada.

The company currently has the largest amount of land holdings of the three newly public OC companies, owning or controlling close to 14,000 lots. It had a recent market value of about $930 million.

3-Pronged Approach

New Home Co.’s recent IPO was the smallest of the three local offerings, giving the developer of the Lambert Ranch community in Irvine

a market value of $201 million as of last

week.

The offering’s size doesn’t faze Chief Executive Larry Webb, he said.

“From our start in 2009, we never wanted to be the biggest, we wanted to be the best,” he told the Business Journal at the time of the IPO.

The company has a three-pronged approach to growth, according to Tom Redwitz, New Home’s chief operating officer.

The builder will continue to do deals on its own, such as a recent purchase of land at the Orchard Hills development in Irvine, where it has high-end homes in the works. It will also invest in joint ventures, such as the one it’s doing at Meridian, a 79-unit condominium development in Newport Center that it’s developing in a deal with a unit of Ross Perot Jr.’s Hillwood, the Dallas-based real estate firm.

New Home will also construct homes under a fee-building arrangement, such as a recently signed deal to work with Newport Beach-based Irvine Company for nearly 800 homes, according to Redwitz.

He said those deals help the builder stay

in touch with large masterplanned develop-

ers and can lead to more business down the

road.

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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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