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BUSINESS PERSON OF THE YEAR – Real Estate: Doug Bauer

TRI Pointe Homes Inc. began 2013 as a private company with a few hundred home sales to its name, a cautious growth plan, and one deep-pocketed investor.

The Irvine-based company ended the year with its shares trading on the New York Stock Exchange after completing Orange County’s largest initial public offering of 2013, and it’s now poised to become one of the country’s 10 largest builders, thanks to an aggressive acquisition of a larger competitor.

Not bad for a builder still operating in a choppy market for new homes and with a stock market still skeptical about the long-term prospects of the building industry.

The past year “has been a blur,” TRI Pointe Chief Executive Doug Bauer said last week.

Growth has been part of the game plan for the company since its 2009 formation, although not at the whirlwind pace of last year.

Bauer, Chief Financial Officer Mike Grubbs and President Tom Mitchell founded TRI Pointe after leaving Newport Beach-based William Lyon Homes in the wake of the last recession.

“We had a fundamental premise when we started that the housing market, which was being pummeled at the time, would recover,” Bauer said. “It was just a matter of when that would happen.”

“We thought it was a good bet,” he said.

Real estate investor Barry Sternlicht, whose Starwood Capital invested $150 million in TRI Pointe in 2010 and is the company’s largest shareholder, took a gamble on TRI Pointe.

Bauer said he’s been friends with Sternlicht, who he calls “the Warren Buffet of real estate,” for nearly 20 years, but the 2010 investment was their first deal together.

Greenwich, Conn.-based Starwood Capital has about $20 billion in assets under management, and Sternlicht is TRI Pointe’s chairman.

The turnaround wasn’t immediate.

2011 “was a scary time,” as was the first half of 2012, Bauer said. But by the end of 2012, the company had plans in place to raise money in the capital markets.

TRI Pointe’s timing proved savvy.

The company raised $233 million in a January IPO. It was the first U.S. homebuilder to go public via an IPO in nearly eight years and the largest IPO in Orange County in several years.

A few other national builders, including William Lyon Homes, went public after TRI Pointe, but by mid-2013, Wall Street’s appetite for builder IPOs waned, a breather that lasted through the end of the year.

TRI Pointe recently had a market value of about $600 million. Its shares ended the year about 5% above its IPO price.

Having access to the capital markets helped it accomplish its second attention-grabbing deal of the year.

In November, TRI Pointe announced it reached a deal to buy the homebuilding division of Federal Way, Wash.-based timber conglomerate Weyerhaeuser Co.

The $2.7 billion deal, consisting of $2 billion in stock, plus a $700 million cash payment, was the first acquisition topping $1 billion involving an Orange County builder since 2006, when Emaar in Dubai bought Irvine-based John Laing Homes for nearly $1.1 billion.

The Weyerhaeuser buy—slated to close in the second quarter of this year—will turn TRI Pointe, which to date has built homes only in California and Colorado, into a national presence.

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.

It was the country’s 17th largest builder by sales volume as of 2012 and its 13th by revenue.

TRI Pointe is buying five homebuilders from Weyerhaeuser, the largest of which is El Segundo-based Pardee Homes, long one of Southern California’s more active builders.

Pardee last year ranked among the top five builders in San Diego and Los Angeles. It also builds in the Inland Empire and Las Vegas.

Bauer and his team didn’t expect an acquisition of that size.

“Our growth plans were more organic, buying land in Southern California, Northern California and Colorado or maybe an acquisition of a smaller, private builder,” Bauer said. “We had no idea (Weyerhaeuser) would be popping up.”

That said, company executives said they think now is the time to take on an acquisition of that size, considering the state of the national housing market, which appears poised for more growth over the next few years.

“I’d rather do a deal like this now,” Bauer said. “You don’t want to be the ones buying in the ninth inning (of the housing recovery).”

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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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