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From Fee Builder to Fastest Grower

You can add another first to the resume of TRI Pointe Group Inc., a homebuilder whose growth over the past seven years is among the most rapid of any Orange County company on record.

The Irvine-based company, which oversees a family of regional homebuilders that span the country, ranks No. 1 among this week’s Business Journal list of the fastest-growing large public companies in Orange County.

TRI Pointe’s revenue jumped 660% in the 12 months ended June 30 to $2.6 billion, up from $339 million for the 12-month period ended June 2014.

It now has a market value of about $2 billion and ranks among the country’s top 10 homebuilders in terms of revenue.

Not bad for a company that kicked off operations in 2009 amid the rubble of the last recession and real estate downturn.

TRI Pointe was formed by Chief Executive Doug Bauer, President Tom Mitchell, and Chief Financial Officer Mike Grubbs, former executives of Newport Beach-based William Lyon Homes.

The company got its start working as a fee builder for Newport Beach-based Irvine Company on the land owner’s first post-recession home development on the Irvine Ranch. It soon moved into more traditional homebuilding arrangements in California and later in Colorado.

Its next big break was getting the financial backing of Barry Sternlicht’s Starwood Capital Group, which helped jumpstart its operations with a $150 million investment in 2010.

TRI Pointe weathered a couple of rocky years as the national housing market looked to find its feet after the recession, and eventually became the first builder to capitalize on Wall Street’s renewed interest in the homebuiding industry, raising $233 million in an initial public offering in January 2013.

It was the first U.S. homebuilder to go public via an IPO in nearly eight years. The IPO was also the largest in OC in several years.

A few other national builders, including William Lyon Homes, No. 5 on our large companies list, and Aliso Viejo-based New Home Co., No. 3 among midsized companies, followed suit and went public shortly after TRI Pointe, which ranked No. 1 among local fast-growing midsized companies in 2014.

All that prior growth turned out to be just a warm-up act for the Irvine builder, whose headquarters are in the Google Center office campus near the intersection of Jamboree Road and MacArthur Boulevard.

In 2014, it completed the blockbuster buy of the homebuilding division of timber conglomerate Weyerhaeuser Co. in Federal Way, Wash., in a $2.8 billion cash-and-stock deal.

Weyerhaeuser’s homebuilding operations—in Arizona, California, Texas, Washington, Nevada and Washington, D.C.—sold more than 3,000 homes for more than $1 billion in revenue in the year prior to TRI Pointe’s buy.

TRI Pointe, in comparison, sold about 400 homes in the same period. As one national report put it, the buy of the Weyerhaeuser assets was “like the minnow swallowing the whale.”

The digestion of the larger company doesn’t appear to be causing issues, based on recent bottom-line results.

The combined operations of TRI Pointe and Weyerhaeuser have seen more sales than when the two companies operated separately, a big chunk of them in its home state.

The company reported 1,258 new home orders in this year’s second quarter, including 547 in California, where it operates as TRI Pointe Homes and as Pardee Homes, long one of Southern California’s most active builders and a former Weyerhaeuser unit that was based in El Segundo.

Pardee owned more than 4,000 home lots in San Diego County, among other assets, at the time of the 2014 deal, including over 1,000 lots at the Pacific Highlands Ranch development near Carmel Valley.

TRI Pointe has been selling some of those lots recently; last quarter it made $62 million from the sale of 102 lots at Pacific Highlands Ranch.

“We are continuing to unlock the value that was embedded in the homebuilding assets we acquired from Weyerhaeuser just over two years ago,” said Bauer, speaking after the company’s latest earnings call with analysts.

“This value will continue to be realized through our homebuilding activity with increased communities and deliveries, along with periodic land sales, as we bring several strategic land assets to market in both coastal and inland California,” he said.

TRI Pointe expects to sell between 4,200 and 4,400 homes this year with an average sales price of approximately $550,000.

It’s currently selling in 17 Southern California developments, including a pair of projects at Irvine Co.’s Orchard Hills, and two more at Rancho Mission Viejo LLC’s Esencia development. Two more sets of homes at the Parasol Park development at Great Park Neighborhoods in Irvine will open for sales next year.

The company brought in $624.8 million from home and land sales last quarter, up from $495.3 million a year earlier. Net income rose to $73.9 million in the quarter from $54.9 million.

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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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