An audacious acquisition of a much larger competitor could soon result in Irvine-based TRI Pointe Homes Inc.—a 4-year-old developer with about 500 home sales to its name—becoming one of the country’s 20 largest builders.
TRI Pointe—which in January became the first U.S. homebuilder to go public via an initial public offering in nearly eight years—is said to be in advanced discussions to buy the homebuilding division of Federal Way, Wash.-based timber conglomerate Weyerhaeuser Co.
The Weyerhaeuser unit owns about 27,000 home lots on a consolidated basis and sold about 2,300 homes last year for about $1.07 billion in revenue. It has five homebuilders in its portfolio, including El Segundo-based Pardee Homes, long one of Southern California’s more active builders.
Pardee has projects under way in Los Angeles, Ventura and San Diego counties, the Inland Empire and Las Vegas.
The company’s other builders include Scottsdale, Ariz.-based Maracay Homes; Quadrant Homes in Bellevue, Wash.; Houston-based Trendmaker Homes; and Winchester Homes of Bethesda, Md.
A report last week in Reuters put an estimated sale price at about $2.7 billion—or $100,000 per home lot.
Other builders also are said to be in contention to buy the Weyerhaeuser portfolio, including Canada-based Brookfield Residential Properties Inc. and Scottsdale, Ariz.-based Meritage Homes Corp.
TRI Pointe is believed to be aggressively pursuing the Weyerhaeuser unit, leading some local real estate sources familiar with the discussions to speculate that it could close a deal in coming weeks.
TRI Pointe executives had not responded to requests for comment as of presstime.
Weyerhaeuser said in June that it planned to explore a potential sale of its homebuilding division. There hasn’t been a builder sale valued in excess of $1 billion that’s been reported in about four years.
“Given the improving fundamentals of the housing market, we believe now is a prudent time to explore strategic alternatives for this business,” Weyerhaeuse’s recently retired Chief Executive Dan Fulton, who ran the homebuilding division before taking the reins of its parent in 2008, said in June.
Trade publication Builder Magazine ranked Weyerhaeuser Co.’s real estate division as the 18th-largest builder on its most recent list of the largest 100 builders in the U.S.
TRI Pointe didn’t make that list, as it has been ramping up operations in California and Colorado over the past year. It reported 131 new home orders for the quarter ending June 30, up from 38 orders in the same quarter a year ago.
The company now lists 20 residential developments under way in California and Colorado, including three in Orange County.
Filings with the city of Irvine’s planning commission also show the company listed as one of the builders tapped for Newport Beach-based Irvine Company’s upcoming Orchard Hills community, a high-end development scheduled to open next year in North Irvine.
The company’s recent growth has come on the resurgent housing market, with a boost from the $233 million it raised in its IPO, as well as the backing of its chairman, Barry Sternlicht.
Sternlicht’s Starwood Capital, which has about $20 billion of assets under management, invested $150 million in TRI Pointe in 2010 and is the company’s largest shareholder.
TRI Pointe currently has a market value of $500 million. Its shares were up about 10% last week on news of the potential deal with Weyerhaeuser.
Specifics on how TRI Pointe would finance the potential purchase of a much larger competitor haven’t been disclosed.
National reports suggest that Weyerhaeuser wants to structure the deal as a “reverse Morris trust” transaction in an effort to reduce taxes.
That type of acquisition would require Weyerhaeuser to spin off the assets it wishes to sell into a subsidiary, which would then be merged with TRI Pointe.
A deal would place TRI Pointe much closer to Irvine-based Standard Pacific Corp. in terms of national size—at least for now.
Standard Pacific—long the largest homebuilder based in Orange County—ranked No. 12 on Builder Magazine’s 2012 list, with about 3,300 sales bringing in $1.28 billion. It had a recent market value of about $3 billion.
Standard Pacific could also have its own mega deal in the works.
In early September, The Wall Street Journal reported that the builder was one of at least three companies in the running to buy Beverly Hills-based homebuilder Shapell Homes.
A purchase price in the $1.5 billion range is reportedly expected for privately held Shapell. The company is said to own about 5,000 home sites in California and has a project in the works in Yorba Linda.
Other builders in the running for Shapell were said to be Horsham, Pa.-based Toll Brothers Inc. and Brookfield Homes.
TRI Pointe also was reported to have taken a look at buying Shapell, but is not believed to be in the mix to acquire the company anymore.
