Expect a larger headquarters in Irvine but not much else in the way of local changes at TRI Pointe Homes Inc. following its audacious buy of the homebuilding division of Federal Way, Wash.-based timber conglomerate Weyerhaeuser Co.
The $2.8 billion cash-and-stock deal, announced in November, closed last week and immediately propelled TRI Pointe toward the top ranks of the homebuilding industry.
The company, which was formed in 2009 and went public early last year with only a few hundred home sales to its name, could soon be among the country’s top 10 builders in terms of sales.
“We expect to grow each of our brands,” said TRI Pointe Chief Executive Doug Bauer. “We’re going to have some fun now.”
TRI Pointe is already a top 10 company locally. Its market capitalization stood at a little more than $2.5 billion last week following the completion of the acquisition, placing it ninth among public companies based in Orange County in terms of market valuation.
It was previously valued at about $480 million.
Adding Pardee Homes
TRI Pointe bought five homebuilders from Weyerhaeuser that build in Arizona, California, Washington, Nevada, Texas and Washington, D.C.
The largest of the units is El Segundo-based Pardee Homes, long one of Southern California’s more active builders.
Pardee recently ranked among the top five builders in San Diego and Los Angeles. It also builds in the Inland Empire and Las Vegas.
The Weyerhaeuser units combined were the 16th largest homebuilder in the U.S. last year, with nearly 3,000 sales, according to Builder Magazine. TRI Pointe reported 396 home deliveries last year.
Each of the six builders is now poised for growth, especially now that TRI Pointe will reinvest cash directly in those companies’ operations. That wasn’t necessarily the case under Weyerhaeuser, according to Bauer.
“We’re already looking at new land deals” following the purchase’s closing, he said. The closing took about eight months to wrap up because of lengthy regulatory reviews of the purchase.
Weyerhaeuser shareholders now own about 80% of the combined companies, and TRI Pointe’s existing shareholders—including Chairman Barry Sternlicht, founder of investment giant Starwood Capital—own the rest.
Bauer and the other members of TRI Pointe’s existing management team—Chief Financial Officer Mike Grubbs and President Tom Mitchell—now run the combined businesses, and top executives with the Weyerhauser units now report to them.
Pricing
Pricing for homebuilders and home lots has been on the rise since the TRI Pointe-Weyerhaeuser deal was announced.
The nearly 27,000 lots TRI Pointe bought in the deal were valued at about $100,000 each in the transaction.
By comparison, a $520 million deal struck last month by William Lyon Homes in Newport Beach to buy the residential building business of Bellevue, Wash.-based Polygon Northwest Co. valued the land it was buying at nearly $124,000 per lot.
There’s little sign of a slowdown in land prices or home sales, Bauer said.
“My personal feeling is that housing still has several years of growth,” he said. “Job growth and the economy are not going gangbusters, but it’s not slowing down.”
The plan is to run TRI Pointe and the former Weyerhaeuser units under their current names.
That’s expected to result in TRI Pointe and Pardee Homes simultaneously selling homes in the same Southern California developments.
“They’re all strong homebuilders with strong names,” said Bauer, who said his goal for the next couple of years is to focus on “operational excellence.”
The deal’s closing is resulting in hiring of an undisclosed number of employees at TRI Pointe’s Irvine headquarters, where the company is beefing up its accounting and systems departments as part of the acquisition. It had about 150 employees before the Weyerhaeuser deal and now has closer to 900.
TRI Pointe is also planning to grow its financial services operations and considering a new division to handle mortgages, insurance and escrow services.
Larger headquarters will help with the extra staffing. TRI Pointe is based at the 19520 Jamboree Road office at the Impac Center complex near the Irvine and Newport Beach city line. It leases about 17,000 square feet at the building, which once held the headquarters of defunct builder John Laing Homes.
In a few months, it will expand into another office at the same campus, at 19540 Jamboree Road, taking over 20,000 square feet vacated by Google Inc., which is moving to a newly built, 140,000-square-foot office at the Impac Center.
TRI Pointe will also keep its existing office, according to regulatory filings.
