Behind all the takeover drama and stock gyrations is a story of heady growth at Newport Beach’s William Lyon Homes Inc.
The homebuilder has expanded thanks to its work in three of the hottest markets in the country: Orange County, Las Vegas and Phoenix.
OC alone has seen double-digit price gains in home prices in recent years, though the price escalation is slowing of late.
The hot housing market helped William Lyon post annual revenue growth of 266% in the three-year period ended June 30, versus $1.8 billion in revenue for the past 12 months.
The company ranks No. 6 on this year’s Business Journal list of fastest-growing companies. It took the No. 8 spot on last year’s list.
William Lyon’s profits also have ballooned. As of June, the company’s 12-month net income was $190 million, up 350% from $42 million three years earlier.
The company has benefited from Chief Executive William Lyon’s longstanding ties with the largest landowners here, including The Irvine Company and Rancho Mission Viejo LLC.
Most of the company’s homes are built in California, which has led the national housing boom.
Whether the growth will hold is an open question.
Some investors are worried about companies such as William Lyon with heavy exposure to markets that may be at or passed their peaks.
William Lyon’s latest new home orders,or contracts to buy homes being built,fell short of expectations. The homebuilder said it received orders for 834 homes during the three months ended Sept. 30, up 27% from a year ago but 91 short of what one analyst had in mind.
San Francisco’s JMP Securities LLC is the only company that follows William Lyon, which is majority owned by Chief Executive Lyon.
William Lyon’s third-quarter orders were up in California and Nevada. Arizona dropped 39% to 118 homes versus a year earlier.
JMP, which has done investment banking for the builder, downgraded its rating on William Lyon shares to “market outperform” from “strong buy.”
JMP initiated coverage of the builder in July with a “strong buy” rating.
The downgrade and new home orders sent the builder’s stock freefalling. Last week it traded around $110, down 27% from the peak of $165 last month.
Still the stock is way up from late April, when Lyon said he wanted to buy all of the shares he doesn’t already control and take the company private.
His offer was $82 per share, about a 10% premium over the stock’s price then. The stock instantly began trading upward as investors bet Lyon would match them.
A special committee of board members rejected Lyon’s offer as inadequate. Lyon later withdrew it, saying he had expected more input from the special committee, such as a counterproposal.
Four board members promptly resigned, including James Dalton, William McFarland, Michael Meyer and Randolph Westerfield.
They said they disagreed with the statements by Lyon that the special committee had restricted its investment banking firm from engaging in any meaningful dialogue and that they had concerns about the July 25 board meeting at which the special committee was disbanded.
Earlier this month the company named three new board members, including former Irvine Co. executive Gary Hunt. He’s a managing partner of California Strategies LLC, a lobbying firm in Newport Beach.
Harold Greene and Arthur Laffer also were named to the homebuilder’s board.
Greene most recently served as the managing director for Charlotte, N.C.-based Bank of America Corp.’s California commercial real estate division. There he managed an investment portfolio worth $2.6 billion.
Laffer, known for his supply-side economic theory, founded Laffer Associates in San Diego. He provides economic research and global investment research consulting services to real estate asset managers, pension funds, financial institutions and corporations.
THE NUMBERS
Employees: 914
Market value: $960 million
3-year sales growth: 266%
Annual sales through June 30: $1.8 billion
Annual net income: $190 million
Company: homebuilder
