RESIDENTIAL
Gen. William Lyon quietly has tightened his grip on the publicly traded homebuilder that bears his name.
Earlier this month, Lyon and a trust fund tied to him bought nearly 1 million shares of Newport Beach-based William Lyon Homes Inc., according to filings with the Securities and Exchange Commission.
Lyon, chairman and chief executive of William Lyon Homes, now controls about 6 million shares, or 60% of the company’s outstanding stock.
On Jan. 7, Lyon bought 655,569 shares from investment firm Bricoleur Capital Management LLC for $44 million, or $67 per share.
That same day, William Harwell Lyon Separate Property Trust bought 331,437 shares from Bricoleur for $22 million. William Harwell Lyon is William Lyon’s son. The general retains voting rights of shares owned by the trust.
Last week, shares of William Lyon Homes were trading at about $80 with a market value of $800 million.
With notable candor, a filing by Lyon states he bought shares as an investment and “to provide him with greater voting control with respect to the election of the members of the board of directors.”
Lyon is bucking a trend among public companies. Activist shareholders and the SEC have been chiming for greater independence on boards.
But William Lyon Homes is a relatively small company and most of its shares long have been owned by Lyon, company officers and a few big investors.
The company’s share price shot up 25% the week after Lyon’s big buy, reflecting the stock’s relatively small float.
William Lyon Homes has about 10 million shares outstanding, though only about 4 million are available for trading.
To pay for the shares, Lyon and the trust took out interest-only loans from Anaheim-based Freemont Investment & Loan, the main unit of Santa Monica’s Fremont General Corp. The loans mature two years from now.
The homebuilder has seen sales and profits rise along with the stellar housing market of recent years. But William Lyon Homes recently reported a 35% drop in orders for new homes in the fourth quarter, citing a lack of homes available for sale and fewer sales locations.
William Lyon Homes also cited “slower sales in certain of the company’s markets.”
Executives with the company and other homebuilders previously have said buyers in OC are getting sticker shock from high prices.
William Lyon’s new home orders for the quarter fell to 493 from 761 a year earlier, the company said. For 2004, orders fell 2% to 3,371.
Dubious Housing Honor
Normally, ranking in the top five is a good thing. But not when a list goes from worst to best.
Orange County is the fourth worst region in the nation for housing affordability, according to the Wall Street Journal and Economy.com.
A family in OC earning the county’s median income can afford 55% of a median-priced home here.
The three markets ranking higher (meaning affordability is lower) all are in California: Santa Cruz-Watsonville, San Diego and Salinas, which tops the list at 49%.
OC’s affordability is down 16% from early 2003. That’s bad, but the worst decline was in Las Vegas, where affordability dropped 42% during the same timeframe.
In Las Vegas, a family earning the median income can buy 91% of a median priced home.
The Journal also noted, as I often have, that declining affordability is spurring buyers into riskier loans.
Last year in the county, 53% of loans taken out to buy homes were interest-only loans, according to San Franciso’s LoanPerformance, which was tapped for research by the Journal.
With interest-only loans, homebuyers pay only the interest on a home mortgage. Such loans offer dramatically lower monthly payments, at least at the start, but can be riskier if the underlying mortgage rate is adjustable.
Some of the nation’s most affordable markets are in New York,though far from Manhattan. They include Buffalo-Niagra Falls, where a median income family can afford 289% of a median priced home, and upstate’s Elmira,the most affordable market in the country,at 334%.
COMMERCIAL
Irvine’s Sares-Regis Group paid $17 million for 27 acres in Industry.
Toledo, Ohio-based glassmaker Libbey Inc. sold the property, which it has used for manufacturing for some 40 years. The company plans to wind down its operations this year.
Libbey plans to raze its plant and deliver the land to Sares-Regis. The developer could start putting something up in early 2006.
“We’re considering several options for the land,” said Larry Lukanish, Sares-Regis’ vice president of commercial investment.
Possibilities include building up to eight industrial buildings on speculation, or doing a build-to-suit building.
Whatever is built on it, the site is good for 490,000 square feet, according to the company. The site is on Old Ranch Road next to another 12-acre parcel that Sares-Regis bought from Libbey in 2002.
On the smaller site, Sares-Regis built and sold two industrial buildings totaling 260,000 square feet at the corner of Old Ranch Road and Ferraro Parkway.
