TRI Pointe Group Inc. has embraced a business-as-usual, California-first approach to its operations following its recent breakup with former majority stakeholder Starwood Capital Group Inc.
What’s more, business is good, say executives of the Irvine-based homebuilder.
Starwood, a Greenwich, Conn.-based private equity firm, in March sold remaining holdings in TRI Pointe, which were valued at about $150 million, and two Starwood execs left the company’s board, including Chairman Barry Sternlicht.
It wasn’t an amicable departure.
Starwood released a curt statement at the time of the stock sale, saying its decision “to exit its stake was due to its ongoing disappointment in the performance of the company over the past several years, [and] lack of confidence in the strategic direction.”
Starwood first invested in the builder in 2010, putting about $150 million into what was then an early-stage company and initially taking a more than 80% stake in it. TRI Pointe, which went public in 2013, now has a $2 billion market value.
TRI Pointe executives have a different take on the situation, based on statements made during the company’s latest earnings call in late April.
Starwood’s actions in “no way alters our outlook for the company, nor does it change our confidence and our ability to execute” on the company’s goals, Chief Executive Doug Bauer told analysts on the call.
“Our senior management team, with full support of our board, remains as excited as ever about the future of TRI Pointe Group, and we are confident that we have the right talent, strategy and leadership in place to enhance shareholder value over the long-term,” he said.
The company reiterated its full-year guidance and said it expects to sell 4,500 to 4,800 homes this year at an average price of $570,000.
Its stock, whose performance Starwood criticized when it exited, has been somewhat volatile since the private equity firm announced its planned stock sale. Shares are off by about 4% since then, although it’s still up about 7% for the year.
Analysts who cover the company have placed an average one-year target price for its stock of $14.59, according to data from Thomson Reuters. Its stock now sells at $12.40, or roughly 15% below that.
The TRI Pointe chairmanship, previously held by Sternlicht, is now held by another private equity executive, Steven Gilbert, who heads New York-based Gilbert Global Equity Partners LP.
Local Focus
The builder has made one clear change to its operations following Starwood’s departure: It’s putting more emphasis on its homebuilding operations in California, where a majority of its sales already take place and where about 59% of its 29,000 lot holdings are.
Last month it started to emphasize an initiative it says is designed to “unlock the value of our longer dated assets in California,” in particular large land holdings in Southern California outside of Orange County.
TRI Pointe said in a statement that it “has made significant strides” bringing some of the assets to market, including a 498-home community in Los Angeles County’s Santa Clarita Valley that opened for sales in February, and a 456-home development in Lake Elsinore in Riverside County that opened last year.
It’s developing four other large-scale projects in Los Angeles and San Diego counties and the Inland Empire that would have over 7,000 homes between them upon buildout.
“Our goal is to continue to shorten the duration of our land pipeline” by accelerating sales at these assets in California, said TRI Pointe Chief Financial Officer Mike Grubbs on last month’s analyst call.
Six of the 14 new communities the company opened last quarter were in California.
It sells in the state under the Pardee Homes and Tri Pointe Homes brands. It bought Pardee Homes as part of 2014’s purchase of the homebuilding division of timber conglomerate Weyerhaeuser Co., a $2.8 billion deal that gave it considerable land holdings in California.
Pardee’s “longer dated” assets make up the bulk of the sites where TRI Pointe plans to ramp up development in Southern California. It delivered nearly 300 new homes to buyers in the region last quarter, including 22 in OC, according to its most recent quarterly report from April.
It has a dozen local projects open or in the works, including sites at Irvine’s Orchard Hills and Rancho Mission Viejo’s Escencia communities, and stand-alone projects it’s leading in Anaheim and Buena Park.
The builder owned 627 home lots in Orange County as of the end of March, according to regulatory filings.
