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Wednesday, Jun 12, 2024

Franco Tenerelli: Forging Landsea’s Public Path

Homebuilder ' on the ground floor' of goals

Franco Tenerelli in 2016 joined Landsea Homes Corp. (Nasdaq: LSEA) as the first general counsel for the Newport Beach-based firm, which was created as the homebuilding arm of China real estate company Landsea Group.

It’s been full speed ahead ever since.

The company has forged its own path to become one of Orange County’s fastest-growing homebuilders, completing four major acquisitions, going public and surpassing $1 billion in revenue, with most of that growth taking place over the past two years.

“We really don’t have a peer that’s seen the tremendous growth that we have had in such a short period,” Tenerelli told the Business Journal. “We’re very much still on the ground floor of something really big.”

Landsea went public at the start of 2021, and now sports a market valuation around $226 million. It’s currently the most valuable publicly traded homebuilder based in Orange County.

Tenerelli was honored at the Business Journal General Counsel Awards on Nov. 10, in the Public Company category.

Fresh Take

Tenerelli joined Landsea from Pennsylvania-based luxury homebuilder Toll Brothers Inc. (NYSE: TOL), where he held a regional counsel position in the firm’s Orange office.

“I came from a Fortune 500 homebuilder, which was where Landsea aspired to be,” Tenerelli said. “We were a small company, but we were able to use that to our advantage to put our own stamp on the industry, and create something that could be around for generations.

“We had a fresh way of looking at the business, and we weren’t stuck doing something simply because it was the way it had been done for decades.”

Even then, Landsea had the goal of going public, and Tenerelli helped implement practices to prep for a future IPO.

Landsea had already established a board of directors to help with diligence and transparency, and Tenerelli soon became part of every single acquisition and land play opportunity to ramp up the firm’s financial standing.

The company, started by John Ho in Pasadena in 2013, has grown from a one-man operation with no revenue into a business that’s seen double-digit revenue growth over the past several years.

Part of that growth is due to its M&A strategy with four major homebuilder acquisitions since Tenerelli joined the firm, launching the firm into the Arizona, Florida and Texas markets.

SPAC Success

In 2019, Landsea saw an opportunity to go public with a special purpose acquisition company, commonly known as a SPAC.

“We were well financed at the time and going public via SPAC would allow us to go public pretty quickly,” Tenerelli said.

Then the pandemic hit.

“We needed to circle the wagons to make sure we could come out of this thing on top,” Tenerelli said.

The company made a pivot to focus on building entry-level and move-up homes, which paid off following a wave of new demand for such homes in 2020.

Landsea went public at the start of 2021, and Tenerelli’s day-to-day has changed a bit to focus on SEC accordance and emphasizing diligence efforts, but for the most part, much of his role is the same.

“There’s no one day that’s just like the next,” Tenerelli said.

Lot Supply

As the residential market slows in response to higher interest rates and inflation, Landsea finds itself in good footing with a “very large supply of lots that could carry us for the next several years.”

“We are not in a position where we have to buy, we can be opportunistic with our acquisitions and make sure we are getting the best price possible,” Tenerelli said.

Landsea owned 12,410 lots as of the end of September.

During the third quarter, Landsea delivered 543 homes at an average sales price of $601,000, contributing to a 57% increase in quarterly revenue to $335.6 million.

California generated 36% of the company’s revenue last quarter. Prior and ongoing local projects include IronRidge in Lake Forest; Lido Villas in Newport Beach; a 132-home project in San Juan Capistrano; a townhome project in Anaheim; and a 139-townhome community in Placentia.

Homes, Sports

In addition to its acquisition push, Landsea has aimed to set itself apart from larger homebuilders through its sustainability strategy, largely showcased in its High-Performance Home initiative, which focuses on energy savings, home automation and eco-friendly practices.

“These efficient homes are an example of how we are deliberate in our offerings,” Tenerelli said.

Outside of Landsea, Tenerelli has been on the board of directors for the Builders Industry Association for several years and also participates in Habitat for Humanity and the American Red Cross. He’s also heavily involved in the sporting activities of his two young children.

“I’m a board member for my daughter’s sports organization, and I plan to do the same for my son when he’s older,” Tenerelli said.

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