Improving fortunes in the housing market and a disciplined operating plan have provided a boost to the fortunes of William Lyon Homes Inc. during its return to the public markets.
The Newport Beach-based homebuilder tops the list of the fastest-growing large companies in Orange County based on this week’s Business Journal list.
The company, which went public via an initial public offering in May 2013, posted revenue of $1 billion for the 12 months ended June 30. That’s an increase of 145% over the $415.5 million in the same period two years earlier.
The builder, which trades under the ticker symbol WLH on the New York Stock Exchange, sells its homes in California, Arizona, Nevada, Colorado, Washington and Oregon. Notable local projects it’s involved in include the Grand Monarch, a high-end project in Dana Point next to the St. Regis Monarch Beach, and Esencia, the latest development at Rancho Mission Viejo.
The revenue growth comes in a market for new-home sales that executives now describe as “healthy” and internal sales metrics that hark back to the last housing boom.
“The combination of our substantial backlog, healthy sales pace through the (first) half of the year, and our increased community count gives us confidence that 2015 will be another successful year,” Bill H. Lyon, the company’s vice chairman and co-chief executive, told analysts during the company’s latest earnings call.
Backlog
At the end of the second quarter, the builder’s backlog of 968 homes under contract but not yet closed was valued at $471.5 million.
That’s the highest backlog value since the third quarter of 2006, said Lyon, the son of company namesake and founder Gen. William Lyon, who now serves as the company’s executive chairman.
Mid-2006 was when the elder Lyon engineered a privatization of the then-publicly traded company, paying about $275 million to buy roughly 25% of company that he didn’t already own. The deal valued William Lyon Homes at about $950 million.
The subsequent housing downturn took its toll on the company, which cut back its operations and had a short stint in bankruptcy but was able to stay in business, unlike numerous builders.
A 2012 recapitalization resulted in several private equity firms—including Colony Capital LLC in Los Angeles and New York-based Luxor Capital Group LP and Paulson & Co.—taking large stakes in the builder.
The 2013 IPO raised about $217 million and was one of three within a year involving an Orange County-based homebuilder, along with TRI Pointe Group Inc. in Irvine and Aliso Viejo-based New Home Co.
The three builders have taken different strategies following their IPOs.
TRI Pointe engineered a $2.8 billion buy of the homebuilding division of Federal Way, Wash.-based timber conglomerate Weyerhaeuser Co., a deal that vaulted the young company to become one of the country’s 10 largest builders.
New Home Co., on the other hand, has continued to be a California-centric builder, with OC’s high-end housing market providing a large source of its business.
William Lyon Homes has largely remained a West Coast builder since going public but expanded its reach in mid-2014 through a $520 million buy of Polygon Northwest Co., a Bellevue, Wash.-based builder.
The deal gave it a presence in the Pacific Northwest.
“It’s a market we’ve looked at for a number of years,” William Lyon Homes Co-Chief Executive Matthew Zaist said at the time the deal was struck. He was promoted from the president’s position this past July.
Consolidation is building nationally and remains a key strategy for many of the country’s largest builders.
Irvine-based Standard Pacific Corp., for example, this month completed its merger with Westlake Village-based Ryland Group Inc., creating the fourth largest builder in the U.S. by revenue, with about $5.2 billion in combined annual sales and 76,000 home lots under its control.
William Lyon Homes, by comparison, has about 18,000 home lots under its control.
Standard Pacific ranked as OC’s second fastest-growing public large company, according to this week’s list, which included earnings data for the company prior to the completion of its merger with Ryland in early October.
Standard Pacific now operates under the name CalAtlantic Group Inc. and continues to be based in Irvine. Its $4.9 billion market value compares to $668 million for William Lyon Homes.
Analysts have broached the idea of William Lyon Homes following in the steps of TRI Pointe or Standard Pacific in being either a more nationally focused builder through acquisitions or by being acquired itself.
“At the end of the day from a business standpoint, our first goal is to continue to execute on our growth plans,” Zaist said during the company’s latest earnings call in response to a question regarding potential acquisition deals.
“We think we created a tremendous amount of shareholder value by executing and monetizing what we think is a really good supply of existing communities and future communities.”
William Lyon earned about $42 million in net income in the 12 months ended June 30.
“That said, we will always sit down and look at all opportunities,” Zaist said, “whether that means we go out and enter a new market through an acquisition, like we did with Polygon, or if there was something that we felt was in the best interest to all of our shareholders on the other side of a transaction.”
