Tri Pointe IPO Could Set Pace for Builders

Tri Pointe IPO Could Set Pace for Builders

Orange County Business Journal
Mark Mueller
January 12, 2013

Tri Pointe Homes LLC in Irvine looks to be the first of several privately held home builders in the area that could tap the public markets to help fund land purchases over the next few years.

The company, formed in 2009 by a trio of former executives at Newport Beach-based William Lyon Homes, recently filed plans to raise up to $201.8 million in an initial public offering.

The Tri Pointe offering is being underwritten by Citigroup, Deutsche Bank Securities, FBR, JMP Securities and Moelis & Co. The company plans to list its shares on the New York Stock Exchange.

First Since May

The Tri Pointe IPO would be the first by an Orange County-based company since last May’s $124 million offering by Irvine-based action-sports retailer Tilly’s Inc.

There hasn’t been a homebuilder in the U.S. to go public via an IPO in nearly eight years.

OC’s only other publicly traded home builder is Irvine-based Standard Pacific Corp., although Miami-based Lennar Corp.—the country’s second-largest builder—runs much of its day-to-day operations out of its Aliso Viejo office.

A few more privately held builders in the area could follow suit with IPOs or other public-financing deals as they seek additional cash for land deals across California and other markets, according to Tom Reimers, California division president for land brokerage Land Advisors Organization.

“Public companies have been very aggressive buying land,” said Reimers, whose company’s Irvine office saw a sharp uptick in land sales across the state the past few months.

“Private companies are trying to be aggressive, too, but they may want to look to go public, which gives them access (to more funding),” Reimers added.

Proceeds from the Tri Pointe IPO would be used “primarily for the acquisition of land,” according to the company’s registration statement with the Securities and Exchange Commission.

The company is looking to invest only in land that can be developed within two to three years, “in order to maximize our returns on capital and minimize our exposure to market risk,” according to regulatory filings.

1,400 Lots

The company owned or controlled nearly 1,400 home lots across California and Colorado as of the end of September, according to SEC filings. Local projects it has in the works include sites in Huntington Beach, La Habra and Rancho Mission Viejo.

Chief Executive Doug Bauer told the Business Journal last year that Tri Pointe’s goal was to have the company building 1,000 homes per year within five years.

Officials for the company were unable to comment last week, due to quiet-period restrictions for companies that are preparing IPOs.

Tri Pointe is one of two builders that recently filed paperwork for a potential IPO; the other builder is Scottsdale, Ariz.-based Taylor Morrison Home Corp., whose Southern California operations are based in Irvine.

Taylor Morrison, which is looking to raise up to $250 million in its offering, said it currently owns or controls 812 lots in Southern California; Tri Pointe owns or controls 387 lots in the region.

Tri Pointe, like Taylor Morrison and a few other privately run builders in OC, currently is backed up by notable names in the private equity world, which could now see IPOs as a good way to cash out some of their investments.

Tri Pointe got $150 million in funding from an affiliate of Greenwich, Conn.-based Starwood Capital Group in 2010.

Starwood founder Barry Sternlicht is Tri Pointe’s chairman. Tri Pointe’s registration statement has not disclosed the ownership stake Starwood expects to keep in the company following the planned IPO.

Other fast-growing private builders in the area include The New Home Co. of Aliso Viejo and City Ventures LLC of Newport Beach, both of which were formed in 2009.

Investors

Investors in The New Home Co. include Toronto-based asset manager Tricon Capital Group Inc., IHP Capital Partners in Irvine and Santa Monica-based Watt Cos.

City Venture’s backers have included Los Angeles-based asset management firm Ares Management LLC and Imperial Capital LLC, both based in Los Angeles.

Neither The New Home Co. nor City Ventures have indicated immediate plans for an IPO, although market watchers said they both could be strong candidates for going public if Tri Pointe’s planned offering is received well by the market.

A specific time frame for completing the IPO has not been disclosed; reports earlier this month said the company was expected to begin pitching the offering to potential investors this week. Pricing terms of the IPO also haven’t been disclosed.

Ex-Lyon Colleagues

Along with Bauer, the former president and chief operating officer of William Lyon Homes, Tri Pointe’s executive team includes two other ex-Lyon colleagues: Mike Grubbs and Tom Mitchell, whose titles at Tri Pointe are chief financial officer and president, respectively.

Another former Lyon executive, Wade Cable, is expected to join the company’s board of directors following the IPO, according to Tri Pointe’s registration statement.

The builder has sold more than 350 homes since its formation. It had about $22.3 million in home sales for the first nine months of 2012, up from $9.3 million in the same period of 2011.

The company has sold close to 100 homes in OC since its founding, primarily in the Woodbury community in Irvine.