Another Run at Phoenix
Weekley re-enters the market with acquisition of the bulk of local builder T.W. Lewis' lots.
Photo: Getty Images
David Weekley Homes, which entered the Indianapolis market in April, added Phoenix to its 15-market footprint in September. The company, via a cash and options deal, purchased most of the remaining home building lots from T.W. Lewis and will begin building in the market by the close of 2011, under the name T.W. Lewis Collection of David Weekley Homes.
"For us, it's a big brand plus," said CEO David Weekley. "We're very excited about what Tom [Lewis] and his team have been doing for 20 years, and that now we get to work with that to do good things for customers and partners, and see what happens. To me, the deal is each one of us squared, and we believe we're at the bottom of the market and we're going to have some real opportunity."
Weekley has had the Phoenix market in its sights for a considerable number of years and went so far as to buy into two parcels, set up a division, and build 14 homes, including models in the Estrella master plan, southwest of downtown Phoenix in 2006. However, after a brief two years in the market, Weekley exited amid the market tank in 2008.
Jim Rado, Austin, Texas-based area president at Weekley, said, "We know we can't pick the bottom, and we also know that if we wait for things to start picking up, the prices will be prohibitive for us to get back in. We weren't really looking to buy a company right now, but you could say that when the opportunity with Tom came along, we were opportunity-driven."
The deal fulfills two of Tempe, Ariz.- based T.W. Lewis Homes owner and CEO Tom Lewis' near-term goals: 1) a leadership succession plan, and 2) a welcome new source of access to capital to accelerate opportunities as the dig out from the housing recession takes hold. To date, Lewis, 62, has been the sole source of his home building operation's capital financing. Especially in a protracted brutal market, capital options have become increasingly critical. Lewis noted that his company paid off its land and housing debt in 2008 and 2009 and asserted that he's profitable on a run-rate basis now.
According to Lewis, details of the deal also include the following:
• David Weekley Homes acquires for cash about 42 lots across T.W. Lewis' 11 active communities in the Phoenix market.
• David Weekley Homes has assigned one of its executives to operate out of the Phoenix operation, serving as David Weekley Homes' division president, reporting through to area president Rado. The assignment's going to Jason Hill, up to now a project manager responsible for a big redevelopment project.
• Weekley enters into an option deal to take down about 120 lots across three additional parcels T.W. Lewis owns, where Lewis will serve as developer and land banker.
• Lewis said he's closing on yet another 30-lot deal in the master-planned community of Seville in Gilbert, and he plans to work as a land acquisition partner with Weekley and continue in an ongoing role as a land banker.
• Additionally, an office building that T.W. Lewis owns in Tempe and serves as the builder's headquarters will be part of a lease agreement, and the offices will now be home to David Weekley Homes' Phoenix operation.
T.W. Lewis, per Builder magazine, ranked 165 in 2010 in Builder's Next 100, with revenues of about $52 million on closings of 111 homes.
Lewis noted that his company will close about 100 homes in 2011, and "this deal will allow David Weekley to get a fast start, with about 100 closings in 2012."
Weekley's Rado confirmed that plans call for 10 to 15 home starts under the T.W. Lewis Collection by David Weekley Homes in 2011. "We plan to close about 100 homes in 2012, and our five-year plan is to close about 250 homes, because we believe that's where this market is going," said Rado.
Avila Advisors served as representative to Tom Lewis' interests in seeking a capital partner.
Earlier, in April, Weekley joined Indianapolis-based Estridge Homes' operations into David Weekley Homes, with principal Paul Estridge, another regional private builder with a strong reputation for customer care and quality. ?John McManus