The calls weren’t just to wish the 30-year-plus industry veteran congratulations. The callers wanted to know what he planned to do with what was left of Orleans.
“We’re seeing some surprising interest from the nationals in the greater Philadelphia and New Jersey market,” says Laing, CEO of the Bensalem, Pa.–based builder. “I think there are a number of companies trying to grow into broader marketplace.”
Laing is a believer in the long-term stability of Orleans remaining in its original markets, but he understands there’s a limited number of players who would be tempted by the high-barrier-to-entry, sluggish Northeastern markets.
“Unless you’re in these markets, there is no one clamoring to get in,” Laing says. “A lot of people can’t see themselves as far north as D.C.”
Judging from the calls Laing received in July, public and private builders already in Pennsylvania and New Jersey have interest in Orleans’ land positions. For the nationals, it would be a contrarian play—a choice to invest their money in more mature markets versus hot, high-growth spots like the Carolinas and Atlanta.
Whether a deal comes to fruition is another question (it took 18 months for Orleans to move the Chicago and Carolina divisions).
But if it does, it will stand out in what has been a frenzied mergers-and-acquisitions environment in home building over the past few years, and not just because it could spell the end of the Orleans brand—a name synonymous with building in the Northeast since 1918. It also will be a win for burgeoning dealmaker Laing, who spent the bulk of the past two years dressing up Orleans for sale.
Finding a Suitor
After starting his career in 1983 at Tridel, a longtime Toronto high-rise builder, Laing landed at PulteGroup in 1993. The move shaped the rest of his career, and he worked with many people who became key industry players. Laing served a variety of roles, most notably head of operations and area president for Arizona before he left Pulte in 2008.
“I had all the fun I could handle,” he says. “So I took a year off and cattle ranched and rode horses.”
But he never fully disengaged from the business. He started home building consulting firm Laing Associates a couple of months after his departure from Pulte and joined the board of Dublin, Ohio–based Dominion Homes in 2009. The consulting business grew as owners of Atlanta’s John Wieland Homes and Neighborhoods signed on, and Laing brought on some former colleagues to help out.
Impressed by Laing’s work, Orleans’ owners—Strategic Value Partners of Greenwich, Conn., and Anchorage Capital in New York—asked him run the Pennsylvania firm, which emerged from bankruptcy in 2011, according to The Philadelphia Inquirer. “Originally I wasn’t interested in doing that, but they’re fairly convincing when they want to be,” Laing says.
After taking the reins on an interim basis in 2012, he moved into the role permanently in spring 2013. From the beginning, Laing knew what his marching orders were.
“My ownership group doesn’t buy these businesses to hold them for 20 years,” he explains.
In early 2014, as mergers and acquisitions were in high gear throughout the home building industry, it made sense for Orleans to test the market. But things didn’t work out. “We never found the valuation that we wanted,” Laing says.
So Laing looked inward to fix Orleans and make it more attractive for potential suitors. “We organized the company around being here for the next two or three years, preparing the company to be the best it could be,” he says.
The first order of business was to flatten the organization. “My background was operations,” he says. “If I have a lot of people between me and the field operation, I’m not at my highest effectiveness.”
In fall 2014, Orleans took about $2.5 million of annualized overhead out of the business, mostly pulling costs out of the corporate level.
“We were able to streamline the organization and get our overhead more in line with the market,” Laing says. “Now our overhead is in line with the industry.”
Laing decided to allocate more capital to the company’s Carolina (an M&A hub in this cycle) and Chicago divisions as he pulled resources out of Philadelphia (including mothballing some developments). Laing also notes he “upgraded” his division presidents in Raleigh, Charlotte, N.C., and Chicago by hiring industry vets Todd Lipschutz, Kevin Granelli, and Steve Atchison, respectively.
“The margins have been healthy and they’re taking full advantage of that,” he says. “That was the last piece of the puzzle.”
After the changes, Laing says Orleans’ core operating metrics improved with better cycle times and cost control. It also took longer land positions.
“Enterprise value is a key component for our owners,” Laing said in April. “We’re tying up a lot of longer-term, bigger parcels of land that we can entitle to bring to market in 2017 and 2018.”
A Long Process
While Orleans didn’t find a partner in 2014, that doesn’t mean Laing didn’t get a chance to play the M&A game. He was the lead director in the sales process for Dominion last year. Pulte, Laing’s former employer, eventually bought the Ohio builder.
“I learned a lot,” Laing says of the Dominion sale. “At Pulte, I had been on the buy side with acquisitions, and I understood it from that side. I hadn’t been on the sale side until Dominion.”
Part of Laing’s education was meeting key lawyers and bankers who would help him when it was time to sell Orleans. As it turned out, it wouldn’t take three years to sell pieces on the venerable Pennsylvania builder. In early 2015, Laing and Taylor Morrison President and CEO Sheryl Palmer, a longtime acquaintance from their Pulte days, began to talk about Taylor Morrison buying the Carolina and Chicago divisions.
“I’ve known Alan for 15 years, and have always been impressed with his best-in-class leadership skills, operational disciplines, and strategic thinking,” Palmer says. “Alan has a keen understanding of the home building business and the market in general, and that has allowed him to be a very successful leader and operator.”
In July, the discussions, which CFO Gray Shell played a major role in, culminated with a sale. Taylor Morrison bought the Charlotte, Raleigh, and Chicago operations and home building assets of Orleans Homes for $166 million. At the time of the sale, those divisions—consisting of 24 communities and approximately 2,100 owned and controlled lots—represented more than half of the Orleans Homes portfolio
“It fit perfectly for us,” Laing says. “They were the buyer of choice. They weren’t in those three markets, and they wanted to be in them.”
Taylor Morrison wasn’t in the original 2014 talks. “Alan and I have stayed in touch over the years, so in subsequent discussions we revisited the opportunity to break up the Orleans portfolio and were able to secure an exclusive opportunity for three of his markets,” Palmer says. “It was really just the right time for both parties as the transaction allowed Taylor Morrison to add operations in three high-growth locations with quality talent and product, while at the same time allowing for the existing Orleans investors to receive a financially sound exit.”
That leaves Orleans with eight active communities and 718 lots in Pennsylvania, New Jersey, and New York. Quita Syhapanya, Metrostudy’s regional director for the Northeast isn’t surprised buyers are interested in these lots. “Some of their land positions are in good markets,” he says. “They have a good amount of land that is still valuable that they could sell off to potential developers or builders.”
Laing is keeping his options open. “We’re going to weigh out all of our options and, in the worst case scenario, we’ll continue to run the business,” Laing says. “But if we get the right valuation for the shareholders and employees, we would sell it.”
If Laing successfully winds down the 97-year-old brand, he’ll be out of a job, but that doesn’t seem to bother him.
“I’ve grown fond of the hedge fund world,” he says. “Despite their reputation, I like them.”
He also could move to a C-suite job with a builder—or he could revisit what he did when he left Pulte in 2008. “I may just go ride horses again,” Laing says. “I don’t really have any plans.”