It didn’t take long for the top brass at Century Communities and Wade Jurney Homes to hammer out the details that culminated in the Colorado-based public builder purchasing a 50% stake in the Southeastern private builder on Tuesday.
The newly formed entity is called WJH, LLC.
Dale Francescon, co-CEO of Century, says initial talks began in late August, the contract was signed in early October, and everything was made official this week. It was a quicker-than-normal negation, he says, because Wade Jurney Jr., president of the Greensboro, N.C.-based company that shares his name, knew exactly what he wanted: a 50-50 split.
This is the first time Century has acquired less than 100% of a company, Francescon says, but the $15 million it paid for a 50% interest in WJH made sense. Down the road, he adds, there is path for Century to acquire all of WJH. “We’re keeping our options open,” he says. “We’ve obviously had those conversations and we have the ability to do that, but we’re very happy with the current arrangement.”
Century Communities and Jurney will share responsibility for all of WJH’s strategic decisions, with Jurney continuing to manage the day-to-day operations under the existing operating model. “He’s devised a really good business model, so we’re happy to have him continue to be the leadership and grow the business.” Francescon says.
The deal allows Century to expand its portfolio in the Southeast while offering a product targeted for entry-level buyers.
“They serve a buyer profile that we don’t serve within our Century brand,” Francescon says. “Their average sales price is $140,000; if you look at Century, ours in $350,000. We have very little product below $200,000. We do in Atlanta, but that’s a really small part of what we do. It was just a fantastic way for us have a significant share of a home builder doing over 1,000 units at a price point that’s doing very well right now.”
Wade Junrey sells exclusively to the entry-level market, with prices varying from $80,000 to the $200s across its five regions—Raleigh, Charlotte, and Greensboro/Triangle in North Carolina, the coastal Carolinas, and Southwest Florida. “What builders are offering, a lot of [millennials] can’t afford,” Jurney told Builder in the spring. “We’re the price leader in any market we go into. We’re really good at being able to compete with the resale market.”
Wade Jurney had 690 closings and $96 million in revenue in 2015 after 437 closings and $60 million in gross revenue in 2014. The progression earned Wade Jurney the title of Fastest Growing Private Builder of The Year in this year’s Builder 100 (No. 60 overall.)
“Wade has found a way to deliver a very affordably-priced product and part of it is there are no options available and that not only takes out costs, but reduces the build time so you can turn you inventory quite a bit faster,” Francescon says.
As of Sept. 30, Wade Jurney had approximately 3,949 owned and controlled lots and 309 homes in backlog representing a value of $42.7 million. For the trailing twelve month period ended on the same date, 2016, Wade Jurney closed 1,060 homes generating $148.2 million in revenue.
For Francescon and Century, Wade Junrey’s asset-light business model is appealing. “They have very little in the way of excess land on their balance sheet and so that’s very attractive,” he says.
In Atlanta, where Century is the second largest builder and WJH currently operates, Francescon says the two entities should work well together. “They’re going to be at a price point below where are,” he says. “We’re not going to be cannibalizing anything we have, but there’s going to be a certain economy that we can overlap in terms of, potentially, land purchases [and] referrals on land deals.”
Century ranked No. 21 in 2015 Builder 100, with $734 million in total revenue on closings of 2,401 homes. According to Francescon, this move will continue his company’s ascension in recent years: “We’ve been on a significant growth trajectory and that’s something we don’t plan on stopping.”