M.D.C. buys in.

By Iris Richmond

With its purchase of the WL Homes operations in Salt Lake City and Las Vegas, M.D.C. Holding's plan to double in size by 2007 gains momentum. The assets acquired consist of more than 2,400 lots purchased or optioned. The transaction marks the builder's entry into Salt Lake City.

"We generally do not do outright purchases of companies," says CFO Gary Reece, explaining the firm's strategy of not taking over debt and other potential negatives. "You can always perform due diligence, but I'm not sure that you can ever do enough to be certain there aren't hidden liabilities."

WL Homes closed 168 homes in Salt Lake City and 353 homes in Las Vegas last year. Reece expects the transaction to be accretive to the Denver-based company's earnings in 2003.

"These two [sales] were part of our long-term strategic plan to shrink the company, which began when we undertook the management buyout last July," says Larry Webb, CEO of WL Homes based in Newport Beach, Calif.

The company declined to elaborate on details of the negotiated price. Reece says the transaction should increase M.D.C.'s debt-to-capital ratio by no more than 5 percentage points, leaving its "balance sheet strong enough to make more acquisitions in the near future."

Las Vegas Market Share

The purchase of WL Homes' assets will move M.D.C. from 10th to third in the Las Vegas market behind KB Home and Pulte Homes, who, together, lead with 22.8 percent of the market share.

Closed Units 2001
KB Home 3,141
Pulte Homes 2,323
American West Homes 1,042
Pardee Homes 903
D.R. Horton 848
Astoria Homes 819
Lennar Corp. 792
Woodside Homes 728
Beazer Homes USA 724
M.D.C. Holdings 679
Source: BUILDER Magazine

Published in BIG BUILDER Magazine, June 2002