Despite six and half months of new-home inventory, Phoenix is a hive of new business activity. California-based Frontier Homes started delivering its first homes in the outer edges of the market in February, after snatching up roughly 450 home sites from bankrupt builder Turner-Dunn Homes in late December. In May, Canadian builder Mattamy Homes started selling homes at its first Arizona community in Pinal County. And although John Laing Homes is still looking for land in the Phoenix market, David Walls is in place as head of the new start-up division.
Quickly following the launch of the new operation in Phoenix, John Laing Homes also breaks into the Houston housing market with the purchase of Lindenwood Homes. Closing 76 homes in the market in 2006, Lindenwood currently has five projects in various stages of development.
Despite its relatively small operations today, Jeffrey Herrmann, vice president of corporate development, says he expects to be able to grow the new Houston division quickly, mainly thanks to the management expertise of Lindenwood owner Jim Lemming, who will remain as division president. "We hope to do 750 homes a year [in Houston] in four years, by 2010," Herrmann says, noting Houston will be a platform for expansion into other Texas markets. Next on the map is likely to be Seattle, where Hermann says the company is ripe to do an acquisition.
Melbourne, Fla.-based Mercedes Homes also plans to move into Houston, with three communities underway by this summer. The new operation would be a complement to its other Texas operations in Austin, Dallas, and San Antonio.
Also in Texas, Wall Homes buys rival Newmark Homes' assets in the Dallas-Fort Worth area from Florida-based TOUSA. The deal more than doubles Wall's local business, which industry estimates put in the ball park of $44 million in revenue last year.
Chicago is another market attracting some new players. After two years of due diligence, Ohio-based M/I Homes enters the market while local developer Ronald Benach revives the Lexington Homes name. Benach previously owned 3H
Although these bubbles of expansion activity continue to surface, a weak housing market is likely to prevent a boil similar to 2005's furious period of growth and acquisition. Moreover, against the backdrop of troubled deals such as TOUSA's joint venture to acquire the assets of Transeastern Properties, Hovnanian Enterprises' purchase of First Home Builders, and Meritage Homes' buyout of Colonial Homes, builders appear to be proceeding with caution. The deals are smaller and start-ups appear a viable strategy to protect against sliding land values. –Sarah Yaussi
Carl Icahn's Latest Move
The salty salvos between WCI Communities' executives and the famous and often infamous financier Carl Icahn continues with another volley of filings with the Securities and Exchange Commission.
In a letter to the WCI board of directors, Icahn accuses the board of both dragging its feet to delay a sale of the company and blocking him from participating as a potential buyer in any sale. He asks to postpone the company's June 15 annual meeting for up to 30 days so that the sales process can be consummated. The meeting also includes a directors' election, for which Icahn has put up his own slate of directors for consideration. (Check out an excerpt from Icahn's letter below.)
Simultaneously WCI files information from an investors' presentation charging Icahn with trying to gain control of the company without paying a premium for it. The presentation also asserts that Icahn was invited "to fully participate in the sale process, including accessing private company documents, but the Icahn Group declined."
And so goes the back and forth between the two companies that has been raging since last December, when Icahn contacted the company suggesting he help find ways to increase its value. He then ratcheted up his stock ownership to 14 percent, proposed to replace the existing board with his own chosen members, and tendered an offer to pay investors $22 a share for their stock in an effort to gain control. Icahn has since let the tender offer expire but remains focused on getting his own line up of directors elected during the annual meeting.
In response, WCI enacted a poison pill provision and, later, put the company up for sale, saying it would entertain offers from Icahn as well as other comers, treating all equally. Sources confirm other interested buyers are on the prowl.
"The board believes that certain potential buyers could realize significant potential synergies in connection with any transaction with the company," WCI's presentation says.
At the same time WCI wrestles with Icahn, it continues to struggle with a market that has hit it especially hard, largely because of its strong concentration in the Florida market and in high-priced, high-rise towers, where buyers have cancelled closings at an unprecedented rate. The company is heavily reliant on closing $1 billion worth of towers this year to help bring down its high debt ratio and stave the bleeding.