That's at least three turns of Texas' boom-and-bust housing cycle roulette wheel.
So, Horne knew early last year that his options had shrunk. No matter that Wilshire had a strong name in Austin and San Antonio, and a strong name among partners, financial and otherwise. He was selling homes—he could take the contracts to the banks—but they were done fronting builders the funds to build. Without financing to go vertical, Horne and Wilshire might simply have been one of the industry's countless casualties, more of which we'll witness in 2011.
Horne dialed up dealmaker Tony Avila and asked him and his company “to start a process.” The process drew interest from public builders, private equity funds, and at least two private home builders. It reached its conclusion in late March. Ed Horne—and three of the four lenders involved in Wilshire Homes' capital lines—agreed to have McGuyer Homebuilders, Inc./MHI Partnership, Ltd., acquire the assets, the operations, the brand, and the dynamo that is Horne himself to help the combined companies reach a new competitive level in San Antonio and Austin.
Making the two one in those two markets may give Austin and San Antonio a new Top 10 home builder in each. Clearly, where home building is showing even the faintest signs of resilience, the competition is cutthroat, the buyer pool can be lured out of apartments, and the opportunities to jockey forward in position come few and far between. For MHI, this one was bona fide. It offered the company an add-on operation that for all intents and purposes seems cut of its own cloth. Horne and the Wilshire name have deep-rooted equity among home buyers and their friends, among trade partners, perhaps most important as prices continue to reset lower—developers and land sellers.
What MHI got was a name it could love, a human face to it, a set of relationships that came with both the Wilshire name and Horne, and an operational approach that speaks essentially of flexibility, scalable semi-custom home building. For Horne and most of his Wilshire team, it was a company that bought their program as well as their assets.
The deal encapsulates three ideas of the moment that we're seeing happen in different ways in the home building market: 1) private home builders—by being able to act decisively—can outmaneuver public builders at one of the more critical challenges, which is seizing the right land assets for the right price; 2) the ongoing viability of the private home builders is taking shape even as publics become dominant in the volume game—if a private is positioned and segmented to meet needs that a public can't, it can grasp a foothold on a future; and 3) sometimes, given the fact that home building companies are personality-driven ventures where pride, passion, and an instinctual sense of purpose play a huge part, deals revolve around more than dollars.
Like this one. If dollars alone mattered in the outcome, a public home builder might well have dangled the most cash, and seller Horne may have taken it and prepared to turn his company over and get ready to spend more time fishing, sooner or later.
But in Texas, home building's truly a breed of its own. From DFW-based world-dominator D.R. Horton to Horton's indomitable mini-me—Eric Lipar's LGI Homes; from the course-corrected and redirected Grand Homes to the full-speed ahead Landon Homes; from the world-class David Weekley Homes to the regional power players Highland Homes and First Texas, building homes in the state that grew by 25 million folks since the prior census in 2000 and has far less of the regulatory encumbrances than other big states is a one-of-a-kind business.
Ultimately, what this means, even in this day and age, is that a handshake among trusting and trustworthy individuals can literally be worth millions of dollars, both on the savings side of the ledger and on the income side.
Learn more about markets featured in this article: San Antonio, TX.