TRI Pointe Homes announces this morning, per a press statement, "the acquisition of 301 lots in three highly desirable Southern California locations in Azusa (Los Angeles County), Temecula (Riverside County) and Huntington Beach (Orange County). TRI Pointe plans to open four new communities at these locations, with one opening in late 2013 and the balance in 2014."
Here we go. That's what all the hullabaloo is all about in the investment world-meets home building and residential development, buying building lots in bulk and selling them for more individually, with new vertical construction and horizontal community development improving their value. The high-stakes game Wall Street is playing right now involves ignoring near-term ups and downs in housing's national benchmarks, and instead, moving piles of chips behind a bet that millions invested now on land, home building capacity, and its multiplier-effect collateral business sectors will net more millions, possibly billions.
Why? The No. 1 assumption is that pent-up demand--which in a physical sense is the "doubling-up" of households, as traditional measures of household formation fell off the map during the latter few years of the past decade--will morph into real demand. This, many on Wall Street theorize, will play out as animal spirits yearn for new households, prices begin to behave normally, and Uncle Sam throws in its two cents with continued low borrowing interest rates.
So, TRI Pointe, whose strategic braintrust earned their wings during the Resolution Trust days of yore working for William Lyon, are leveraging a collective skill-set that has seen many of today's conditions before, and knows what to do to thrive in them. Keep land purchases modeled on a 2-year sell-through horizon, keep debt low, and drive quality and process improvement through their network of operating units.
The purchase of 301 lots in three communities fits the two-year horizon math to a unit, and the only thing left to question is how much TRI Pointe paid, and what its profits might be given the relative pricing power California builders have in many submarkets, where scarcity has, if anything, fueled desire.
Here's the balance of TRI Point's press statement:
“These acquisitions fit our overall strategy of building quality innovative homes in communities with convenient access to major transportation and employment corridors,” said Douglas F. Bauer, TRI Pointe’s Chief Executive Officer. “With 25 years of experience in sourcing, acquiring and developing land, we have consistently secured land in our high demand core markets. These latest acquisitions have grown our number of lots owned and controlled to over 2100.”
The acquisition in Azusa, comprised of 66 lots, is located off the I-210 freeway in the Rosedale master-plan. Named Avenswood, the community will feature first-time move-up, single-family detached homes ranging from 2,500 to 3,100 square feet priced from the low $600,000’s. In addition to the Avenswood community, the Company is currently selling single-family detached homes priced from the mid $400,000’s at its our Tamarind Lane community in Rosedale.
In Huntington Beach, the Company acquired 49 lots from the Fountain Valley School District, offering a unique opportunity for an infill community of single-family detached homes in an established neighborhood midway between the Pacific Coast Highway and the I-405 freeway. The homes will range in size from 2,800 to 3,300 square feet and be priced in the high $900,000s.
In Temecula, the Company acquired 186 lots in the master-planned community of Paseo Del Sol, located near the I-15 freeway between Riverside to the north and Escondido to the South. TRI Pointe plans to build 90 entry-level attached townhomes and 96 motor-court homes on these lots. These entry-level homes, priced in the mid $200,000s, will range in size from 1,000 to 1,700 square feet.
“We believe our years of expertise in land acquisition and development enables us to implement our strategy of controlling a two to three year land supply of developed lots, while continuing to be diciplined and highly selective in our approach to building TRI Pointe Homes,” said Mr. Bauer. “We are very excited about these recent transactions and look forward to opening nine new communities in 2013.”