In spring 2014, Joel Shine was ready to cross the finish line. After working for more than a year to take Woodside Homes public, the son of a longtime Los Angeles home builder had the Salt Lake City–based company poised for an IPO.
“We were done with the process,” says Shine, Woodside’s CEO. “We were done with the SEC, the analysts, and all of that.”
Then came the problem. “One of the builders announced results that weren’t great, the market overreacted and traded down dramatically, and I thought, ‘This isn’t the time to kick off an IPO.’”
After a week, the situation grew worse. Weeks turned into months, and conditions were still poor. Shine decided the IPO was off, at least in the short term. Unencumbered by concerns about the stock price, he chose to focus on growth.
Shuffling the Deck
In 2008, Woodside Group, the parent company of Woodside Homes, filed for bankruptcy. As part of the settlement, Shine came aboard as CEO in January 2010.
“Joel had a strong builder background and strong finance background,” says John Burns, CEO of John Burns Real Estate Consulting. “He brought in Jay Moss, who has a strong marketing background, and they were off to the races.”
Shine spent most of 2009 as a consultant to the company’s creditors, so he was able to hit the ground running. “I was asked to come in and bring in a new leadership team by the creditors,” Shine says. “We did, and we turned it around. We became profitable pretty quickly, recapitalized with some private equity, and we’ve been growing the business ever since.”
With expansion on his mind and investors looking to lessen their stake, Shine filed privately for an offering in March 2014. At the time of the IPO, Reuters reported that Oaktree Capital Management, John Hancock Life Insurance Co., and Stonehill Institutional Partners had taken a stake in the firm. Though Shine wouldn’t identify particular investors, he did say a couple stepped up to fill the void. In addition, the company issued $50 million in debt.
“The steps that we had to take to rearrange the company were nothing,” Shine says. “Our investors put some money in and we raised a little more debt because we had a few more deals tied up that we wanted to close.”
It’s not like these backers would have left after the offering anyway. “Usually the IPO only monetizes about a one-third of their position,” Shine explains. “They hang on to stock and slowly sell it off over time.”
Even though Woodside never completed its IPO, it retained practices and controls it established for the public markets. It is run by an independent board and is capitalized like a public home builder. The only difference, Shine says, are that its shares are owned by opportunity funds and private equity.
Defining a Niche
Though it hasn’t jumped into the frenzied mergers and acquisitions market, growth hasn’t been a problem for Woodside.
In 2014, it closed 1,402 homes, followed by 1,644 closings last year. Since Shine came aboard, the firm has made 130 land deals. “We keep the retained earnings in the company and just keep growing it on our own capital,” he says.
Flexibility plays a big role in Woodside’s growth. “Our strategy is to look for great land opportunities, be creative in product design, and understand where buyers are so we can hit some niches,” Shine says. “We have a pretty good skill set across a wide array of product types, delivering homes from the high hundreds to over a million dollars.”
The company seeks to tie up fully entitled land and adjusts its approach based on the market. Woodside has three divisions in California and one each in Utah, Las Vegas, Phoenix, and San Antonio. “We like to do a lot of research to see what’s missing in various markets and then try to fill that void,” he says.
Shine relies on his divisions to buy land and build what’s missing. “The advantage of having a bunch of divisions and smart guys running them is everybody has got their own skills sets, and we just try to cross pollenate it.”
Sales is a key part as well, and Woodside has invested in the coaching and development of its staff. “They make sure that the people on the front line are constantly motivated and inspired,” says Forrest Performance Group principal Jason Forrest, who was hired by Woodside to work with its salespeople.
The strategy gives the company room to grow at a sustainable pace. “Could I build 30,000 or 40,000 homes a year? Probably not,” Shine admits. “Could we double our company with this strategy? Absolutely.”
While the window closing on an IPO might seem like a lost opportunity for key insiders, looking back, Shine sees it as a positive.
“My investors would have a stock trading below what it would IPO at,” he says. “I’m pretty darn happy we didn’t do it. In 20/20 hindsight, the IPO would have been a big mistake.”
The idea isn’t off the table, however, despite Woodside’s registration withdrawal request filed with the Securities and Exchange Commission in December. “If the capital markets recover, it’s certainly a possibility,” Shine says. “We’re in a position right now where ... we could be ready to go in 30 days.”