William Lyon Homes, Newport Beach (NYSE: WLH) said Tuesday that it has entered into a definitive agreement to acquire RSI Communities (“RSI”), a Southern California and Texas based home builder and three additional related real estate assets for an aggregate cash purchase price of approximately $460 million.
The transaction marks the Lyon’s entry into Texas and is expected to close in the first quarter of 2018, subject to the satisfaction of certain closing conditions.
RSI Communities has operated in the Inland Empire of Southern California and the Austin and San Antonio, Texas markets since being founded by Newport Beach based entrepreneur and building products veteran, Ron Simon, and 30-year home building veteran, Todd Palmaer. As of December 31, 2017, RSI owned or controlled 11,128 lots, including 6,895 in Austin, Texas, 1,060 in San Antonio, Texas and 3,173 in the Inland Empire, California. RSI primarily targets the entry level and first time buyer segments.
“The addition of RSI Communities to the William Lyon Homes family enables us to strengthen our position in the land-constrained Southern California market and gain immediate size and scale in Austin as a foothold in the attractive Texas region, which we view as the first step in a broader Texas strategy,” said Matthew R. Zaist, president and CEO of William Lyon Homes. “We expect this acquisition to drive top-line growth and operational synergies for the Company, to generate significant cash flows over the coming years, and to be accretive on an earnings basis to our shareholders.”
Todd Palmaer, president and CEO of RSI, stated, “We are delighted to have our company join the William Lyon Homes organization. We have a great deal of confidence in the William Lyon Homes platform and its executive management team, and believe that its acquisition of RSI Communities will add to Lyon’s continued success in its current and new markets.”
Palmaer continued, “Our companies share many of the same core values, including a culture of character and integrity, with the overriding goal of becoming the home builder of choice by consistently delivering an unparalleled value and customer experience through operational excellence, and I am pleased that William Lyon Homes has embraced RSI’s employees who are expected to become an important part of the Lyon organization.”
It is anticipated that upon the closing of the transaction that RSI’s Texas operations will become a new William Lyon Homes region, led by RSI’s current Chief Operating Officer, John Bohnen, who will serve as regional president. Prior to his time with RSI, Bohnen served in various executive positions for several publicly traded home builders, including most recently as division president for Standard Pacific Homes and CalAtlantic Homes in Austin, Texas from 2012 to 2016. Bohnen also served for several years as an Infantry Captain in the U.S. Army prior to his home building career.
RSI’s Southern California operations will become a new Inland Empire division of William Lyon Homes, led by Pat Donahue as Inland Empire Division president. Donahue brings nearly 30 years of home building experience to his new role, with particular expertise in start-up initiatives and new divisions. Prior to his service as Southern California Division president for RSI, Donahue served in executive roles at several private and public home builders, including Pulte Homes. Mr. Donahue is also a veteran of the U.S. Marine Corps.
“We are thrilled to bring John, Pat and their respective teams on board as an integral part of William Lyon Homes,” said Zaist. “The RSI management team brings a tremendous amount of industry experience and historical public company operating discipline and has developed a reputation for high quality construction and customer satisfaction, along with an attractive lot supply that our combined company can leverage for future top and bottom-line growth.”
Zaist, concluded, “The acquisition of RSI represents our most significant acquisition since our entry into Portland and Seattle with the Polygon Northwest Homes acquisition in 2014 and furthers our strategy of building in the strongest markets in the Western U.S., while also strengthening our pipeline in Southern California, as we continue our mission of being the premier Western Regional home builder.”
The company intends to fund the acquisition with cash on hand, debt, and approximately $200 million in land banking proceeds to be provided by Hearthstone.
The transaction is subject to the satisfaction of customary closing conditions and regulatory approvals and is expected to close in March of 2018. J.P. Morgan Securities, LLC acted as exclusive financial advisor for William Lyon Homes and Latham & Watkins LLP acted as legal advisor. Citi acted as exclusive financial advisor for RSI and O’Melveny & Myers LLP acted as legal advisor.
