Weyerhaeuser announced yesterday that it will explore strategic options to "optimize value" for its five regional powerhouse home building operations.
Underlying the question of who may buy the Weyerhaeuser real estate group is the essential question of what lots are worth--not necessarily now, but in the 12- to 24-month period ahead. This is the black box that is home building right now. Investors are manic, home builders are cautiously optimistic, and home buyers are still largely in the wings of the market, awaiting clarity, stability, and a fair chance at not becoming suckers.
Weyerhaeuser management, of course, will have nothing more to say about its options or intentions until they decide what they're doing and have structured a deal.
Here's what they look like on a map.
Now, what might motivate a strategic purchaser to acquire this portfolio?
1. The ability to acquire 2014 and 2015 lots for a known dollar figure
2. Additional scale in markets one already operates in
3. Removal of a competitor--both for home buying customers and future land, materials, and labor acquisition
4. Incremental sales
5. Operational process improvement
We'll look further at those opportunities with respect to Weyerhaeuser, and where they match up to potential acquirers. We can not discount the possibility of a spin-off, given the valuations investors are giving home builders in the market these days.
Here's a look, from Hanley Wood's Metrostudy unit, at the Weyerhaeuser lot pipeline by unit, according to estimates:
Weyerhaeuser financial data indicates that it closed on 2,314 homes in 2012, netting $100 million in income contribution, or $43,000 a home, with a margin on revenue of about 11%. Look at the vacant developed lots total and do the math.