The TRI Pointe Group based in Irvine, Calif., and one of the nation’s top 10 builders, is beefing up its operations in the red hot Texas market by buying Dunhill Homes and its 55+ brand Nathan Carlisle Homes, both of which are Winchester Carlisle Companies. The deal was cut for approximately $60 million in cash.
One builder buying another is the state of the market these days. For instance, D.R Horton recently purchased Terramor Homes in Raleigh-Durham, CalAtlantic finalized its merger with Lennar earlier this year, and Taylor Morrison acquired AV Homes.
Doug Bauer, TRI Pointe Group CEO, had three good reasons to add Dunhill to his lineup: “Access to new markets, quality land positions, experienced and well-respected management teams,” he says. Dunhill was expected to deliver more than 300 homes last year while owning or controlling nearly 1,500 lots in the Dallas-Fort Worth region. TRI Pointe Group also recently branched out into the Carolinas in October by launching a new division to service the housing boom in Charlotte and Raleigh.
Acquiring a new company starts with figuring out where opportunities exist and then finding out if existing firms in the area are interested in selling out, he notes. “In addition to our own relationships and due diligence in monitoring the industry, we work with investment bankers and other intermediaries to gather specific details about companies that are potentially for sale,” says Bauer.
Although the notion of selling off a firm built on blood, sweat, and tears would seem fraught with hard feelings Bauer dispels the myth, saying that “sellers are typically happy about selling their company.” he says. “It’s optimal when you can align with an already strong leadership team that shares the same values, mission and vision of your brand,” says Bauer.
Easing the transition is all about spelling things out clearly for everybody involved. “With the help of existing or new leadership of the new company, we aim to be as transparent and responsive as possible in regard to employees’ positions and roles. Keeping the lines of communication open at all times and ensuring we set the right expectations for the business going forward is key,” says Bauer.
TRI Pointe Group is also making progress expanding within its home state by moving into the Sacramento market and executives are also focused on what’s happening in the Northwest part of the country. TRI Pointe Group acquired Quadrant Homes based in the Puget Sound area in 2014 when it bought five brands owned by Weyerhaeuser.
Fine tuning such a fast rate of growth while keeping the home building balls in the air requires maintaining your eyes on the prize. “The largest challenge in buying another builder is staying disciplined in your acquisition focus. Potential mergers and acquisitions targets must meet our strict underwriting standards and be a good fit for our organization culturally in order for us to move forward,” says Bauer. “Ensuring those elements are in place makes for a smooth transition during the process.”
The upside of the expansion means a builder does not have to worry about keeping all the eggs in one basket. “The most significant benefit of our continued expansion is that we become a larger organization, leveraging our ‘best of big and small’ approach with the thought leadership, scale and resources of TRI Pointe Group,” says Bauer. “Combined with the nimble, local expertise and relationships of our regional home builders. It also makes us a more geographically diverse and opportunistic builders.”
