Dream Finders Homes (Nasdaq: DFH) has entered a definitive purchase and sale agreement to acquire the home building, mortgage banking, and title insurance assets of Houston–based home builder MHI-McGuyer Homebuilders and related affiliates. MHI, doing business as Coventry Homes, builds in Austin, Dallas, Houston, and San Antonio and has been operating since 1988.

MHI ranked No. 37 on the latest Builder 100 list with 2,082 closings in 2020. With an average sales price of $441,779, the company generated revenues in excess of $900 million last year. Throughout its history, MHI has closed more than 55,000 homes across its Texas markets. DFH, which ranked No. 24 on the Builder 100 with 3,154 closings in 2020, expects the transaction to close in the beginning of the fourth quarter of 2021.

“MHI has a reputation for being a great partner and has earned the respect of developers and homeowners across the great state of Texas,” said Patrick Zalupski, Dream Finders Homes chairman and CEO. “We are excited to welcome MHI employees into the Dream Finders family and look forward to growing our footprint in one of the country’s best housing markets. The MHI transaction will significantly increase our geographic operations in the Austin region and will allow us to expand into Houston, Dallas, and San Antonio. These metro areas rank as some of the largest and fastest growing residential home building markets nationally, with aggregate permits in excess of 120,000 annually. We are excited to get to work and anticipate making significant capital investments in these new markets, with the goal of being one of the largest builders in Texas.”

With this deal, DFH expects to acquire roughly 1,850 homes in backlog across Austin, Dallas, Houston, and San Antonio, in addition to approximately 200 finished lots at closing to begin home construction imminently. It's anticipated that the consolidated company will own and control over 40,000 lots after closing of the transaction. MHI stakeholders will retain about 1,000 finished lots, and DFH will have the option to purchase the finished lots over the two years subsequent to the MHI acquisition effective closing date. DFH exercised its right for a $300 million increase in the aggregate commitments under its senior unsecured revolving credit facility, which reached $750 million, to finance MHI’s work-in-process inventory. In connection with the MHI acquisition, DFH plans to pay off the construction lines of credit MHI has historically used to finance its inventory.

“I am extremely proud of the businesses we have built over the last 30 years," said Frank McGuyer, founder of MHI, in a statement. “My strategic priority in identifying a merger partner was to ensure that our people and the Coventry brand would have the opportunity to continue to grow post-merger. DFH has a proven track record of growth and will be looking to the leadership of the Coventry team to build the combined company into one of the largest home builders in Texas. I am excited to see what the future holds for Coventry and Dream Finders.”

Builder Advisor Group, in its 10th home builder deal for the year, served as exclusive M&A adviser to MHI in the transaction.