Based in Irvine, CA, TRI Pointe Homes (TPH) scheduled a $173 million IPO with a market capitalization of $474 million at the price range mid-point of $15, for Thursday, January 31, 2013.
Five IPOs are scheduled for the week of Jan. 28, 2013. The full IPO calendar is available here.
S-1 filed January 16, 2013.
Manager, Joint Managers: Citigroup/Deutsche Bank Securities/FBR
Co Managers: Moelis/JMP Securities
TPH is a new homebuilding company formed by a very experienced management team lead by Barry Stenlicht (MANAGEMENT see below).
Revenues are now derived primarily from home deliveries. TPI is phasing out its fee building services provided to independent third-party property owners.
In September 2010, TPH received an equity commitment of $150 million from the Starwood Fund, all of which has been contributed as of September 30, 2012.
TPH has the management team and access to funding that could make it one of the established homebuilders. We are positive on TPH for both the IPO and later, six to nine months.
TPH is engaged in the design, construction and sale of innovative single-family homes in planned communities in major metropolitan areas located throughout Southern and Northern California.
TPH also provides fee building services whereby TPH builds, markets and sells homes for independent third-party property owners with whom TPH has revenue sharing agreements on projects typically marketed under the TRI Pointe Homes brand name.
OVERVIEW AND OUTLOOK
During the nine months ended September 30, 2012, the overall housing market continued to show signs of improvement largely driven by increasing consumer confidence levels related to the homebuilding industry, continued excellent housing affordability based on historical metrics, decreasing home inventory levels in many markets, and more positive consumer sentiment for the overall economy.
Individual markets continue to experience varying results as local economic and employment situations strongly influence the local market demand and home buying abilities.
However, most of TPH's markets have shown positive indicators of a sustainable recovery. TPH improved on most key operating metrics during the nine months ended September 30, 2012, as compared to the same period in 2011, including increased net new home orders, home deliveries, average sales prices, home sales revenue, backlog units, backlog value and homebuilding gross margins.
RESULTS OF OPERATIONS
TPH's primary goal in 2011 was to source, perform due diligence, contract and acquire land or lots in targeted market areas to generate deliveries with profitable returns beginning in late 2012 and beyond.
TPH is currently actively acquiring and developing lots in California to maintain and grow the lot supply and active selling communities that are strategically located in selected "core" markets with favorable population and employment growth as a result of proximity to job centers or primary transportation corridors.
In addition to expanding the business in existing markets in California, TPH continues to evaluate opportunities to expand in other Southwestern markets. In October 2012, TPH announced its entry into the Colorado market.
During the nine months ended September 30, 2012, TPH acquired 199 lots in three communities in California and signed a land option contract, a purchase contract or a non-binding letter of intent to acquire an additional 547 lots in California and Colorado.
As of September 30, 2012, TPH owned 552 lots in which TPH had commenced development, held options or were under contract to acquire an additional 689 lots and had entered into non-binding letters of intent to acquire an additional 91 lots in target markets.
In October 2012, TPH entered into an option contract to acquire an additional 61 lots in one new community in Southern California.
TPH also focuses on increasing the number of active selling locations which TPH expects will contribute to net new home order growth, homes in backlog and ultimately new home deliveries.
TPH opened seven new selling locations during the nine-month period ended September 30, 2012, five in Southern California and two in Northern California.
TPH experienced a 279% increase in net new home orders from 34 to 129, a 720% increase in backlog units from 10 to 82.
TPH experienced a 1,052% increase in backlog value from $4.0 million to $46.1 million for the nine months ended September 30, 2012, as compared to the same period in 2011.
Home sales revenue was $22.3 million for the nine months ended September 30, 2012, representing an increase of $13.0 million, or 140%, when compared to the same period in the prior year, due to a 112% increase in the number of homes delivered from 26 to 55 and an increase in the average sales price of homes delivered from $357,000 to $405,000, representing an increase of $48,000, or 13%, during the period.
As of September 30, 2012, TPH had options or were under contract to acquire land for an aggregate purchase price of approximately $109.3 million (net of deposits) on which TPH expects to build 689 homes in eight new communities in California and Colorado.
These projects are located in Rancho Mission Viejo (Orange County), Huntington Beach (Orange County) (two communities), Mountain View (Santa Clara County), Alameda (Alameda County) (three communities) and in Castle Rock (Douglas County, Colorado). As of September 30, 2012, TPH had paid $16.5 million in non-refundable deposits relating to these pending acquisitions.
TPH also has entered into non-binding letters of intent, and, in October 2012, entered into an option contract, to acquire land for an aggregate purchase price of $56.0 million on which TPH expects to build 152 homes in two new communities and one existing community.
Owned and Controlled Lots
As of September 30, 2012, TPH owned or controlled, pursuant to option contracts, purchase contracts or non-binding letters of intent, an aggregate of 1,393 lots.
Chairman of the Board, Barry S. Sternlicht:
Sternlicht serves as the chairman of the board of managers and, following TPH's formation transactions, will serve as the chairman of the board of directors.
Sternlicht has been the Chairman and Chief Executive Officer of Starwood Capital Group since its formation in 1991. He also has been the Chairman of the Board of Directors and the Chief Executive Officer of Starwood Property Trust, Inc. (STWD), a New York Stock Exchange-listed company, since its formation in 2009.
Over the past 21 years, Sternlicht has structured investment transactions with an asset value of more than $50 billion. From 1995 through early 2005, he was the Chairman and Chief Executive Officer of Starwood Hotels & Resorts Worldwide (HOT), $12 billion market cap, a company he founded in 1995.
Sternlicht is the Chairman of the Board of Société du Louvre and Baccarat. He also serves on the Board of Directors of The Estée Lauder Companies (EL), Restoration Hardware Holdings, Inc. (NYSE: RH), Mammoth Mountain, Ellen Tracy, Field & Stream and National Golf. Mr. Sternlicht is a Trustee of Brown University. Mr. Sternlicht received his B.A., magna cum laude, with honors from Brown University. He later earned his M.B.A. with distinction from Harvard Business School.
Top Management was recruited from William Lyon Homes, whose common stock was listed on the New York Stock Exchange from 1999 until the company was taken private in 2006 and includes:
Douglas F. Bauer, CEO. Most recently the President and Chief Operating Officer, for William Lyon Homes.
Thomas J. Mitchell, President, COO & Secretary. Most recently Executive Vice President, for William Lyon Homes.
Michael D. Grubbs, CFO & Treasurer. Most recently the Senior Vice President and Chief Financial Officer, for William Lyon Homes.
As of September 30, 2012, TPH had 53 employees, 31 of whom were executive, management and administrative personnel, 11 of whom were sales and marketing personnel and 11 of whom were involved in field construction.
The Starwood Fund*, 57%
Douglas F. Bauer, 3.3%
Thomas J. Mitchell, 3.3%
Michael D. Grubbs, 2.8%
*VIII/TPC Holdings, L.L.C., which is one of the wholly-owned subsidiaries that constitutes the Starwood Fund, will sell 1,700,000 shares of TPI's common stock as a selling stockholder in this offering, or 3,455,000 shares of TPI common stock if the underwriters exercise their option to purchase additional shares in full.
In September 2010, TPI received an equity commitment of $150 million from the Starwood Fund, all of which has been contributed as of September 30, 2012. TPI has been advised that the Starwood Fund is an affiliate of a broker-dealer
USE OF PROCEEDS
10mm shares from TPI, 1.7 million shares from the Starwood Fund. TPH expects to receive $138 million from its IPO.
TPH intends to use the net proceeds from this offering primarily for the acquisition of land.
Disclaimer: This IPO report is based on a reading and analysis of TPH's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.