TRI Pointe Begins First Post-IPO Land Deals

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On April 16, 2013 TRI Pointe Homes announced in a press statement, “the acquisition of 301 lots in three highly desirable Southern California locations in Azusa (Los Angeles County), Temecula (Riverside County), and Huntington Beach (Orange County).  TRI Pointe plans to pen four new communities at these locations, with one opening in late 2013 and the balance in 2014.”

The investment world meets residential development and homebuilding.  The company bought lots in bulk and will sell each one individually for more.  The company is improving its value with new vertical construction and horizontal community development.  Wall Street is playing a high-stakes game by ignoring the near-term ups and down in the national housing benchmarks.  Investors have invested on land and the home building capacity, and anticipate the collateral business sectors multiplier-effect will net them more millions and possibly even billions. 

These assumptions are based on the increased demand for new housing nationwide.  And Wall Street theorized that the need for homes will have even more demand since home prices are stabilizing and interest rates remain low.    

Douglas F. Bauer, TRI Pointe’s CEO said, “These acquisitions fit our overall strategy of building quality innovative homes in communities with convenient access to major transportation and employment corridors.  With 25 years of experience in sourcing, acquiring and developing land, we have consistently secured land in our high demand core markets.  These latest acquisitions have grown our number of lots owned and controlled to over 2100.”

Bauer said, “We believe our years of expertise in land acquisition and development enables us to implement our strategy of controlling a two to three year land supply of developed lots, while continuing to be disciplined and highly selective in our approach to building TRI Pointe Homes.  We are very excited about these recent transactions and look forward to opening nine new communities in 2013.”

TRI Pointe’s executives have many years’ experience in strategic planning from their previous years with Resolution Trust.  They’ve seen many of today’s conditions and they’re leveraging their collective skill-set because they know how to thrive in these conditions.   The companies land purchases are modeled on a 2-year sell-through horizon.  It will keep debts low and drive quality and process improvements through its network of operating units. 

The two-year horizon math fits with the company’s purchase of 301 lots.  The only thing left to learn is how much the company paid and what its profits will be.  With home scarcity driving desire and California builders having the relative pricing power, it will be interesting to see how this investment transforms into profits. 


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