Irvine builder TRI Pointe Homes plans to combine with Weyerhaeuser Real Estate Co. in a deal pegged at roughly $2.7 billion, giving the Orange County firm a nationwide stake in a recovering housing market.
The deal greatly expands TRI's footprint — until now focused in California and Colorado — into markets it sees as poised for long-term growth, including Phoenix, Washington, D.C, Richmond, Va., Houston, Las Vegas, Tucson and the Seattle region. The merger, announced Monday, transforms the Irvine firm into one of the nation's 10 largest home builders based on estimated combined market value, TRI said.
"We are barely a year into a housing recovery. It's perfect timing," said TRI Pointe Chief Executive Doug Bauer.
Although TRI will gain access to markets nationwide, the greatest boost to its portfolio will come in the highly sought-after California market, including Los Angeles, San Diego, Riverside and San Bernardino counties, where buildable lots are in short supply. California home prices have flattened recently, but only after skyrocketing earlier in the year, with families and investors in bidding wars over the thin supply of homes.
Despite that sharp rebound, builders have yet to ramp up construction to historically normal levels. One reason builders cite is the shortage of buildable lots after development stalled during the recession.
TRI Pointe Homes Inc., which went public in January, said the deal would add roughly 27,000 lots to its portfolio — with more than 16,000 of those in California markets with a shortage of ready-to-go-lots, making it a significant player within the state. As of the second quarter, the company owned or controlled only 2,682 lots in California and Colorado.
"This provides us access to markets right in our backyard, with land and lots we can build on," Bauer said.
TRI Pointe gains five brands of Weyerhaeuser Real Estate: Pardee Homes, Trendmaker Homes, Maracay Homes, Winchester Homes and Quadrant Homes.
Weyerhaeuser Real Estate, a wholly owned subsidiary of Weyerhaeuser Co., will merge with TRI Pointe Homes after splitting from the parent company, based in Washington state. Some assets of Weyerhaeuser Real Estate would not be part of the deal, the companies said, without providing details.
In June, Weyerhaeuser Co., citing a rebounding housing market, said it would explore "strategic alternatives" for its home building business, including a merger, sale or spinoff. Its shareholders would control roughly 80.5% of the newly merged home builder.
The deal is expected to close in the second quarter of next year. TRI said it would retain its headquarters in Irvine, as well as its top management. Bauer said there would be no layoffs involving the merger.
TRI Pointe's stock closed at $16.15, up 77 cents, or 5.01%. Shares of Weyerhaeuser Co. closed at $30.37, up 3 cents, or 0.1%.
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