William Lyon Homes and M/I Homes are getting in on the expansion through acquisition game as Lyon plans to purchase RSI Communities and M/I Homes enters an agreement to purchase Detroit-based Pinnacle Homes. Lyon gains access to the Texas market, while M/I's plans represent the builders first foray into the Michigan market.
Lyon will pay $460 million for RSI Communities, which builds and sells in California in the Inland Empire and in Texas in Austin and San Antonio. Their specialty is entry-level homes. The Texas market represents the most active market in the country for housing starts and annual closings.
RSI began as an affordable-housing idea from Newport Beach entrepreneur Ron Simon, whose collection of businesses is best known for making home cabinetry. The homebuilder, founded in 2008, controls 3,173 home lots in the Inland Empire.
It builds in Southern California in Beaumont, Lake Elsinore, Menifee, Moreno Valley, Murrieta and San Jacinto. According to RSI’s corporate webpage, pricing starts in the low-$300,000 range.
But Lyon’s key to the deal, expected to close by the end of March, is exposure to the Texas market. At year-end 2017, RSI controlled 6,895 lots in Austin and 1,060 in San Antonio and is currently selling homes from the high-$100,000 range around San Antonio to a community in Austin where pricing starts in the high $300,000s.
Texas continues to lead the nation for housing starts and annual closings, according to data from Metrostudy released in its 1Q18 Housing Webcast on Feb. 21.
“The addition of RSI Communities to the William Lyon Homes family enables us to strengthen our position in the land-constrained Southern California market and gain immediate size and scale in Austin as a foothold in the attractive Texas region, which we view as the first step in a broader Texas strategy,” said Lyon CEO Matthew Zaist.
Lyon’s last major foray out of its home state of California was jumping into the Portland and Seattle regions by buying Polygon Northwest Homes in 2014.
And in 2017, that deal paid off. Lyon delivered 16 percent more homes — 3,239 — than the previous year as homebuilding revenues rose 28 percent to a record $1.8 billion.
Lyon’s top market was California (919 sales, up 27 percent in a year) and followed by Oregon (747 sales, up 4 percent). Washington was the No. 4 market with 516 sales up 79 percent.
The move expands the footprint of M/I Homes into Michigan, where it lacks a market presence. Pinnacle now controls more than 1,000 home sites and delivered 214 homes last year. Pinnacle was founded in 2005 by Howard Fingeroot and Steve Friedman. The Bloomfield Hills, Michigan-based homebuilder works primarily in upscale homes.
"We believe this acquisition represents an excellent strategic fit for M/I Homes and further enhances our market position with a well-established operation and land position in a dynamic and growing housing market," Bob Schottenstein, president and CEO of M/I Homes, said in a statement.
Fingeroot, Pinnacle's managing partner, will join M/I Homes as an area president and will oversee the Detroit market.
"Howard brings with him nearly 25 years of homebuilding experience, knowledge and expertise and will capably lead our operations in this exciting market. We welcome Howard and his team to our company," Schottenstein said.
In its annual report released this month, M/I Homes said it saw a record net revenue of $1.96 billion, almost all of which came from home sales. It delivered 5,089 homes last year and has 28,500 lots under control at the end of the year. It's now marketing homes for sale in 188 communities in 15 markets.
In its latest earnings outlook, M/I estimated it would spend $550 million to $600 million on land purchases and land development this year. The company develops homes in the $170,000 to $1.4 million price range and has constructed more than 105,000 homes since its founding in 1974. It has 1,238 employees.
Reported by Orange County Register (Feb. 21, 2018) and Columbus Business First (Feb. 26, 2018)
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