Deeper local scale and greater exposure to first-time entry-level buyers once again played a key role in the latest big mergers and acquisitions deal, as Houston-based LGI Homes agreed to acquire local Raleigh, N.C.-private builder Wynn Homes.
The transaction fits a pattern of late. Builders find that they can model, manage, and gain advantage in the areas of securing labor, optioning lots, driving operational discipline, procurement pricing, and cost of sales and marketing if they command a dominant market share position in an active new home construction market.
In Wynn Homes, LGI gets 23 selling communities in the hot Raleigh market, with prices ranging from the low $200,000s to the low $300,000s. Word is, Wynn is on pace to build and close on upwards of 475 homes in 2018. The acquisition would sling-shot LGI into a top 5 ranking in a Raleigh market whose 2018 closings are running at upwards of 12,600, an almost 10% increase in activity, according to BUILDER sibling Metrostudy.
Here’s how the press statement, released this morning, reads:
LGI Homes, Inc. (Nasdaq:LGIH) acquired the real estate assets of Raleigh, North Carolina-based Wynn Homes, a 20-year-old privately held homebuilder, for approximately $80 million. Wynn Homes, known for building affordable single-family homes and townhomes, priced from $140,000 to $450,000, across central and eastern North Carolina, gives LGI Homes increased exposure to first-time buyers.
As a result of this transaction, LGI Homes acquired approximately 200 homes under construction, along with approximately 4,000 owned and controlled lots that will be available for future sales as the Company expands operations throughout the Raleigh and Wilmington markets.
“This is an opportunistic purchase for LGI Homes, comprised of homes in various states of construction, finished lots, and land under development covering a large portion of these markets,” said Eric Lipar, the Company’s Chief Executive Officer and Chairman of the Board. “The acquisition of Wynn Homes provides us with a valuable asset position allowing us to accelerate our growth in one of the nation’s fastest growing markets.”
Lipar concluded, “In addition to adding new and future communities, we are pleased to welcome our new colleagues who will enable us to become one of the largest homebuilders in the Raleigh market.”
Builder Advisor Group served as financial adviser to LGI Homes for the acquisition, and David Rosen of Long Grove Capital advised Wynn Homes in the transaction.
