Tri Pointe Homes—No. 16 on the 2020 Builder 100—announced the consolidation of its six regional home building brands under one single brand in January.
A month later, on its most recent earnings call, the unified builder reported 14% year-over-year order growth in Q4 2020—before the consolidation—as well as a home building gross margin of 23.2% and a backlog dollar value of $1.9 billion, up 69% from one year ago. The builder anticipates delivering between 5,700 and 6,000 new homes in 2021, up from 5,123 homes delivered in 2020, with an expected gross margin of 21% to 22%.
BUILDER spoke with Tri Pointe CEO and director Doug Bauer about the company’s decision to unify under one brand, the impact of the COVID-19 pandemic on broader trends, and the future of the industry as a whole.
BUILDER: How long has the brand consolidation been in the works? Why consolidate now, and what’s had to happen in order to make the unified brand work?
Bauer: We started considering it back in the spring/summer of 2020. We acquired the Weyerhaeuser Real Estate Co. and inherited its five regional brands in 2014, which really transformed us into what we are today, one of the largest home building companies in the country. And we inherited the multiple brand approach, and it served us well for six years. We had the ability over the last six years to develop a vision and a culture across the company while still fostering trust and long-term relationships in the local markets.
The decision to go to one brand is not unusual. It happens to a lot of companies. But it comes at a time where we’re looking to optimize our operations across the country. A unified brand, as I call it, has some inherent efficiencies that will be part of our overall growth strategy for the company. Instead of concentrating efforts around six brands, you concentrate efforts under one, right? It’s obviously very intuitive. Therefore, it improves your financial results, but it also allows us to invest in more powerful and more consistent technology platforms that are critical for our success in the future.
Lastly, it creates a stronger brand. We’re a public company, and having six brands was a little bit diluted when the public company is Tri Pointe Homes.
It was the smart thing to do to let [the company] evolve over six years, and we decided in the spring of 2020, what’s going to be best for our customers, what’s going to be best for our shareholders, and what’s going to be best for our team members. And that was to put everybody under one brand.
BUILDER: How has COVID-19 affected business conditions at your company and across the industry?
Bauer: It’s my belief that this pandemic has definitely had an effect on the consumer and how they view housing. Many of us are working from home, we may work from home more, part time, than we did before. I always felt being in the home building business was a noble business, because I can’t think of anything better than building homes for families. It’s gotten that much more important during a pandemic.
The big headache, from a construction standpoint, is the interruptions from contact tracing. Counties are doing the best they can with their resources, but you and I are both living through a pandemic, so it puts stress on the system.
I don’t know of anybody, there’s nothing that’s immune to this pandemic. I feel really bad for the airline industry, the tourism industry, the restaurant industry, but the silver lining to this pandemic has been the housing industry because we’re not spending as much money, and we’re all looking at our house and thinking, maybe I want to buy a new house, maybe I want to refurbish it. So the house is—and again, I can’t overemphasize this—it’s truly become the most important asset that any family can have.
BUILDER: A lot of builders have had to adopt new technology to account for online buying or tours, or they’ve had to speed up and bring things into wider use. How has Tri Pointe faced that challenge?
Bauer: Well, luckily we have an incredible chief marketing officer, Linda Mamet. Two years ago, she had the vision that we needed to be a more technology-driven company. So well before the pandemic, we had already invested heavily in new technology to market and sell our communities online. COVID has just accelerated the use of those technologies so that we can stay ahead of the consumers’ desire to shop more and more in a virtual environment.
When you roll the technology umbrella through one brand versus six, it’s obviously very intuitive. Going through six brands is a lot more work than one. So Linda is the chief there, and she’s done a great job of prioritizing technology for our company.
BUILDER: What do you expect for the future?
Bauer: I will say what I said in the October earnings call—I do believe that the housing industry is in a very good position to continue to see growth over the next several years plus. Because again I give to the fact that it’s not just the pandemic that has made housing attractive. There is an overall lack of supply on the resale side, you’ve got favorable interest rates, you’ve got a very tough entry into the land and regulatory environment. So there’s a lot of macroeconomic factors that have pointed housing to a very long and sustained growth pattern.
I think housing is in an excellent position because of supply constraints, the demand characteristics of the millennials and the baby boomers, favorable interest rates, and favorable jobs that have still been in place during this pandemic and will grow back even after the pandemic, whether you’re talking about the airline industry or hospitality and so forth.
I’m still very bullish on the long-term forecast and characteristics of the housing industry, because of supply/demand characteristics. It’s too early to tell, but, generally speaking, I think the new administration will be favorable to housing, as well.
