Great Southern Homes (GSH), the 45th largest company on the 2022 BUILDER 100 list, has entered into a definitive merger agreement with DiamondHead Holdings Corp., a special purpose acquisition company. Upon the closing of the acquisition, GSH will become a publicly traded company and DiamondHead Holdings will be renamed United Homes Group (UHG).
The transaction values the combined company at a pro forma enterprise value of approximately $572 million, as of Dec. 31, 2022. The transaction, approved by the board of directors of GSH and DiamondHead Holdings Corp., is expected to close during the first quarter of 2023.
GSH builds homes in South Carolina and Georgia, focusing on the entry-level and first-time move-up home buyer segments. According to the company, it plans to employ a capital efficient “land-light” operating model that is expected to generate higher returns with lower cyclical risk compared with a traditional home building operating model. GSH says by controlling land supply primarily through lot option contracts instead of carrying lot inventory on-balance sheet the company expects to generate higher returns on invested capital with more flexibility. GSH currently has access to over 11,000 finished lots in high-demand submarkets, according to the company.
“For over 20 years I have worked to build GSH into the leading Southeast home builder it is today,” says Great Southern Homes founder and CEO and 2020 Hearthstone BUILDER Humanitarian Award winner Michael Nieri. “I am excited for the next chapter for GSH, where through the combination of my operational expertise with David Hamamoto’s public company and capital markets experience, we plan to grow UHG into a national home builder.”
The company’s growth plan includes both organic expansion as well as mergers and acquisitions. Nieri says the builder plans to become a merger partner of choice for smaller regional builders located in high-growth markets.
“Additionally, we are building out a programmatic, institutional build-to-rent platform, where our current product set and geographic footprint are well positioned to meet the demands of the strong and growing rental market for single-family homes,” he adds.
DiamondHead co-CEO and chairman David Hamamoto has over 40 years of experience in real estate investing, as well as operating both private and public real estate businesses. Hamamoto was the founder and chairman of the previously publicly traded NorthStar real estate related companies. DiamondHead is co-sponsored by Antara Capital, an event-driven hedge fund that invests across a wide variety of financial instruments.
“We are thrilled to partner with Michael Nieri and the GSH team and look forward to executing on our shared long-term vision,” Hamamoto says. “We are impressed with the scale and operational performance of GSH, and we are excited to work with the GSH team in continuing their growth as a public home builder. We believe there continues to be a massive undersupply of single-family homes in the U.S., especially in starter and first move-up products, which will result in significant demand for the foreseeable future.”
