David Weekley adds T.W. Lewis to Growing Portfolio, Footprint
Private home builder David Weekley Homes, which entered the Indianapolis market in April by hooking up with a private home builder on the brink of extinction, has added Phoenix as its 16th market, taking over a company on more solid financial footing, but no less opportunistic.
Weekley, via a cash and options deal, has purchased most of the remaining home building lots of T.W. Lewis and will begin building in the Phoenix market within 90 days, under the name T.W. Lewis Collection of David Weekley Homes.
The deal fulfills two of Tempe, Ariz.-based T.W. Lewis Homes owner and CEO Tom Lewis’ near-term goals: 1) a leadership succession plan, and 2) a welcome new source of access to capital to accelerate opportunities as the dig out from the housing recession takes hold. To date, Lewis, 62, has been the sole source of his home building operation’s capital financing, and, especially in a protracted brutal market, capital options have become increasingly critical. Lewis notes that his company paid off its land and housing debt in 2008 and 2009, and asserts that he’s profitable on a run-rate basis now.
However, expecially in light of the opportunities that will be there for those with bigger treasure troves of cash, Lewis can now breathe a sigh of relief on behalf of his team of 35 employees that the company will tap into the deep pockets and deep leadership bench at Weekley, which is regarded as private home building’s preeminent business culture.
Lewis sent a note yesterday to friends, partners, and associates that says:
“Under the new agreement, T.W. Lewis will complete all of our homes started through 2011 and transition to ‘The T.W. Lewis Collection by David Weekley Homes’ during 2012. I will remain active in management and will be a partner in the new venture for five years. All current T.W. Lewis employees also will remain with the organization.”
In an interview this morning with Builder Pulse, Lewis explained some details of the structure of the deal:
- David Weekley Homes acquires for cash about 42 lots across T.W. Lewis’ 11 active communities in the Phoenix market.
- David Weekley Homes has assigned one of its executives to operate out of the Phoenix operation, serving as David Weekley Homes’ division president, reporting through to Austin, Texas-based area president Jim Rado. The assignment’s going to Jason Hill, up to now a project manager
- Weekley enters into an option deal to take down about 120 lots across three additional parcels T.W. Lewis owns, where Lewis will serve as developer and land banker.
- Tom Lewis says he’s closing today on yet another 30-lot deal in the master-planned community of Seville in Gilbert, and he plans to work as a land acquisition partner with Weekley and continue in an ongoing role as a land banker.
- Additionally, an office building that T.W. Lewis owns in Tempe and serves as the builder’s headquarters will be part of a lease agreement, and the offices will now be home to David Weekley Homes’ Phoenix operation.
T.W. Lewis, per Builder, ranked 165 in 2010 in Builder‘s Next 100, with revenues of about $52 million on closings of 111 homes.
Tom Lewis notes that his company will close about 100 homes in 2011, and “this deal will allow David Weekley to get a fast start, with about 100 closings in 2012.”
Weekley’s Rado confirmed that plans call for 10 to 15 home starts under the T.W. Lewis Collection by David Weekley Homes in 2011. “We plan to close about 100 homes in 2015, and our five-year plan is to close about 250 homes, because we believe that’s where this market is going,” said Rado.
Avila Advisors served as representative to Tom Lewis interests in seeking a capital partner.
This arrangement gives Weekley a presence in a market that it has coveted a position in earlier but failed to establish. Now it has a running start with a lot pipeline, a partner with a strong name as a land buyer and home builder in the market; a set of relationships with trade contractors that stretches back 20 years, and an alignment with a business culture that’s a good match with the Weekley ethic of quality.
Earlier, in April, Weekley joined Indianapolis-based Estridge Homes‘ operations into David Weekley Homes, with principal Paul Estridge, another regional private builder with a strong reputation for customer care and quality.
Campbell to Exit Standard Pacific at Yearend
When Ken Campbell cleared security and got buzzed in by Standard Pacific’s lobby receptionist in Irvine, Calif., in the Fall of 2008, the company’s welcome for the Matlin Patterson operative had all the warmth of greetings to the grim reaper himself.
In an April, 2010 profile of Campbell, just shy of two years into his resuscitation efforts at Standard Pacific, we wrote:
His m.o. is simple. Come in. Listen. Do the obvious. Give others credit for success. Then, move on, making Matlin-Patterson’s $5 billion distressed market fund investors a little—or a lot of—money in the bargain. It’s become an iterative play because it’s his makeup—a good listener, a rapid learner, a dispassionate decision-maker, an impatient doer, and—what strikes many as an oxymoron but shouldn’t—a deeply caring pragmatist with little-to-zero need to prove anything to anybody … except maybe himself.
Home building, they say, is different. It’s local. It’s real estate. It’s manufacturing. It’s marketing and sales. It’s trade relationships. It’s logistics and distribution. It’s the business of dreams. It eats “outsiders” for lunch. You have to be there. You have to do it to know it. Public home building company CEOs are a club not looking for new members.
Campbell stepped into the StanPac arena with fluid three-part goal: 1). stop the bleeding, 2). prevent the venerable company from going into bankruptcy, and 3) establish a platform from which the company could grow.
Industry insiders, observers, and analysts may have their say about Campbell’s three-year tenure now that he’s chosen this moment–before the destiny of both the company and the home building industry itself is clear–to exit.
Whatever the subjective comment might be, the facts of Campbell’s Standard Pacific performance are pretty clear. Here’s some of what that tenure looks like:
- Overhead: reduced overhead by $145 million to $145 million … i.e. cut overhead by 50% from end of 2008 to present
- during that period sales went from 5,000 to 2,500
- Debt: Standard Pacific had a balance of $2.2 billion in May 2008, all of it due to mature before 2016; now, the debt balance is $1.3 billion, and less than $100 million of it is due before 2016
- JV debt went from $178 million to zero
- Operating Profit: EBIDTA is 12%, highest in the industry … actual dollars went from $44 million to $132 million
- Per unit margin: breakeven in terms of sales per month per community was 3.2 … now the breakeven on per sales per community is 1.1
- ASP: Average selling s price in 2008 was $300,000; now, in StanPac’s new communities, the ASP is close to $390,000 …. Opened 100 new communities in last 2 years… all new home designs…. Another 50 are scheduled to open in the next year
- JD Power noted in its final series of rankings of that Standard Pacific ranked No. 1 in customer satisfaction among public home builders in its markets
Not a bad report card to add to the resume of a “fixer.”
Thing is, Campbell lives up to another standard on all that one might consider an accomplishment, his own.
“The real measure of whether I’ve succeeded is does the company do better after I’ve left. Standard Pacific is in a position to do that.”
As was his plan practically from the get-go Campbell’s operational mantel goes now to Scott Stowell, who’s worked yeoman’s service at the company since 1986, in various division, region, and headquarters titles, most recently as president. In June, the team added an industry outsider, Jeffrey J. McCall, as chief financial officer and executive vice president, who’d worked in the past with Campbell, and who represents continuity in asking questions, raising challenges, and thinking outside prevailing industry conventional wisdom.
“I used to say in analyst calls that it was easy for me to think out of the box because I didn’t know where the box was,” says Campbell. “Now, that role goes to Jeff, who also doesn’t know where the box is. The issue is fatigue… people are tired but they get it… Sitting around and waiting for the market to recover is not a good operating strategy. Jeff is not tired. He’ll keep people focused on what’s going on as opposed to what they hope will go on.”
Campbell is a big believer in Stowell, McCall, and the team of 750 associates who currently work for a company founded and built by Ron Foell and Art Svendson, starting 45 years ago. Going from losing $1.2 billion to actually making money didn’t happen without a lot of inspired, committed, sweat equity.
“A turnaround as successful as this was only possible because of the solid “bones” the company had,” says Campbell.
The afternoon of the announcement of his forthcoming status as an expert in sand saves, Campbell was riding an exercycle at the gym.
“Exactly what I was doing the morning I finished at Railworks….was asked to run Ormet that afternoon….weird.”
Today, Ormet, the Hannibal, Ohio-based aluminum plant Campbell “fixed” before his StanPac term of service thrives, and is hiring.
That’s what he wants for Standard Pacific three years from now.