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.