Monthly Archives: April 2016

Lennar to move forward

When WCI Communities, a “lifestyle community developer and luxury homebuilder” headquartered in Florida, announced last month that it agreed to a “definitive merger agreement” with fellow homebuilder Lennar for $643 million, the company said that its board was going to take a 35-day “go shop” period to seek a better deal.

Now, the 35-day “go shop” period is over and the merger with Lennar is moving forward, but it’s not a done deal yet.

WCI announced Thursday that its board actively solicited alternative acquisition proposals throughout the go-shop period, but did not receive “any superior proposals” to top the Lennar deal during those 35 days.

In the deal, Lennar agreed to acquire all of the outstanding shares of WCI common stock in a cash and stock transaction, which values WCI at $23.50 per share.

That price is based on a 37% premium above where WCI closed on Sept. 21, 2016.

The deal values WCI at approximately $643 million in equity, or an enterprise value of $809 million, the company said.

In the end, WCI’s board didn’t find a better deal. WCI’s board of directors unanimously approved the merger agreement with Lennar, and now the deal moves forward, with a caveat.

WCI is now subject to customary “no shop” provisions that limit the company’s ability to solicit alternative acquisition proposals from third parties or to provide confidential information to third parties, which basically means that WCI cannot actively pursue a better offer, but if one comes along, its board can consider it.

The “no shop” provision is subject to customary “fiduciary out” provisions, which again basically means that if WCI gets a better offer, it can take it.

According to WCI, it will file proxy materials with the Securities and Exchange Commission related to a special meeting of WCI’s common stockholders to vote on the merger agreement.

The company said that anticipates that the special meeting will be held in December 2016 or January 2017. The company said that if the merger agreement is approved, the merger would be expected to close shortly thereafter.

If the merger is completed, the transaction would include a portfolio of owned or controlled land totaling approximately 14,200 home sites, located in most of coastal Florida’s “highest growth and largest markets,” WCI said.

According to data provided by WCI, the company completed 1,118 homes with an average sales price of $444,000 during the 12 months ended June 30, 2016.

WCI is more than just a homebuilding business. The company also operates a real estate brokerage, title and lifestyles amenities businesses, all of which would be included in the Lennar deal.

“Our agreement with Lennar testifies to the legacy and quality of our brand, the attractiveness of our homes and communities, and the talent of our team members,” Keith Bass, president and CEO of WCI, said in September when the deal was announced.

“WCI Communities homebuyers and homeowners can expect a smooth transition and the continuation of the top-tier service they have come to expect from WCI,” Bass continued. “The Lennar offer represents immediate and attractive value for our stockholders.”

Oversee project management

Melia Homes, a home builder in Southern California, named Tim McSunas as its new executive vice president.

McSunas brings nearly 30 years of experience to the company. He held senior management roles in companies such as John Laing Homes, Pardee Homes, Taylor Woodrow Homes, The Shopoff Group and William Lyon Homes.

In these positions, McSunas developed skills in sourcing and controlling new land opportunities, negotiating purchases and sales agreements, conducting land feasibility, leading underwriting and developing new joint venture partnerships.

In his new role, McSunas will oversee operations, project management, product development, sales and marketing. He will also be involved in land acquisition opportunities.

“I’m excited to join Melia Homes’ executive team and look forward to getting involved in the progressive strategies that have shaped its visionary approach,” McSunas said.

According to data provided by WCI, the company completed 1,118 homes with an average sales price of $444,000 during the 12 months ended June 30, 2016.

WCI is more than just a homebuilding business. The company also operates a real estate brokerage, title and lifestyles amenities businesses, all of which would be included in the Lennar deal.

“Our agreement with Lennar testifies to the legacy and quality of our brand, the attractiveness of our homes and communities, and the talent of our team members,” Keith Bass, president and CEO of WCI, said in September when the deal was announced.

“WCI Communities homebuyers and homeowners can expect a smooth transition and the continuation of the top-tier service they have come to expect from WCI,” Bass continued. “The Lennar offer represents immediate and attractive value for our stockholders.”

Hover near 50 year low

National vacancy rates for rental housing decreased to 6.8%, down 0.5 percentage points from last year and the same as the second quarter this year. The homeowner vacancy rate remained unchanged from last quarter and last year at 1.8% in the third quarter.

“Given other evidence from the release, my views swing more with the optimists than the pessimists,” Trulia Chief Economist Ralph McLaughlin said. “Household formation surpassed 1.1 million, climbing from 944,000 last quarter. About 560,000 – or nearly half – of these households were owners, up from a loss of 22,000 last quarter.”

“I think this is good news in light of the fact that millennials now make up the largest pool of potential new households,” McLaughlin said. “Though many are still living with their parents, they eventually will move out.”

“First, they will rent, and as they settle down, and then they will buy,” he said. “While we can’t know for sure they will own at rates of older generations, our survey work at Trulia shows 80% of Millennials want to own a home – the highest share of any cohort and the highest in the seven years we’ve run the survey.”

A chart from First American shows Millennials have a higher percentage of people with a college degree than any other generation. Historically speaking, homeownership rates are much higher among those with college degrees.