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The Big List, part 3
John McManus / BIG BUILDER / September 6, 2013
The inside story of how TRI Pointe Homes went public and changed the game of housing in 2013 and beyond
In earlier segments of The Big List, we met the principle cast of characters in TRI Pointe Homes quest for a big strategic play on Wall Street earlier this year. In Part 1, we noted how global and domestic urgency around yield crescendoed toward the end of 2012 and the beginning of 2013, driving capital into home building as investors wagered that housing’s big turnaround had come.
In Part 2, we looked at a more granular level at the pedigree and essentials for a home building company to validate itself among such investors: talent with a track record in big time equity and debt markets; money (often in the form of major league private equity sponsorship); and relationships that would ensure continued and replicable access to well-priced building lots.
In this final segment of The Big List, we look at the last leg of the
When the debt market window began to open in the Fall of last year, Bauer, Mitchell, and Grubbs started investigating how they could get in on the low-cost money that big public builders were accessing to re-term their debt. A number of private companies, like Ashton Woods, David Weekley Homes, the Mattamy Group, and (then-private) William Lyon Homes and Taylor Morrison Homes issued high-yield notes ranging from $200 million to $550 million, at yields of from 6.5% to 9%, which was cheap compared with where those same rates had been.
So, Bauer and Grubbs considered doing something similar in the debt markets, and as they pursued options, it became clear that a Rule 144a equity offering was among them. Sternlicht’s call from Korea to Bauer on the sideline of his son’s Mater Dei football game put the kibosh on the Rule 144a equity offering.
“I knew that Doug and his team were ready for this,” said Sternlicht. “Doug was super nervous about it, but I felt that as long as they could replicate their structure and discipline, we could keep looking at new markets and grow this thing.”