Tri Pointe Homes Inc. (TPH), a housing company financed by investor Barry Sternlicht, jumped 12 percent after raising $233 million in the first initial public offering by a U.S. homebuilder since 2004.
The Irvine, California-based company and shareholders sold 13.7 million shares for $17 each, above the marketed range of $14 to $16, Tri Pointe said in a statement today. The stock closed at $19.05 in New York trading today.
Homebuilders are turning to debt and public-equity markets to raise cash as buyer demand for new construction rises amid low mortgage rates and a shrinking supply of existing residences for sale. Builders are expected to break ground on 650,000 single-family homes this year, up 22 percent from 2012 and about half the “normal” pace of 1.3 million annual starts, the National Association of Home Builders said in a Jan. 22 report.
“The housing market’s red hot,” Robert Wetenhall, an analyst with RBC Capital Markets LLC, said in a telephone interview from New York before the IPO. Publicly traded companies including KB Home (KBH), Lennar Corp. (LEN) and D.R. Horton Inc. “all reported exceptionally strong order trends that came in ahead of most expectations. This provides a bullish backdrop for homebuilders in the context of the new-issue market.”
The 11-member Standard & Poor’s Supercomposite Homebuilding index rose 91 percent in the 12 months through today, compared with a 14 percent gain in the S&P 500 index. The broader measure’s best performer was PulteGroup Inc. (PHM), a Bloomfield Hills, Michigan-based homebuilder, whose shares almost tripled.
Taylor Morrison Home Corp. (TMHC), a builder based in Scottsdale, Arizona, filed plans last month to raise $250 million in an IPO. Lennar, based in Miami, and Fort Worth, Texas-based D.R. Horton this week sold notes.
Tri Pointe will have net proceeds of about $156.3 million from the IPO, the company said in today’s statement.
Tri Pointe, which currently builds homes in California and Colorado, said in regulatory filings it will use proceeds from the IPO to acquire land. Some of the land will come from Sternlicht’s Starwood Land Ventures LLC. The company owns 9,600 lots in California, Arizona and Colorado, according to Tri Pointe’s IPO prospectus.
“The neat thing about what we’re doing is it’s immediately accretive to the value of the company,” Tri Pointe Chief Executive Officer Doug Bauer said in an interview on CNBC today. “It’s not for general working capital of the company, but for real assets. That’s really critical for our growth.”
Sternlicht’s Starwood Capital Group LLC has invested $150 million in Tri Pointe since 2010, owning about 84 percent of the company before the IPO. Sternlicht, who will be Tri Pointe’s chairman, will own about 45 percent of the shares after the offering, the prospectus shows.
Sternlicht sold 3.7 million shares for $62.7 million in the IPO, while retaining 14.3 million shares, according to the prospectus. After his $150 million in costs, he has a total paper profit of $185.8 million based on today’s closing price.
Citigroup Inc. (C), Deutsche Bank AG and FBR & Co. led the offering.
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