5 minute readLennar agrees to purchase JTW also advised Breland Homes on its sale to Lennar in the Huntsville, Ala. and Pensacola, Fla. markets. The Executive Construction Homes deal also marks JTW’s second transaction in the Columbia, S.C. market. In 2020, JTW advised Essex Homes in their sale to Stanley Martin Homes (a division of Japanese-based Daiwa House Group). Broadly, homebuilder M&A transactions are said to be going on at a faster clip and a heightened urgency. Similar to trends in home sales themselves, those who are earnest on both the buyer and the seller sides of the equation view intensifying volatility, higher risk, and greater rewards as catalysts for action. At face value, Lennar – in a fashion similar to its Q4 2021 acquisition of Carolina Coastal operator Realstar, and more recently, the Q1 purchase of Gulf Coast Alabama and Florida operator Breland Homes – is carrying out the “orderly targeted growth” Lennar executive chairman Stuart Miller referred to in commentary during the company’s recent Q1 2022 earnings call. As we noted in our account of the Breland acquisition: Lennar’s move into Alabama runs consistent with a game plan that reflects opportunism and a tried-and-tested market expansion model that’s proven to be a success since COVID-19 began in Spring 2020 to alter migration trends, hybrid workplace requirements, second home demand, generational housing preferences, and an overall embrace of healthier, safer, more durable new homes. With the Breland Homes acquisition, Lennar instantly adds incremental profitable volume in the North Alabama and Gulf Coast markets – previously considered secondary and tertiary markets whose permit counts might not support full divisional focus – that have experienced outsized, pandemic-resilient growth. In the case of the Executive Construction Homes purchase, similarity with the Breland deal go one step further. In each of those two cases, sellers get to gain a financial windfall and a rampway of operational continuity in the vertical construction entity, and, at the same time, get a capital adrenaline infusion and a sustaining customer for ongoing land acquisition and development work going on separate from homebuilding operations. Nested in this pivot are two of the seismic shifts playing out in homebuilding’s landscape. In Q1 earnings commentary, Lennar co-ceo Jon Jaffe addressed this particular issue: If you sit down with CEOs and key executives of manufacturers, distributors for 4 to 6 hours, really opening up the thought process, how do we have a different approach to the products we buy, to the way that they’re distributed, to joining together manufacturers and distributors to think through from the origin of the supply chain, all the way to the installation of our home. You’re going to come up with a lot of interesting thoughts and ideas. And we’re in the process right now of really vetting those, we’ll be beta testing them and are very confident that we already see opportunities for significant improvement. And as I mentioned, it’s going to give us better cost control for both us and for our trade partners and give us much more clarity as to the delivery process. And it begins a lot with our technology and our ability to give forecasting information with real clarity to our vendors, which is critically important for them as they plan how to strategically supply us. In the same Q1 earnings transcript, Rick Beckwit, co-ceo with Jon Jaffe, carried the point across in terms of how local dominance – at both the land and the construction supply channel – begins to turn the screws even tighter, pressuring local private builders even further with a shrinking local market position. There’s no question we continue to gain market share on the private builders and many of the larger or mid-market public builders. This is going to continue to happen. A lot of this is driven by really access to land. Because when we have 20% to 40% market shares, the land market needs to work with us. So those land relationships are driving a lot of the gain. And then just the efficiency of our product, our Everything’s Included program allows us to work much more efficiently with the supply chain and as a result of that, we’re capturing more product. All in, both the better, more strategic, and more disciplined buyers, and the better, more operationally-sound, and more capable on the land access, entitlement, and development front a seller is, the riper the M&A market is. JTW Advisor’s Jasinski observes that a deep and wide potential pool of buyers remains relatively undeterred to achieve their acquisition goals, even as uncertainties send shivers of risk into parts of the economy and business outlook. You’re seeing a period of heightened transaction activity, and now changing conditions mean that activity means more deals will be harvested,” says Jasinski. “The windows of opportunity to sell don’t exist – especially the ones open now – at every part of a housing cycle. So, for sellers – as for buyers, who are mostly angling for land where it’s constrained in a concentrated number of mostly Smile States markets – timing matters.” Going forward, pressures – to grow and deliver completed homes on the strategic acquirers side, and to buffer increasing supply chain chokehold risk and potentially become longer term land providers on the sellers side – are building fast. Unpacking the deal: What it Means to builders
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Lennar Mini M&A Spree Continues With Buy Of Columbia, S.C. Firm
April 8, 2022, 4:30pm
