In late-July,

Source: Tri Pointe Homes Q2 earnings presentation

Tri Pointe’s choice to start the new Utah division from scratch rather than to take the quicker-hit of an M&A deal follows a tried-and-true strategic playbook (i.e. Charlotte/Raleigh, N.C. in 2019) and taps into a cycle-proven strategist, Washington state division president Ken Krivanec, to lead the expansion.

In a press statement, Krivanec says:

Utah’s consistently strong housing market is fueled by its diverse economy, which provides a runway for long-term growth,” said Ken Krivanec, who has been named as president of the new division. Krivanec, who has served as division president for Tri Pointe Homes’ Washington division for 12 years, will serve in a dual president role. “The state is home to a large number of different industries, including tech, life-sciences, aerospace, financial services and energy/natural resources. This diversity has led to one of the strongest job growth markets in the country which coincides with an ever-increasing demand for housing.

“Utah, like the rest of the country, has a severe housing shortage, which has been exacerbated by existing homeowners who are unwilling to sell and give up their low interest rate mortgages,” said Krivanec. “At the same time, new home builders have pulled back on housing starts, which has created an even greater shortage. We believe that this presents Tri Pointe with an ideal opportunity to apply our Best of Big and Small pillar when expanding into Utah and to successfully leverage the unbalanced supply and demand conditions in the market.”

In entering the Utah market, Tri Pointe’s product line and community positioning and pricing – mostly a notch-or-two-above the fiercely competitive fray of highly interest-rate sensitive entry-level and first-time buyer-focused builders – check several important boxes for a state growing leaps and bounds due to both natural and in-migration population growth, as well as economic development.

Per a recent Axios overview:

Utah’s population is still expanding — but not as fast as it was a year ago.

Driving the news: Newly released census estimates show Utah grew by about 41,700 people from July 2021 to 2022 — the ninth biggest net population growth and 10th highest growth rate of any state.

With its “premium lifestyle” product and pricing positioning, Tri Pointe strategists are likely betting a new divisional start-up can get a jump-start at least in part because it’s not competing head-to-head for lots, homebuying customers, and, to some extent, construction trades with entrenched major nationals like D.R. Horton, M.D.C., and Lennar nor trusted Utah private builder operators like Edge Homes, Ivory Homes, Woodside Homes, and Clayton’s Oakwood Homes group.

Still, establishing traction, gaining momentum, and grabbing sufficient market share to achieve local scalability for a new division often stems from local relationships and experience to get the product just right and draw on trust capital among land sellers, construction crews, and the distribution channel there.

In Q2 earnings comments chairman and CEO Bauer nodded to extra challenges of a de novo division:

Whenever you start up a division – for example, Raleigh, where our scale is still growing – you’re going to have a few more challenges to attract and retain the right trade partners. But labor has always been tight before the pandemic. Our labor force was aging well before the pandemic started. But we’re still able to scale up with our trade partners, especially in our 15 divisions, we’ve got tremendous growth that we’re experiencing in the Texas and the Carolinas market, especially the Charlotte market. So, as you do scale up, as you said, you do get more trade partners and become more efficient on both costs and cycle times.”

The good news as well is that Krivanec – although he’s spent 13 years as Tri Pointe’s division leader in Seattle and another seven before that as head of sales and marketing at Quadrant Homes (which became part of Tri Pointe in 2010) is native to the Utah market and has built trusted relationships on the ground there through the years.

From the press statement:

Ken is the ideal leader to launch our new Utah division,” said [Tom] Mitchell [president and chief operating officer of Tri Pointe Homes]. “Having been raised in Utah, working in the industry there previously, and regularly travelling over the last decade between the Washington and Utah markets, Ken has deep ties and a profound understanding of the market.”

As for further use that $1.7 billion in liquidity Tri Pointe may deploy when the time, place, and number are right, it may be just a little bit early to say what or when.

As Doug Bauer says:

More to come on that.”