Dive Brief:
- PulteGroup has announced its $430-$450 million acquisition of Atlanta homebuilder John Wieland Homes and Neighborhoods, Builder Magazine reported. As part of the deal, PulteGroup will acquire 7,400 controlled lots and 280 homes in backlog lots in prime Southeast markets: Atlanta; Charleston, SC; Charlotte, NC; Nashville, TN; and Raleigh, NC.
- The luxury, high-end builder was sold to a joint venture of the Wieland family and a Connecticut investment firm in 2012, and, for the 12 months ending September 2015, it has generated $280 million in revenue, with an average home selling price of $495,000.
- The deal is expected to close deal in the first quarter of 2016. Former PulteGroup executive Greg Huff took over as CEO of John Wieland Homes earlier this year..
Dive Insight:
PulteGroup’s strategy of investing in high-return projects that will allow market growth over time is consistent with the Wieland acquisition, PulteGroup spokesperson Valerie Dolenga said. Eugene James, regional director of Metrostudy Atlanta and Nashville, told Builder that Wieland is able to deliver a larger-than-expected number of homes and at an above-average selling price due to Wieland’s good reputation in the market.
"With population growth and housing demand in the Southeast expected to remain strong for years to come," Dolenga said, "our acquisition of the John Wieland Homes and Neighborhoods brand and its robust land pipeline provides a great opportunity to increase our market share and operating leverage in five important cities, while expanding our presence in the luxury segment."
According to Trulia’s 2016 predictions, the "bargain belt" of the South will continue to boom despite pessimism in other areas of the housing market. Another indication that the South is a growing area for construction is the recent Associated Builders and Contractors Construction Backlog Indicator report, which found the South’s backlog of nonresidential construction projects shot up to 10.3 months, the region's highest CBI reading ever.
This move by PulteGroup — the third-largest homebuilder in the U.S. — is another indication of the general trend toward consolidation in the homebuilding industry. The merger wave was led this year by the Ryland/Standard Pacific deal earlier this year. The Taylor Morrison/Orleans Homebuilders acquisition soon followed, with the M/I Homes/Hagen and Clayton Homes/Chafin Communities deals following soon after.
J.P. Morgan’s Michael Rehaut agrees that the deal is consistent with a broader industry consolidation, as well as the recent trend, he told Builder, of public builders buying out small to mid-sized private companies.