Masterly Ambitions

2004 Housing GIANTS

Bill Lurz, Senior Editor
April 1, 2004
Professional Builder

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With the exception of No. 13 Shea Homes, all Masters of the Universe are public companies. That means they want to grow fast and draw Wall StreetÆs attention whenever they have something to brag about, and most of them do. Flush with cash, they have strong balance sheets and share prices that are higher than they were a year ago. Even their worries are only dark sides of positive trends.

Booming markets, for example, are driving up land costs and stimulating opposition to growth, with resulting concerns about price and availability of the most crucial raw material. The Masters also are having trouble finding and keeping talented managers to keep operations humming.

Significantly, the MastersÆ pace of acquisitions last year slowed from that of past years. Most analysts attribute this to the time that many companies needed to digest recent large deals. A few key purchases were made in 2003 ù Pulte Homes acquired Sivage Thomas Homes in New Mexico and Arizona, and Standard Pacific Corp. broadened its Florida operations by landing Jacksonville-based Coppenbarger Homes.

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But most of the growth by these companies came by organic expansion of existing operations, price increases thanks to hot sales, and greenfield startups in new markets. With higher share prices creating the currency for acquisitions, we look for more deals this year than in 2003.

Michael Kahn of Jacksonville, a middleman for both buyers and sellers, predicts that the pace of acquisitions will surge this year.

ôIf you want to grow 15% a year and your base keeps getting bigger, itÆs hard to hit the forecast without doing acquisitions,ö Kahn says. ôHovnanian acquired Windward Homes in Tampa [800 homes a year] to get back into the Florida market. ItÆs getting hard to find builders that do 1,000 homes. I think weÆll see an upsurge in smaller deals simply because the publics have no other choice.ö