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US Homebuilder Tri Pointe Goes Public

**Tri Pointe IPO Priced Above Expected Range**

Tri Pointe Homes LLC (TPH:NYSE), which is due to start trading today, is the first US homebuilder to float since December 2004. The move comes as the California-based company, financed by real estate investor Barry Sternlicht, aims to monetise investors’ rising appetite for housing-related stocks amid a recovery in the sector.
Hoping that the rebounding US property market would generate interest for its shares, on Tuesday Tri Pointe raised the size of its initial public offering. The homebuilder said in a regulatory filing two days before its flotation on the New York Stock Exchange that it will sell 13.7 million shares in the IPO, 17 per cent more than the 11 million shares it was initially planning to offer.

In a further sign of optimism, Tri Pointe reported today that it had priced its shares at $17, valuing the company at about $537 million (£340.2 million). The announced valuation is above the price range of between $14 and $16 a share which Tri Pointe had indicated earlier this month.
According to Tri Pointe’s IPO prospectus, total net proceeds from the stock market flotation, after deducting the underwriting discount and estimated offering expenses, will be approximately $156.3 million (£99 million). The company intends to use the net proceeds for the acquisition of land and development in California – one of the hardest-hit states during the US housing crisis – and in Colorado. As stated by the homebuilder, the raised funds will also be used for single-family home construction and related purposes in those states.

Starwood Capital Group, investor Sternlicht’s private equity fund, has invested $150 million (£95 million) in Tri Pointe since 2010, equating with about 84 per cent of the company before the IPO. The prospectus further revealed that Sternlicht, who will become Tri Pointe’s chairman, will own about 45 per cent of the issued equity after the offering.

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**Publicly-Listed Homebuilders Cashing in on Housing Rebound**
In a sign that the US housing market is gradually rebounding six years after its collapse in many areas, homebuilders have been showing strong trading performances. In the past year, publicly-listed homebuilders have been the best performing sub-industry group on the S&P 500, with the sector rising over that period by more than 100 per cent. Best performer was Pulte Group (NYSE:PHM), whose shares almost tripled through 2012.

The positive trend in the US housing market has also translated into better earnings for builders. As iNVEZZ reported earlier this week, construction company D.R. Horton (NYSE:DHI) has just posted its most profitable first quarter since 2007. Lennar Corp (NYSE:LEN) and KB Home (NYSE:KBH), two other American homebuilders, have also reported big jumps in order backlogs and in quarterly earnings.

About the author

Rachel McCormack
Rachel loves food, drinks, broadcasting and financial markets. She enjoys a fine wiskey and some stock market research.

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