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9/9/2019 Pulte Doubles Down on Las Vegas Bets With American West Acquisition | Builder Magazine
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HOME > BUILDER 100 > PULTE DOUBLES DOWN ON LAS VEGAS BETS WITH AMERICAN WESTACQUISITION
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Posted on: April 17, 2019 0 Like
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PULTE DOUBLES DOWN ON LAS VEGAS BETS WITH AMERICAN WESTACQUISITIONPulteGroup's move adds deep local scale in an economically solid market as well as a volume bump. A strongmarketing-led operator joins its portfolio.
By John McManus
PulteGroup has acquired 35-year-old Southern Nevada regional power operator American West, the number four builder in
Las Vegas' Clark County, and the 77th ranked U.S. home builder in the Builder 100 list of companies from 2018. The deal
was announced to American West employees this week, according to an executive with knowledge of the transaction.
The purchase gives Pulte an adrenalin-boost of deep local scale in a market that's managed to sustain momentum through a
fits-and-starts national patch, thanks to strong economic growth and in-migration patterns, helped by skyrocketing prices
in California and other neighboring West Coast markets. The combination will allow Pulte to leap-frog from the No. 9
position in the Vegas market to very close to No. 1, competing with Lennar for top local honors.
A Q4 2018 market summary from Metrostudy regional director Ryan Brault concluded:
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9/9/2019 Pulte Doubles Down on Las Vegas Bets With American West Acquisition | Builder Magazine
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Las Vegas has seemingly ridden the year [2018] better than most other
markets which experienced significant pullbacks in sales and pricing.
Fundamentals still look good for Vegas, however. Price appreciation has
been the highest in the country amongst major markets per the Case Shiller
Index (Figure 8), a staggering 12.8% as of the most recent data. As that has
contributed to a substantial drop in affordability, though, expect both
volume and pricing to flatten as we go further into 2019. As of now I’m
projecting an even 10,000 combined new home starts for 2019 with a more moderate 3-4% growth in base prices and 8%
appreciation on the resale side – still good considering increasing challenges.
The deal--the first major M&A activity in CEO Ryan Marshall's era as leader at Pulte since September 2016--affirms that
although the pace and cadence of builder combinations activity has slowed and become more cautious since the back-half
spate of uncertainties that surfaced in 2018, strategic moves like Pulte's--to pounce on market share and a quantum leap in
concentrated volume are still in the cards as 2019's deal flow gets going--can pencil,.
This one can allow Pulte to make gains on the No. 1 and No. 2 national builders--D.R. Horton and Lennar--and further
separate itself from the rest of the top publics, in a market that may expect continued fundamental economic growth in the
next three to five years and more.
One of the factors playing into why this alignment of stars may have taken place could have a demographic ingredient in the
motivation.
American West founder, principal and CEO is Larry Canarelli, who's 71, and
may look at the combination with Pulte as both an opportunity to generate
the greatest value for the enterprise he built and a chance to lead efforts on
the ground for at least a transition period ahead.
He has been quoted as saying "I want to build homes as long as I live."
As strategic public builders continue to troll for both incremental sales
opportunity and the a series of benefits from concentrating and owning
greater marketshare in select competitive operating areas, they've also got
company in the pursuit of acquisition targets. Japan-based Sumitomo
Forestry, Daiwa House, Sekisui House, and, more recently Misawa Homes--
which invested in North Texas builder Impression Homes--all continue to
show interest in U.S. acquisitions, given flattening new-home growth opportunity in Japan. Clayton Properties
Group/Clayton Homes, which has assembled an 8-company portfolio of site-build home builders as part of its gigantic
national operations, manufacturing, and distribution network, may continue add to its site-build mix.
Two timing factors figure into what may motivate and provide urgency to sellers. The overarchingly important one has to do
with the cost and risks associated with capital financing--which for private builders weighs heavily in the form of personal
guarantees--as mixed-signal signs of a Recession in the nearing horizon force them to take financial chips off the table to
reduce their exposure.
Further--there are still many home building enterprises whose principals, founders, and second-generation leaders are in
their late-50s, 60s, even 70s. They're looking, in some cases, to assure the legacy of the local or regional enterprise they've
built, and in others, a "financial event" that returns them a big reward for the reputational and operational equity--land,
relationships, and a operational talent--they've built in a given operating arena.
So, even as the home builder M&A deals that do happen in 2019 need to have more going for them than, perhaps, in the few
years past, a good match is still possible.
Larry Canarelli, founder and CEO of American West Development.
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9/9/2019 Pulte Doubles Down on Las Vegas Bets With American West Acquisition | Builder Magazine
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JOHN MCMANUS
John McManus is an award-winning editorial and digital content director for the Residential Group at Hanley Wood in Washington, DC. In
addition to the Builder digital, print, and in-person editorial and programming portfolio, his accountability for the group includes strategic
content direction for Affordable Housing Finance, Aquatics International, Big Builder, Custom Home, the Journal of Light Construction, Multifamily Executive, Pool & Spa News,
Professional Deck Builder, ProSales, Remodeling, Replacement Contractor, and Tools of the Trade.
Advertisement Keywords:
Subject:
Mergers and Acquisitions Land Acquisition Local Markets Operations
State:
Nevada
Location:
Las Vegas-Paradise, NV
Organization:
Pulte Pulte Group American West Homes
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