It may seem like only yesterday that the nation’s economy was crushed under the weight of collapsed mortgage-backed securities, leaving the housing market stagnant as banks resisted lending. But, for at least the past couple of years, as tensions have eased, the industry has once again become a seller’s market for homeowners, and it’s now the succesful homebuilders, including Ryland Group, who find themselves in a buyer’s market.
In the past year or so, the company, one of America’s biggest homebuilders, has acquired the assets and operations of four private builders, growing its footprint by more than 4,300 lots and 500 sold homes. Though the 47-year-old firm has traditionally grown organically, the signs of industry recovery and the opportunity to break into or return to markets were too good to pass up, general counsel Tim Geckle says.
After six years of recession, Geckle says that homebuilding is making a comeback. “One of the characteristics of this industry,” he explains, “is that it’s cyclical. The challenge for us is to grow the business with market trends on the uptick right now.”
When the housing market began to drop off in 2006, Ryland, like many large builders, tried to stay asset-light, exiting, for example, the Phoenix market. This allowed the company to come out of the recession cash-ready—a luxury not afforded many smaller homebuilders—and in a unique position to make a deal. “With banks not lending, many small, private builders have found access to capital quite difficult,” Geckle says. “Joining Ryland gives them the ability to focus on the business of selling and building homes instead of dealing with capital-constraint issues.”
“Many small, private builders have found access to capital quite difficult. Joining Ryland gives them the ability to focus on the business of selling and building homes instead of dealing with capital-constraint issues.”
Four such builders—Charlotte and Raleigh, North Carolina-based Timberstone Homes, Phoenix-based Trend Homes, Dallas-based LionsGate Homes, and, most recently, Philadelphia-based Cornell Homes—have come into the Ryland fold. Timberstone joined in July 2012 as the ninth-largest builder in Charlotte, according to 2011 rankings. Trend Homes, which has been in Arizona since 1989, brought the Ryland name into seven active communities in December of 2012. LionsGate, which Ryland acquired in the summer of 2013, carries the distinction of two 2013 award nominations in the Dallas Builders Association’s McSAM awards, one for Builder of the Year and the other for People’s Choice Builder of the Year. The most recent acquisition, Cornell Homes, gives Ryland a strong presence in the highly land-constrained Philadelphia market.
The benefit of acquisitions, Geckle says, is that they establish a builder’s presence in a market quickly. Rather than buying land and developing it from scratch, working with an established builder gives Ryland an immediate foothold in a market. Acquisitions also give the company access to operations and teams who are already familiar with the market.
Geckle says there is no firm game plan in the immediate future to expand further through acquisition. Every builder and market is unique, so each is considered independently. Whether it’s a well-positioned builder or an attractive market that guides Ryland’s search is not immediately clear, but Geckle says his company’s broad approach keeps the homebuilder more open to the many opportunities that come its way.