Dream Finders has acquired a variety of housing, mortgage and title assets from McGuyer Homebuilders and its affiliates for roughly $471 million in cash, subject to post-closing adjustments.
The acquisition of assets from McGuyer, which primarily sells move-up houses and does business as Coventry Homes, is aimed at helping the publicly-traded Dream Finders make inroads into Texas markets that include Houston, Dallas and San Antonio. It’s also designed to help the acquirer expand its presence in the hot Austin market, which has led the nation in
Seasonally-adjusted home sales projections have been stable to slightly lower on a consecutive month basis in Austin, Houston and San Antonio regions as well as statewide, but up slightly in the Dallas area, according to Texas A&M’s most recent analysis of Census data. Unadjusted annual comparisons continue to show notable gains with the exception of Dallas, where projections are just slightly lower than a year ago.
The deal will give DFH access to a backlog of 1,845 homes in the $350,000-$700,000 price range that extends
“We believe we can provide capital and efficiencies to help the current team grow well beyond its 2,000 homes produced annually,” said Patrick Zalupski, chairman and CEO of Dream Finders, in a press release. “We also believe we structured the deal in a highly accretive way for DFH shareholders, allowing us to maintain our asset-light business model and generate-leading returns on shareholder capital.”
To do this, Dream Finders plans to continue to hold land off its balance sheet and carry only short-term debt used for purposes related to work-in-process inventory.
DFH paid for the acquisition with $20 million in cash-on-hand, 150,000 shares of newly-designated Series A convertible preferred stock, and an increase in senior, unsecured, revolving credit commitments that also was used, in part, to pay down other debt. The convertible preferred stock can be redeemed in year four or five after closing at an annual rate of 9% with the aim of avoiding dilution.
McGuyer shareholders retained around $100 million in finished lots previously held by the company on its balance sheet to create an asset-light model for that company. Dream Finders has the option to take down the home sites over the next two years and use the structure as an unsecured revolving credit facility that can finance future acquisitions of land off-balance sheet.
A second closing is set for the fourth quarter on a 90-unit model home portfolio with an estimated retail value of $65 million, and DFH plans to market it to investors through a sale-leaseback arrangement that can generate cash-flows. That money can then be used to repay revolving debt.
Dream Finders plans to retain McGuyer’s Coventry branding as well as its CEO and staff.
