IPO Report: WCIC Communities (WCIC)

Francis Gaskins |

Based in Bonita Springs, FL, WCI Communities (WCIC) scheduled a $185 million IPO with a market capitalization of $566 million at a price range mid-point of $22, for Thursday, July 25, 2013.


S-1 filed July 15, 2013
http://www.sec.gov/Archives/edgar/data/1574532/000104746913007557/a2215945zs-1a.htm


Manager; Joint Managers:  Citigroup; Credit Suisse; J.P. Morgan
Co Managers:  Zelman Partners; FBR; Raymond James


Summary

WCIC builds master planned communities where homes are typically purchased as second home or adult homes, in Florida.  Recent land acquisitions provide the oppurtunity to build almost 1900 homes.

This news item may give a few IPO buyers second thoughts about the homebuilding market.

Unexpected Drop in Starts Curbs U.S. Housing Rebound: Economy  http://www.bloomberg.com/news/2013-07-17/housing-starts-in-u-s-unexpectedly-fall-to-lowest-in-a-year.html

Valuation

WCIC appears to be priced ‘in range’ compared to this years homebuilding IPOs.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price/

Price /

% offered

annualizing Q1 ’13

Cap (mm)

Sls

Erngs

EBITDA*

BkVlue

in IPO

WCI Communities (WCIC)

$566

2.6

183.8

4.8

1.9

33%

 

 

 

 

2012 yr

 

 

 

 

 

 

 

 

 

COMPARE TO RECENT HOMEBUILIDNG IPOs

 

 

 

 

TRI Pointe Homes (TPH)

$510

4.6

425.0

 

1.7

 

William Lyon Homes (WLH)

$690

2.1

-69.0

 

2.5

 

Taylor Morrison Home (TMHC)

$3,001

2.0

31.3

 

2.5

 

http://gaskinsco.com/ucp-chart.png

Glossary: http://gaskinsco.com/glossary.htm

Conclusion

Building second home master planned communities is a slightly different business than the vanilla business of building homes – it’s about discretionary income rather than bread & butter – and is more subject to economic fluctuations.

However, on a price-to-book value WCIC is priced at the lower end.  The rating on WCIC is neutral to negative at the price range mid-point of $22..

Business

WCIC is a lifestyle community developer and luxury homebuilder of single-and multi-family homes in most of coastal Florida’s highest growth and largest markets, in which WCIC owns or controls 8,300 home sites.

WCIC homes and communities are primarily targeted to move-up, second home and active adult buyers.

Three business segments

WCIC’s business is organized into three operating segments: homebuilding, real estate services, and amenities.  The homebuilding segment accounted for 61.0% of total revenues and substantially all of the total gross margin in 2012.

•Homebuilding:  During 2012, we delivered 352 homes with an average delivered price of $396,000, compared to 128 homes with an average delivered price of $326,000 in 2011.

•Real Estate Services:  WCUC operates real estate brokerage and title services that complement the  Homebuilding operations. In 2012, WCIC’s  real estate brokerage business was the third-largest brokerage in Florida and the 36th largest in the United States based on sales volume.

•Amenities:  Within many of the communities, WCIC may own and/or operate resort-style club and fitness facilities, championship golf courses, country clubs and marinas.

Recent land acquisitions and disposition

In April 2013, WCIC closed on the acquisition of a master-planned community consisting of 1,525 remaining home sites in six neighborhoods located in Venice, Florida, including 400 home sites that are ready to build, for an aggregate purchase price of $47.2 million.

In June 2013, WCIC closed on a land acquisition for a master-planned community with 360 home sites across two neighborhoods located in Naples, Florida, for an aggregate purchase price of $18.2 million.

In addition, the sale of two parcels consisting of 450 planned home sites in the Lost Key Golf & Beach Club community located in Pensacola, Florida is scheduled to close in July 2013 for a sales price of $9.8 million. The parcels consist of a two acre beachfront site planned and entitled for a 300 room hotel and conference center and 47 acres of adjacent land planned for parking facilities and future development.

Emerged from bankruptcy

On August 4, 2008, the predecessor company and certain of its subsidiaries filed voluntary petitions for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware in Wilmington (the “Bankruptcy Court”).

The bankruptcy filings were the result of a highly leveraged balance sheet, the global recession and a severe housing downturn. WCIC emerged from bankruptcy on September 3, 2009 with a $300.0 million senior secured term loan and a $150.0 million senior secured subordinated term loan. In addition, all of the assets and liabilities, including the land portfolio, were reset to then-current fair market value.

5% stockholders pre-IPO

Monarch Alternative Capital LP and certain of advisory clients, 25.3%
Stonehill Institutional Partners, L.P., 23%
WCI Communities, Inc. Creditor Trust, 5.2%
Affiliates of The Royal Bank of Scotland PLC, 4.1%

Use of proceeds

WCIC expects to receive $135.5 million from the sale of 6.8 million shares.  Shareholders intend to sell 1.7 million shares, or 20% of the IPO.

Proceeds are allocated for general corporate purposes, including the acquisition and development of land and home construction.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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CHWD Chatsworth Data Sltns Inc n/a n/a n/a 0

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