TPG to buy stake in struggling homebuilder

The Fort Worth, Texas-based private equity firm will invest $135 million in an Arizona-based homebuilder, marking its second senior housing transaction this year.

TPG Capital has agreed to make a $135 million investment in AV Homes, a Scottsdale, Arizona-based builder of active adult and conventional communities in Arizona and Florida, at $14.65 per share – a 9.6 percent premium to the 30-day trailing average closing price of the company’s common stock. The transaction, which was announced yesterday, is expected to close today.

Upon closing of the transaction, TPG will own a 41 percent stake in the company, which currently operates in Phoenix and central and south Florida markets. AV Homes develops active adult communities for people aged 55 and over through its Vitalia brand, as well as conventional housing communities under its Joseph Carl Homes brand.

“AV Homes has assembled a strong management team with deep industry experience,” Kelvin Davis, senior partner at TPG, said in a statement. “The company is well-positioned to participate in the ongoing recovery of the housing market, with real estate assets located in two healthy and growing Sunbelt markets.” 

TPG’s capital infusion into AV Homes follows the homebuilder’s recent turnaround efforts, which began in 2011 and have included reducing overhead, launching initiatives to improve internal processes, investing in a new IT platform and developing a strategic growth plan. In November, AV Homes hired its current president and chief executive, Roger Cregg, the fourth person to serve in that role in the space of approximately two years. The company was operating at a net loss of $4.76 million at the end of the first quarter, up from a net loss of $8.45 million during the same period one year ago, according to its first quarter earnings report.

AV Homes represents TPG’s eleventh real estate investment to date and its third involving a US homebuilder. In February, the private equity firm agreed to acquire Assisted Living Concepts, a Menomonee Falls, Wisconsin-based operator of senior-living residences in the US, for about $278 million, less than half the basis of typical senior housing acquisitions. That transaction is anticipated to close next month. 

Previously, in partnership with Oaktree Capital Management, TPG bought Taylor Morrison, the North American arm of troubled UK homebuilder Taylor Wimpey, in 2011, investing a total of $1.1 billion in the company. The partnership took Taylor Morrison public in April.