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Get Ready for Homebuilder IPOs!

A pair of homebuilder deals should be hitting markets soon


Well, the IPO market ended the year with a whimper, no doubt helped in part by the impending fiscal cliff. But as we start the new year, expect the IPO market to get back into gear — potentially within the next few weeks, led by several homebuilders testing investors’ enthusiasm.

And according to the Wall Street Journal, these deals will be the first for homebuilders since 2004 … so yeah, they’re due.

The rebound in the real estate market seems to be more than a temporary spurt. There’s a bevy of key drivers, including rock-bottom interest rates, improvement in employment and the tightening of supply of housing. That has led to a few deals on the docket, including …

Taylor Morrison

Taylor Morrison, which focuses mostly on single-family detached and attached homes, was founded over 75 years ago, and it’s about to become the No. 6 public homebuilder in North America.

During the first nine months of 2011, Taylor’s revenues spiked by 47% to $879 million, and EBITDA came to $125.1 million. It also reported a hefty backlog of 4,205 homes.

Lead underwriters include Credit Suisse (NYSE:CS) and Citigroup (NYSE:C).

TRI Pointe Homes

TRI Pointe Homes is a much younger firm, having gotten its start in the depths of the financial crisis of 2009. But considering what happened after that, the timing seems pretty spot-on.

TRI Pointe, which is focused on California, has been growing at a rapid pace, with revenues soaring from $4.1 million to $26.5 million from fiscal 2010 to 2012.

TRI considers itself a next-generation homebuilder — the company does a large amount of due diligence before investing in a home development, including research on population growth, the local economy and potential competition.

Lead underwriters include Citi, Deutsche Bank (NYSE:DB) and FBR Capital Markets.

Bottom Line

Public homebuilders have definitely staged a huge rally over the past year, with big names like KB Home (NYSE:KBH), PulteGroup (NYSE:PHM), Lennar (NYSE:LEN) and Hovnanian Enterprises (NYSE:HOV) all more than doubling in that time.

Of course, those gains could easily fade away — and that’s why Wall Street bankers will want to rush the deals for Taylor and TRI, as well as aggressively get other homebuilders on the IPO track.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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