The New Home Company Inc. operates as a homebuilder that focuses on the design, construction and sale of homes in major metropolitan areas within select growth markets in California and Arizona, including Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area.
The company owned approximately 1,340 lots and had options to purchase an additional 678 lots as of December 31, 2020.
Segments
The company operates through three segments: Arizona Homebuilding, C...
The New Home Company Inc. operates as a homebuilder that focuses on the design, construction and sale of homes in major metropolitan areas within select growth markets in California and Arizona, including Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area.
The company owned approximately 1,340 lots and had options to purchase an additional 678 lots as of December 31, 2020.
Segments
The company operates through three segments: Arizona Homebuilding, California Homebuilding and Fee Building.
Homebuilding Operations
Homebuilding operations acquire and develop land and construct and sell single-family attached and detached homes and might sell land.
The company focuses on identifying sites and creating communities that allow it to design, construct and sell consumer-driven, single-family detached and attached homes in major metropolitan areas in Southern California, metro Sacramento, the San Francisco Bay area and the greater Phoenix area. Defining characteristics of its markets generally include barriers to entry, job growth, high employment to building permit ratios and increasing populations, which can create growing demand for new housing.
The company’s California Homebuilding segment aggregates the Southern California and Northern California homebuilding operating segments.
Fee Building Operations
Although the company’s primary business focus is building and selling homes for its own account, the company also selectively provides general contracting, construction management and coordination services, sales and marketing services and escrow coordination services as part of agreements with third-parties and its unconsolidated joint ventures.
The company refers to these projects as ‘fee building projects.’ Its fee business is consisted primarily of building for third party landowners for a fee with such third party landowners paying or reimbursing the company for all costs associated with construction. The company’s fee building segment also includes its management fee revenues that the company receives for serving as the managing member or other similar role in its joint ventures. For the year ended December 31, 2020, 97% of the company’s fee building revenue represents billings to third-party land owners for general contracting and construction management services and 3% represents management fees from unconsolidated joint ventures and third-party land owners for construction and sales management services.
The company’s fee building operations build homes and manage construction and sales related activities on behalf of third-party property owners and its joint ventures. While the company’s corporate operations conduct no independent construction, development, sales or land acquisition activities, its corporate operations develop and implement strategic initiatives and support the company’s operating segments by centralizing key administrative functions, such as accounting, finance and treasury, information technology, insurance and risk management, litigation, marketing and human resources.
Owned and Controlled Lots
As of December 31, 2020, the company owned or controlled an aggregate of 2,018 lots in its homebuilding segment and 54 lots through its fee building segment.
Sales and Marketing
In connection with the sale and marketing of its homes, the company makes use of advertising and other promotional activities, including through its website, social-media, brochures, direct mail and other community-specific collateral materials.
The company primarily sells its homes through its own sales representatives and through the use of outside brokers. Its wholly owned subsidiary holds the corporate broker's licenses in California and Arizona. The company’s in-house sales force works from sales offices located in model homes or sales centers close to, or within each community. Sales representatives assist potential buyers by providing them with floor plan, price and community amenity information, construction timetables and tours of model homes. The company sells homes using sales contracts that include cash deposits by the purchasers.
Insurance and Warranty Program
The company provides a limited one-year warranty to its homeowners covering workmanship and materials. In addition, it provides a more limited warranty, which ranges from a minimum of two years up to the period covered by the applicable statute of repose that covers certain defined construction defects.
Additionally, the company has dedicated customer service staff that work with its homebuyers and coordinate with subcontractors and trade partners, as necessary, during the warranty period. While its subcontractors who perform its homebuilding work provide it with an indemnity for claims relating to their workmanship and materials, it also purchases general liability insurance that covers development and construction activity at each of its communities. The company’s subcontractors are covered by these programs through an owner-controlled insurance program (OCIP). The company maintains insurance, subject to deductibles and self-insured retentions, to protect it against various risks associated with its activities, including general liability, all-risk property, construction defects, workers’ compensation, automobile, and employee fidelity.
Seasonality and Cycles
The company has experienced seasonal variations in its quarterly operating results and capital requirements in each of its California and Arizona homebuilding segments, as well as its fee building reportable segment. The company takes orders for more homes in the first half of the fiscal year than in the second half (year ended December 31, 2020), which creates additional working capital requirements in the second and third quarters to build its inventories to satisfy the deliveries in the second half of the year. The company’s revenues and cash flows (exclusive of the amount and timing of land purchases and land sales, if applicable) from homebuilding operations are higher in the second half of the calendar year, particularly in the fourth quarter. The company expects this seasonal pattern to continue over the long-term, although it might be affected by volatility in the homebuilding industry. The homebuilding industry is cyclical.
History
The New Home Company LLC was founded in 2009.
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