Great Southern Homes Inc.one of the most visible homebuilders in the state, goes public.
The Irmo company with construction projects – most of them large housing developments – throughout South Carolina and some in Georgia announced today that it has reached an agreement with Diamond Head Holdings Corp.an ad hoc acquisition company.
The transaction values the combined company at a pro forma enterprise value of approximately $572 million, as of December 31, 2022.
Upon completion of the transaction, Great Southern Homes will become a publicly traded company and DiamondHead Holdings Corp. will be renamed United Homes Group Inc., according to a press release. DiamondHead is expected to remain listed on the Nasdaq Capital Market and is expected to trade under the new symbol “UHG”.
GSH is one of the largest home builders in the Southeast. The company builds homes geared towards entry-level buyers and those moving up for the first time, the company says.
GSH plans to use a capital-efficient “land-light” operating model that is expected to generate higher returns with lower cyclical risk compared to traditional residential construction operating models, the press release said. The land-light approach allows the company to control the supply of land primarily through lot option contracts rather than book lot inventory on the balance sheet. Through organic growth, GSH became the 25e ranked number one home builder and the 41stst ranked builder of single-family homes in the United States, respectively, based on home closures in 2021, according to professional builderHousing Giants Report 2022.
DiamondHead is a special purpose acquisition company led by co-CEO and chairman David Hamamoto, who was the founder and chairman of the previously publicly traded NorthStar real estate-related companies: NorthStar Realty Finance Corp., NorthStar Asset Management Group Inc. and NorthStar Realty. Europe Corp. He was a former partner of Goldman, Sachs & Co. and the co-founder of its Real Estate Principal Investment Group and Whitehall funds.
DiamondHead is co-sponsored by Capital of Antaraan event-driven hedge fund founded by Himanshu Gulati.
Founded by Michael Nieri, Great Southern Homes and its predecessors have built over 11,000 homes. Population growth and single-family home starts in the Society’s markets in Georgia and South Carolina have exceeded the national average since 2017, the news release noted.
“For more than 20 years, I have worked to make GSH the leading homebuilder in the Southeast that it is today,” Nieri said in the press release. “I am excited about the next chapter for GSH, where, through the combination of my operational expertise with David Hamamoto’s public company and capital markets experience, we plan to grow UHG into a national homebuilder. Our growth plans include both continued organic expansion and becoming a merger partner of choice for smaller regional homebuilders located in high growth markets. Additionally, we are building a programmatic and institutional build-to-let platform, where our current product line and geographic footprint are well positioned to meet the demands of the strong and growing rental market for single-family homes.
Hamamoto said the company will help ease the housing shortage.
“We believe there continues to be a massive shortage of single-family homes in the United States, particularly in starter and first-rise products, which will drive significant demand for the foreseeable future,” he said. he stated in the release. “Furthermore, as Michael mentioned, we believe there are extremely attractive opportunities to drive accretive growth through mergers and acquisitions as well as a programmatic build-to-let platform.”
As part of the transaction, all existing GSH shareholders will convert 100% of their shares into shares of the combined company and, assuming no buyout by DHHC’s public shareholders, will own approximately 51% of the company’s shares. combined with the closing, the release said.
Assuming no buyouts from DHHC shareholders, the transaction will yield approximately $320 million in cash proceeds, net of estimated transaction costs, to the combined company, including a covenant of $25 million to buy and not buy back public shares of DHHC from DHHC’s group of sponsors, including Hamamoto and Antara Capital, the press release predicts.
The boards of GSH and DHHC have approved the transaction. The transaction is expected to be finalized in the first quarter of 2023.
Zelman Partners acts as exclusive M&A advisor to DiamondHead. Sullivan & Cromwell LLP is acting as counsel to DHHC.
Additional information on the proposed transaction, including an investor presentation, will be available on line.
Contact Ross Norton at 864-720-1222.