LGI Homes Profile
LGI Homes, Inc. engages in the design, construction, and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, Pennsylvania, Maryland, and Utah.
During the year ended December 31, 2023, the company had 6,729 home closings. The company’s homes are constructed by employees of subcontractors and other third parties. The company has established LGI Mortgage Solutions and LGI Insurance Solutions, two separate joint ventures with a long-time, third-party preferred lender and third-party insurance agency.
Business Opportunities
Since December 2013, the company has grown substantially, expanding its operations from eight markets in four states to 36 markets in 21 states. The company offers homes for sale in 117 communities throughout the United States.
The company offers multiple product lines, including attached and detached entry-level homes and active adult offerings that are marketed and sold under the company’s LGI Homes brand and luxury homes that are marketed and sold under the company’s Terrata Homes brand.
During 2023, the company’s average home completion time was approximately 108 to 150 days and home size ranged between 950 to approximately 4,100 square feet. For the year ended December 31, 2023, the company closed 6,729 homes.
The company is experienced in converting raw land into residential communities. The company endeavors to maintain a pipeline of desirable land positions for replacement and new communities. The company generally targets land acquisitions that are further away from urban centers than many other suburban communities but have access to major thoroughfares, retail districts and centers of business. The company will continue to focus primarily on entry-level homebuyers.
Additionally, the company engages in other business activities that leverage or complement the company’s core homebuilding operations. The company’s wholesale business builds and sells homes primarily to large institutions interested in acquiring single-family rental properties through bulk sales agreements. Beginning in 2021, the company began building and leasing a number of single-family homes in select, existing communities. These rental projects are income producing and the company maintains the option to sell these homes in a bulk purchase agreement. Finally, the company’s strategic joint ventures, LGI Mortgage Solutions and LGI Insurance Solutions, provide mortgage financing and homeowners insurance services to the company’s customers.
Sales and Marketing
The company’s well-defined sales and marketing approach focuses on converting renters of apartments and single-family homes into homeowners. The company uses extensive digital and print advertising to attract potential homebuyers. The company employs various marketing methods, such as digital marketing strategies, interactive online media, social media, direct mail, directional signage, and billboards. These methods have proven highly successful in reaching the company’s target market, placing potential homebuyers in front of the company’s trained sales professionals and communicating the company’s core messages of value and dream fulfillment.
While a proportion of the company’s business comes from realtors, the company’s marketing efforts are principally designed to connect directly with potential customers renting their residences and encourage them to schedule an in-person appointment at one of the company’s information centers. The company’s information centers are typically open eight to ten hours per day, 359 days per year, and generally staffed by two to four sales professionals who are supported by a dedicated loan officer.
The company provides each customer with a comprehensive introduction to the community and the surrounding area, furnishing them with detailed information regarding utilities, schools, homeowners association dues and restrictions, local entertainment and nearby dining and shopping options.
Homebuilding Operations
The company’s homebuilding operations are organized and managed by seven operating segments: West, Northwest, Central, Midwest, Florida, Southeast and Mid-Atlantic. The Midwest division is included in the company’s Central reportable segment and the Mid-Atlantic division is included in the company’s Southeast reportable segment.
The company offers a set number of floor plans in each community with standardized finishes. Doing so enables the company to utilize an even-flow, continuous construction process that is designed to efficiently build and maintain an inventory of move-in ready homes that are available for immediate sale.
The company employs experienced construction management professionals to perform the tasks of general contractors for home construction in each of the company’s communities. The company’s employees provide the purchasing, construction management and quality assurance for the homes the company builds, while third-party subcontractors provide the material and labor components of the company’s homes. In each of the company’s markets, the company employs construction managers with local market knowledge and expertise. Additionally, the company’s construction managers monitor its compliance with zoning, safety, and other regulations, production schedules, and quality standards for the company’s projects.
The company also works with its construction managers and subcontractors and trains them using a comprehensive construction manual that outlines the most efficient way to build an LGI home.
The company’s homebuilding operations utilize a paperless purchase order system to conduct business with the company’s subcontractors and suppliers. The company’s master build schedule allows its trade partners to receive their specific tasks from the company’s electronic system and plan several weeks in advance before starting their work. This means of communication allows the company’s subcontractors to schedule their crews efficiently. Typically, the company’s contractors are paid every week, which contributes to the strength of the company’s business relationships with them.
The company’s homes are designed to meet the preferences of its target market of potential homebuyers and enable cost efficient and effective construction processes. In 2019, the company introduced its CompleteHome and CompleteHome Plus packages to continue the company’s legacy of offering buyers well-appointed, move-in ready homes, a streamlined buying experience, and superior quality with even more standard features than offered before. Each of these packages includes preselected, upgraded features, including stainless steel appliances, cabinets with crown molding, granite or quartz countertops, undermount sinks, as well as convenient outlets with USB charging capability and a Wi-Fi-enabled garage door opener. Additionally, both packages include programmable thermostats, double-pane Low-E vinyl windows, LED flush mount ENERGY STAR lights and a variety of other energy-saving features. The company’s CompleteHome Plus package includes everything in the CompleteHome package plus 42’ upper cabinets, nine-foot ceilings, designer paint selections, additional landscaping and window blinds in every room of the house.
The company offers an attached townhome product in certain markets that enables the company to keep its entry-level price point within reach of more new homebuyers.
The company’s active adult communities offer affordable homes in both open and age-restricted lifestyles in amenity-rich communities. These communities leverage existing floor plans with minor modifications designed to meet the needs of active adult homebuyers at prices that present a compelling value-proposition.
The company’s Terrata Homes brand allows the company to leverage its systems and processes, including the company’s customer centric sales system, to deliver move-in ready homes with preselected luxury features. During 2023, the company closed 249 Terrata Homes. As of December 31, 2023, the company offered Terrata Homes in 15 of its active communities. The company expects that home closings in the company’s Terrata Homes branded communities will be less than 5% of its annual home closings during 2024.
The company’s mortgage financing and homeowners insurance joint ventures provide a streamlined, customer-focused experience for the company’s homebuyers. LGI Mortgage Solutions provides mortgage services to the company’s customers through an unconsolidated joint venture. LGI Insurance Solutions provides homeowners and other insurance products to the company’s customers through an unconsolidated joint venture.
The company’s wholesale business provides opportunities for the company to leverage its even-flow construction methodology to build and sell homes primarily to large institutions interested in acquiring homes to be used as rental properties, primarily through bulk sales agreements. During 2023, the company had 679 wholesale home closings. The company expects its wholesale business to represent approximately 5% of the company’s annual home closings during 2024.
Land Acquisition Policies and Development
The company continues to be an active and opportunistic acquirer of land for residential development in the company’s markets. The company sources land from a wide range of landowners, brokers, lenders, builders and other land development companies. The company generally acquires raw land and finished lots in affordable locations that are further away from urban centers than many other suburban communities but have access to major thoroughfares, retail districts and centers of business. The company also maintains a pipeline of desirable land positions for replacement communities and new communities.
The company’s lot inventory was 71,081 owned or controlled lots as of December 31, 2023. The company had 117 active communities as of December 31, 2023.
The company utilizes land banking financing arrangements on a limited and strategic basis. During the year ended December 31, 2023, the company entered into several land banking financing arrangements with a third-party land banker to repurchase land that the company sold to the land banker as a method of acquiring finished lots in staged takedowns.
The company has also purchased larger tracts of land across its markets, which will provide the company with more opportunities to build homes with multiple price points in the company’s communities. The company’s land development expertise will allow the company to meet its growth and profit objectives with respect to opportunities in which the company is the developer. Similar to the company’s home building operations, the company’s personnel oversee the contractors who perform the development work. The company’s land development projects may include the sale of home sites or commercial property as a part of the project.
The company has strong relationships with the land brokerage community in many of the company’s markets. The company also acquires and develops land for use in its wholesale business.
Homes in Inventory
When entering a new community, the company intends to build a sufficient number of move-in ready homes to meet the company’s budgets. The company bases future home starts on home closings. As homes are closed, the company starts more homes to maintain its inventory. As of December 31, 2023, the company had a total of 2,017 completed homes, including information centers, and 1,410 homes in progress.
Seasonality
In all of the company’s reportable segments, it has historically experienced similar variability in the company’s results of operations and in capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry. The company generally closes more homes in its second, third and fourth quarters (year ended December 2023). The company’s revenues and capital requirements are generally similar across its second, third and fourth quarters. As a result of seasonal activity, the company’s quarterly results of operations and financial position at the end of a particular quarter, especially the first quarter, are not necessarily representative of the results the company expects at year end.
History
LGI Homes, Inc. was founded in 2003. The company, a Delaware corporation, was incorporated in 2013.
