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California Homebuilder Ryland: The Basics

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Ryland is a major homebuilder based in California

Ryland (RYL) is a major homebuilder with wide geographic exposure. Its operations consist of six reportable segments: four geographically determined homebuilding regions, financial services, and corporate. Ancillary services like origination and title comprise a small percentage of its revenues—the vast majority (about 98%) of its 2014 revenues came from the homebuilding sector.

Ryland targets the entry-level, move-up, and second move-up buyer. The company’s prices generally range from $160,000 to more than $650,000, with 2014’s selling prices averaging $330,000.

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Geographic exposure

Ryland’s homes are built on site and marketed in four major geographic regions, or segments: North, Southeast, Texas, and West. Within each of those segments, the company operated in the following metropolitan areas as of December 31, 2014:

  • North (about 28% of revenues): Baltimore, Chicago, Delaware, Indianapolis, Minneapolis–St. Paul, New Jersey, Northern Virginia, Philadelphia, and Metro Washington, D.C.
  • Southeast (about 27% of revenues): Atlanta, Charleston, Charlotte, Myrtle Beach, Orlando, Raleigh–Durham, and Tampa
  • Texas (about 21% of revenues): Austin, Dallas–Fort Worth, Houston, and San Antonio
  • West (about 24% of revenues): Denver, Las Vegas, Phoenix, and Southern California

Ryland’s merger with Standard Pacific (SPF) allows the combined company to diversify its geographic exposure

Financial services

Ryland’s financial services consist of mortgage-related products and services, as well as title and escrow services. Last year, the company originated $1.1 billion of mortgages, primarily for its homebuyers. Substantially all of the loans the company originates are sold to third-party investors in the secondary mortgage market on a servicing-released basis.

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Title and Escrow

Cornerstone Title Company provides escrow and title services, acting as a title insurance agent primarily for the Ryland’s homebuyers. It provides title services in:

  • Arizona
  • Colorado
  • Delaware
  • Florida
  • Illinois
  • Indiana
  • Maryland
  • Minnesota
  • Nevada
  • New Jersey
  • Pennsylvania
  • Texas
  • Virginia

Other merger arbitrage resources

Other important merger spreads include the Freescale-NXP transaction. The merger of Freescale Semiconductor (FSL) and NXP Semiconductors (NXPI) is expected to close by the end of the year. For additional information on risk arbitrage investing, please read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the homebuilding sector should look at the S&P SPDR Homebuilder ETF (XHB).

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