Landsea Homes Corp (LSEA) 2020 Q4 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Landsea Homes' financial results for the fourth quarter and full year ended December 31, 2020. Joining us today are Landsea Homes' CEO and Interim CFO, John Ho; Chief Accounting Officer Trenton Schreiner; President and COO Michael Forsum; and the company's external Investor Relations Representative, Cody Cree. Following their remarks, we'll open the call for your questions.

And before we go any further, I would like to turn the call over to Mr. Cree as he reads the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Thanks, Joseph. This call will include forward-looking statements within the meaning of the federal securities laws, including but not limited to, our expectations for future financial performance, business strategies, or expectations for our business, including as they relate to anticipated effects of business. These statements constitute projections, forecasts, and forward-looking statements and are not guarantees of performance. Landsea Homes cautions that forward-looking statements are subject to numerous assumptions, risks, and uncertainties which change over time.

Words such as may, can, should, will, estimate, plan, project, forecast, intend, expect, anticipate, believe, seek, target, look, or similar expressions may identify forward-looking statements. Specifically, forward-looking statements may include statements relating to the benefits of the business combination, the future financial performance of the company following the business combination, changes in the market for Landsea Homes' products and services, and expansion plans and opportunities.

These forward-looking statements are based on information available as of the date of this call and our management's current expectations, forecasts, and assumptions and involve a number of judgments, risks, and uncertainties that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the risk factors described by Landsea Homes in its filings with the Securities and Exchange Commission.

These risk factors and those identified elsewhere in the press release, among others, could cause actual results to differ materially from historical performance and include, but are not limited to, the ability to recognise the anticipated benefits of the business combination which may be affected by, among other things, competition, the ability to integrate the combined businesses, and the ability of the combined business to grow and manage growth profitably; costs related to the business combination; the ability to maintain the listing of Landsea Homes' security on NASDAQ; the outcome of any legal proceedings that may be instituted against the company following consummation of the business combination; changes in applicable laws or regulations; the inability to launch new Landsea Homes products or services or to profitably expand into new markets; the possibility that the company may be adversely affected by other economic, business, and/or competitive factors; and other risks and uncertainties indicated in Landsea Homes' SEC reports or documents filed or to be filed with the SEC by Landsea Homes.

Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We do not undertake any obligation to update forward-looking statements to reflect the events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

I would also like to remind everyone that this call will be available for replay through March 18, 2021 starting at 8:00 PM Eastern Time tonight. A webcast replay will also be available via the link provided in today's press release as well as on the company's website at www.landseahomes.com. In addition, a supplemental earnings presentation has been posted on the Investor Relations portion of the site that we encourage you to view.

Now, I'd like to turn the call over to the CEO of Landsea Homes, John Ho. John?

Thank you, Cody, and good afternoon, everyone. We are very happy that you can join us today on our first earnings call as a public company. Since many of our listeners may be new to our company, to kick things off, I wanted to introduce Landsea and our unique growth story and provide a high-level overview of our 2020 results. From there, I will hand it off to Trent Schreiner, our Chief Accounting Officer, to discuss our financials in more detail; and then Mike Forsum, our President and COO will provide an operational update and share our strategic vision.

Landsea Homes is a California-based homebuilder highly focused on growth, led by a team of industry professionals with decades of experience and deep expertise across the homebuilding industry. We build master plan communities that offer a variety of home types that reflect modern living and fit the evolving needs and desires of today's homebuyers. We're an organization that is committed to offering customers the best in home automation, sustainability, and energy savings, and we are doing this through our innovative and unique high-performance homes and LiveFlex offerings.

This truly sets us apart from others in the homebuilding industry. We have designed all of our homes and communities to provide a superior living environment by enhancing a home's comfort and durability, improving indoor air quality, delivering cutting-edge home automation solutions through strategic partnerships, reducing energy costs, and lessening the consumption of the earth's precious resources.

Our company has grown tremendously since our homebuilding operations first began in 2014, and we are excited to bring these unique offerings to even more markets as we look to exponentially expand our footprint through prudently managed growth in the coming years. We started in California and have since expanded into Arizona with the acquisition of Pinnacle West in 2019 and then further grew our Arizona footprint when we acquired Garrett Walker Homes at the beginning of 2020.

Through the successful and rapid integration of both of these businesses, Landsea is now a top-five homebuilder in Arizona, and we're excited to implement our strategy into similar markets like Texas and Florida through both acquisitions and organic growth, supported by our strong balance sheet.

We are now able to pursue a more rapid expansion strategy in additional markets with $107 million of net proceeds we've received from going public via SPAC earlier this year. Since the inception of Landsea Homes, it has always been our goal to become a public-listed homebuilder in the US and access the public markets to fuel our continued growth, while maintaining strong financial discipline.

After much deliberation over several options over a year ago and with the full support from our majority shareholder, we chose a SPAC transaction with a strong partner in LF Capital. The SPAC merger was completed on January 7, [and with the] significant infusion of cash and a very strong balance sheet, we're confident we have the firepower and resources to continue supporting our long-term growth strategy.

As we count upon the one year anniversary of the COVID-19 pandemic, our business has benefited from our strategy that we initiated several years ago to focus on selling entry-level and move-up level homes in larger volumes and lower average sales prices. I'd like to note that our organization was able to execute this transition rapidly and very successfully, all while dealing with the effects of a global pandemic.

During the onset of COVID-19, we acted swiftly to enact the necessary measures to protect our customers, trade partners, and employees. And we continue to do so as the macroeconomic environment was changing on a daily basis. Mike will go into detail regarding these measures later on, but we couldn't have done this without our employees exceeding our expectations in implementing this strategy despite the uncertainties surrounding them.

In 2020, we were able to increase our total homes delivered by 156% to 1,527 from 597, while decreasing our average sales price from $953,000 last year to $481,000. This helped drive our total revenue for the year, increasing 16% to nearly $735 million compared to $631 million in 2019, with total home sales increasing 29% on the year. Additionally, we ended the year by substantially strengthening our backlog to 750 total homes with a dollar value of $389.3 million and an average sales price of $519,000. This strong backlog positions us extremely well as we move further into 2021.

At the same time, we continue to see robust demand and interest brought by new work-from-home business environment and the millennial cohort searching for entry-level and move-up level homes, underpinned by low interest rates. If you combine these favorable macroeconomic conditions with an exceptionally strong balance sheet, our innovative and unique offerings in our strategic footprint in high-growth, affordable housing markets, we are well positioned to increase shareholder value.

Given this, we are reiterating the strong outlook we set for 2021 in August of last year. Trent will walk you through these metrics shortly, but we have utmost confidence in our ability to deliver on the expectations we set.

Overall, I'm incredibly proud of our dedicated and hard-working team here at Landsea Homes. Each and every one of the employees was instrumental in swiftly executing our business at all levels and significantly driving higher sales volume with lower ASP homes that delivered strong operating results for the year despite that operating amid the ongoing challenges of a global pandemic. I can't thank them enough for their efforts. We truly believe that we are just getting started by maximizing this company's growth potential, and we'll look forward to expanding on our success in the years ahead.

With that, I'll now turn the call over to Trent Schreiner, our Chief Accounting Officer, who will provide commentary on our financial and operational results for the fourth quarter. Trent?

Thank you, John, and good afternoon, everyone. Before we get started, I wanted to remind everyone that due to the business combination closing after the first of the year, our financial results will be filed via 8K as the 10K will be associated with LF Capital Acquisition Corp. results prior to the merger. While we are reporting on both fourth quarter and the full year and full sets of results were quite strong, I will be focusing on our quarterly results due to the similar narrative driving year-over-year changes for both periods.

So let's jump in our financials for the quarter. Total revenue was $284.7 million compared to $286.1 million in the fourth quarter of 2019. The slight decline was primarily due to not having any lot sales in 2020 compared to $11 million in the fourth quarter of 2019. When we exclude land sales from total revenue, total home sales increased 3% compared to the fourth quarter of last year.

Addressing lost sales, we're a homebuilder first and foremost, so we consider lot sales opportunistically. In 2020, we did not find any favorable prospects, but we'll continue to evaluate opportunities at the right terms going forward.

Total home deliveries during the quarter increased 111% to 587 homes at an average sales price of $485,000 compared to 278 homes delivered at an average sales price of $990,000 in the fourth quarter of 2019. Our average sales price decline is mainly attributed to the fact that the volumes of homes sold in Arizona, where the average sales price is $301,000, which was over two times lower than our California market, where the average sales price was $943,000.

Net new home orders increased 182% to 415 homes with a dollar value of $235.4 million, an average sales price of $567,000, and a monthly absorption rate of 4.5 compared to 147 homes with a dollar value of $130.6 million, an average sales price of $880,000 (sic - see press release, "$888,000"), and a monthly absorption rate of 2.4 in the prior-year period. The decline in average sales price remains consistent with our strategic shift to selling a higher volume of entry and move-up level homes, along with having a higher percentage of orders in Arizona.

Adjusted home sales gross margin in the fourth quarter was 22.1% compared to 23.5% in the prior-year period. The decline was primarily driven by lower interest costs -- lower interest in cost of home sales and higher purchase price accounting for acquired inventory. For this metric, we adjust out the following where applicable, interest in cost of sales, inventory impairments, and purchase price accounting for acquired inventory. We believe this is useful to show as it provides insight into the impact that financing arrangements and acquisitions have on our home sales gross margin and allows for closer comparability to our competitors that present similar information.

Net income attributable to Landsea Homes in the fourth quarter was $10.7 million compared to $12.9 million in the prior-year period, which was the result of our total operating expenses increasing 19% as we invested in sales and marketing and efforts throughout the year. Adjusted net income attributable to Landsea Homes was $19.4 million compared to $21.2 million in the prior-year period. The decline was primarily a result of the aforementioned increase in sales and marketing expenses linked to advertising our new housing developments offerings.

Adjusted EBITDA was $36.1 million compared to $40 million in the prior-year quarter, with the decline primarily driven by the aforementioned increase in operating expenses along with this quarter not having any lot sales compared to the fourth quarter of last year.

Looking at our liquidity, we ended the year with $105.8 million in cash, cash equivalents compared to $154 million at December 31, 2019. Total debt was $264.8 million compared to $190 million at the end of last year. Our ratio of debt to capital was 33.3% at December 31, 2020 compared to 24.6% at the end of last year. And our net debt to net book capitalization ratio was 22.6% at the end of this year compared to 5.4% at the end of 2019.

As a reminder, the company's balance sheet at December 31, 2020 does not reflect the influx of approximately $107 million in net proceeds from the closing of the business combination LF Capital Acquisition Corporation on January 7, 2021.

Lastly, I would like to reaffirm our financial guidance for 2021. We expect to report approximately $883 million in total revenue with 1,979 total home deliveries at an average sales price of $446,000. Additionally, we continue to expect to report adjusted net income attributable to Landsea Homes, approximately $44 million in 2021.

These expectations for 2021 are being driven by organic growth, along with benefits from potential near-term acquisition targets. With our strong financial position, dedicated team, and industry tailwinds, we are well positioned to drive growth while seeking M&A opportunities in 2021 and beyond.

Now, I'll pass it to our President and COO, Mike Forsum, to provide more color around our operational successes and strategic visions moving forward. Mike?

Thanks, Trent. It's great to be joining all of you on this call today, and I look forward to sharing why our great team and I are so energized about Landsea Homes' growth potential and the opportunities in front of us. So let's jump right into it.

The year 2020 certainly was a year of unanticipated challenges, primarily driven by the global pandemic, along with wildfires across our markets in California and social unrest across the country. Despite these setbacks and as the economy rapidly recovered in the back half of the year, our team did a great job consistently adapting to the unpredictable and ever-changing environment, while ensuring our homeowners and homebuyers were completely satisfied with every step of the sales process and their living accommodations.

To accomplish this, we built a wide array of tools to give customers a vibrant, virtual experience that included community videos, photo galleries, 360-degree virtual tours, interactive floor plans, and maps of our sites and our local areas. In addition, our team of inside sales counselors supported all division and community web leads, phone calls, and on-site appointments seven days a week, driving traffic and orders throughout the year.

Not only did we do a great job ensuring all our customers remained safe during the sales process, we also implemented multiple mitigation measures stringently following CDC guidelines to ensure the safety of all of our employees. In fact, we established a medical directorship with Hoag, a regional health care delivery network in Orange County, California and their corporate health solutions team to provide all our offices and employees with consulting and clinical services, including testing and vaccination support.

We also designed and implemented new office layouts for when our employees returned from the initial work-from-home orders to ensure we continue to operate safely and maintain 6 feet social distancing requirements. As a result of these measures, I'm proud to report within our Northern California division, there were no -- there were zero work hours lost due to COVID-19, and we had over 25,000 health check-ins since the pandemic started. And this was a similar outcome for our other divisions in Southern California and Arizona.

The combination of the reworked sales process and the preventative measures we introduced allowed us to complete virtual closings, new virtual community grand openings, and private on-site tours, all of which ultimately help drive our strong results for the year. I am incredibly proud of our organization's adaptability. And while we certainly hope we return to normal sooner rather than later, I'm confident we will be able to continue executing our growth strategy in this current environment.

Now moving to our strategic division, as John mentioned, we have significant tailwinds that we believe will allow us to continue our strong momentum throughout 2021. One of the benefits of having so many people move to a work-from-home business model is they finally started paying attention to their living spaces and realizing they need their home to be more than just a place to sleep at night. Homebuyers are now demanding that their home be much more flexible and adaptable to their specific lifestyles, whether that means having a home office, education space for at-home learning, a guest bedroom, or a dedicated room for exercise.

Our LiveFlex offerings meet these very needs and has gained significant traction due to this shift in consumer preferences. Select floor plans within several committees also provide an option for our new LiveGen suites, which provides separate living spaces within the home to accommodate multigenerational families and other special living situations.

Consumers are incredibly attractive to these offerings, and I'm proud to report that approximately 15% of our home sales in Q4 included LiveFlex options. We believe that number will continue to increase as we introduce this option in more communities across our existing and future footprints.

As mentioned earlier, California and Arizona are our cornerstone markets. We started homebuilding in California, specifically creating master-planned communities in San Francisco and Los Angeles regions, which have both seen medium home prices grow double digits since 2015. As a result of the continued increase in home prices within these two markets, we believe there is a growing opportunity to service outside metro areas as demand increases for lower-priced homes.

A great example of this is our new community in Ontario, California called ShadeTree. We opened this in the early days of the pandemic. Before we entered the Ontario market, the area consisted of one type and style of home, traditional. So we envisioned bringing something new, fresh, and modern to the area.

Our goal was to create a different community for Ontario Ranch, one that included a mix of mid-century, modern, Spanish ranch-style and farmhouse architecture to create unique neighborhoods filled with modern elevations, but also touches of warm traditions.

Our research also told us that homebuyers are looking for a community that met their amenity needs, especially since neighboring communities featured smaller facilities. So we decided and dedicated to dedicate 84 acres to provide resort-style amenities, including a community pool, a children's pool, cabanas, a party pavilion, a dog park, fire pits, a children's play area, and a private clubhouse. We also created green space and walkability through parkways, which allows for families to enjoy the outdoors without having to drive anywhere.

Interior architecture, layout, innovative features are some of our main differentiators, all of which combine to make living in ShadeTree more comfortable. Each home includes an open floor plan that provides utility space for any number of uses, the optionality of our LiveFlex program, and all of our homes are part of our high-performance collection. With so many different floor plans and square footages, ShadeTree appeals to homebuyers who want to customize their space to meet their lifestyle.

Now, I'd like to provide some color to how we implemented the sales process during the initial days of the global pandemic to highlight the adaptability of our business and how we were able to succeed despite having so many factors against us. On March 28, 2020, we were prepared for a grand opening celebration of the long-awaited ShadeTree community that I just spoke of but had to pivot when the shelter-in-place orders were announced.

Initially, we started with private in-person appointments, which were booked out almost 2.5 weeks in advance. But as the market slowed at the end of March through April, our sales strategy shifted again. We then launched the Matterport 3D technology, utilized resolution images loaded on our website, and went completely virtual with our home selling efforts.

This was crucial because as homebuilders, it's imperative that we're able to provide an opportunity where prospects can experience an accurate and real-life essence of what life in their new home will be like. In May, as expected, in a highly competitive new home market, we saw an uptick in activity. With shelter-in-place orders still active and historically low mortgage interest rates, people began to see the high value of owning a home, especially at a more affordable community like ShadeTree.

Sales increased significantly in June with 34 homes sold there. Then in July, strong sales continue with 32 more homes sold, and people began to camp out several days in advance prior to home releases to ensure that they could secure their desired lot and floor plan.

As the demand at ShadeTree continued to grow, we instituted a best-offer sales process, which we're still currently utilizing. This means that one week prior to sales, pricing is released to potential buyers.

Buyers are able to make offers on up to two lots as long as they are prequalified from a preferred lender, and those offers are received on a Saturday. We do not accept offers below our released pricing. The following Monday or Tuesday, managements selects the strongest buyer based on their net offer price whether or not the buyer also has a broker or whether or not the buyer plans to go with one of our preferred lenders or not.

This approach has allowed us to manage the high demand for homes at ShadeTree and ensure that we are interacting with only the most serious and strongest buyers, all of which increases our profitability. Over the five months that we've adopted the best-offer strategy, we have released 87 homes and earned nearly $557,000 over asking price with an average offer being $65,000 over a listed price.

To give you even more context to this demand, a total of 174 offers have been made, and Landsea has accepted 58 of those offers. On average, we have released 16 new homes a month, and an outstanding 76% of those homes received same-day offers. In fact, to date, we have sold 241 homes in ShadeTree, which is more than half the total amount of homes within the community.

I'm sharing this example to provide you with a concrete real-life example of how we're able to successfully launch a community and sell better than we could have imagined in this environment. With demand seemingly only getting stronger, we believe we have plenty of runways to go.

Lastly, I wanted to walk you through our M&A strategy. Now that our one-year anniversary of acquiring Garrett Walker has passed us, and we feel confident in our foundation and growth trajectory in Arizona, we are looking at expansion opportunities and other desirable markets like Texas and Florida. As we explore these opportunities, we are utilizing the same discipline that we developed in California and successfully implemented in Arizona. This includes a three-step approach.

First, we acquire land in new markets. Second, we develop relationships and subcontractor list while pursuing accretive acquisitions. And third, we acquire a builder and retain the employees to further develop relationships and scale.

We take a strategic role of approach to all acquisitions, targeting undercapitalized players who have built up their businesses as far as they can with local capital. As a result of this playbook, we have become an acquirer of choice for smaller homebuilders given that the owners of these businesses are looking to sell to the right homebuilder who will take care of their employees, which is a commitment that we are dedicated to upholding.

We anticipate having more to share on progress with our acquisition strategy soon. It remains a top priority, and we are approaching the process with precision and significant due diligence.

No matter where we end up expanding, we remain focused on providing homes to our customers that stay true to our defining principle of live in your element. This is the idea that we build homes where our customers want to live and allow them to live how they want to live in a home created, especially for them. It is incredibly important to us to provide a superior living environment for our homebuyers, and we will continue to ensure that that expectation is met.

Overall, we are incredibly proud of the continued success we have had, and we remain optimistic about capitalizing on the growth opportunities ahead of us as we move forward in our first year of being a publicly traded company. Thank you for joining us, and we look forward to speaking with you all regularly throughout this new journey. Operator, we're now ready for Q&A.

(Operator Instructions) Matthew Bouley, Barclays.

Good afternoon, everyone. Thanks for taking the questions, and congrats on the first results out of the gate here. So maybe first one on the M&A side, which Mike, you just touched on there at the end.

Just looking through the original projections and all of that. I think there was an assumption of a transaction closing towards the first quarter of 2021. And I realize some of these things have some moving pieces, but if you could just outline a little bit more detail on the M&A side and just what the expectations should be as we model out 2021? Thank you.

Sure.

You'll answer that first, and then I can talk about the (multiple speakers) --

Sure. Yeah, absolutely. Thanks, Matt. Without being able to go into too specific details, but I think that we're still tracking generally, as what we had described to earlier in our calls. We're very excited about some opportunities that we're tracking hard, and those conversations are advanced. And we look forward, God willing as I hit on this table, that we can continue to move those conversations to pure execution and get those acquisitions done.

Okay.

Hey, Matt. John Ho. In our 2021 forecast guidance, there was $85 million of revenue assumed through a business combination and I believe $8 million of adjusted net income. We still are very confident in these projections for the year.

Okay. Perfect. Second one, that was a lot of interesting and helpful detail there on ShadeTree. I'm curious if you could go into a little more detail around this best-offer sales process. And maybe not necessarily at ShadeTree itself since you just gave that detail, but I guess my question is, are you doing that in other places, number one.

And then number two, just what should we think about just the impacts of all that in terms of slowing sales pace, the margin. Mike, you've you've been in this business a long time; John, as well. As you think about this type of best-offer sales process, maybe if you can educate us on what tends to happen when you do this? How long can it keep going?

I know I'm throwing a lot of questions at you, but just any kind of more details around this very interesting process you're doing. Thank you.

Sure. And thank you for listening to that long-winded explanation of ShadeTree and how we're pricing, and I'm glad you caught some of that. But we found that in times like this -- and you're right, I've been doing this a long time. And as we've kind of cycle up and cycle down, there's different methods.

But certainly in a very active and robust market that we find ourselves in now, particularly in communities that are getting a lot of attention, we don't particularly like people camping out. I don't think that it's a really, ultimately a healthy way to start a relationship with our homebuyers. We don't want to put them through that.

But at the same time, we always look for what is the best and fair process. And we have found that over the years, this type of offer process is the best way of essentially setting a market, and it's very transparent. And so from that standpoint, the buying public and those that are in the queue, get a chance that they really got a real fair shot at getting a home and that there isn't any games being played and that the market really clears itself. And so therefore, you get the transparency that makes everybody kind of settled down.

So it's a good fair way to do it. And we have again found that it continues to add incremental dollars instead of us guessing where the market is going and maybe possibly leaving some money on the table. The market tells us what they're really willing to pay, and we want to grab those dollars. And of course, that's all incremental to where we are.

So from that standpoint, that's a fairly unique situation, though we are seeing elements of that starting to arise in Arizona in a couple of our communities, and we'll be taking that out here very shortly there as well. Arizona is really strong, and it has a lot of flavors of what we're feeling in some of our other markets and what other some of the analysts and our competitors are seeing as well. So we'll see it there.

This was something that I deployed way back in days of [yore] in the Bay Area in particular during very robust times. And it seems that it works, and so we like it. It seems that our prospects like it and then we have a much better relationship with our homebuyers and homeowners as we go forward after close because they felt that they were fairly treated, and it's just better for the process.

So as it goes back to how we're moderating sales, we're definitely doing that as well, although I don't think that this necessarily clips back demand. Really, what clips it back is just the frequency of your releases and the size of your releases. And so in cases in Arizona, we talked about it as well, we'll release three and then come see me as kind of what we're talking about now on our sales teams on the floors. And we're getting them on a weekly basis a release of three, and then we're increasing pricing thoughtfully but aggressively.

And then as those sell, we're going right back and then repricing the next three on the release. So we have different methods and different ways of trying to ride this market to its fullest, but not alienate our customers and not turn off our communities because turning them back on is a very difficult thing.

Perfect. No, that's very helpful. And thank you for catching all the pieces of my multipart question there. Last one for me, on LiveFlex, I think you said it was up to 15% of sales in Q4. I guess it's kind of a similar question, but if you could just speak through what that's telling you about what the consumer is looking for today.

I heard you around a lot of the post-COVID demands, but what that's actually doing to your business relative to what you would have thought 12 months ago? So adding LiveFlex, what's the implication to the home prices, to options, and upgrades and ultimately to margins for Landsea? Thank you.

Sure. So with our LiveFlex, in LiveFlex Plus options that we've created in response to how the consumer has been shifting, we really -- what I defined is early during this was really a flight towards safety and space. And LiveFlex really does try to address that.

Today, our consumers looking for a higher level of utility coming from the home that they're buying. They're looking for greater safety in terms of their ability to live in a healthier environment. And I think we've tried to address that in many aspects for HPH strategy that John Ho created for us. But also, the utility side of really taking what I used to say as sort of the token nod to a home office that at every sales complex, you would walk into the -- as you came through the front door, there would be a den with a little desk and a chair and something that sort of displayed that maybe possibly something could happen there.

Where we've elevated that, such that there's real utility coming from it. Because today, our buyers are telling us that they want to educate their children in there. They want to work in privacy. They want to exercise. There's all kinds of elements that they're looking for that we're addressing through our LiveFlex option program.

Interestingly, that room doesn't necessarily need to be downstairs to the right of the front door. We're actually seeing it really desired in the upstairs. So therefore, in our LiveFlex program, we provide extra installation two by six walls as opposed to two by four walls. There's other elements that we put in there that kind of help from sound attenuation and also strength to the floor if they want to put some gym equipment and some things that could act for some deflection into that floor.

So we're thinking a lot about how really to use that space in a robust way that makes a lot of sense for the buyer today. In so doing, we're getting really great responses. And so the consumer is paying for it. I believe that they're getting that by virtue of the fact that we have a mortgage environment today that's allowing the buyer to load up a little bit more on the house on the options.

But with LiveFlex, we do have a much bigger margin in that offering that we would be -- in some of our other room adjustment margins that we would normally be offering out there. So it's really good for us. It's just a matter of timing though, Matt. This is really about where we have cut off dates when you're in the construction process.

So you've got a time that right and get the buyer in there so they can choose that option, or if we're doing spec starts, we'll probably more than likely include that LiveFlex option room within that spec start on our own and then price side into the house going forward.

Great. Well, thanks for all the details. Congrats again, and good luck in '21.

Thank you.

Alex Rygiel, B. Riley.

Hey, guys. Congratulations on a great year. A couple of quick questions here. First, you mentioned that M&A was tracking to plan, but your guidance suggests that there could be an acquisition in the first quarter of this year and an acquisition in the second quarter of this year, which would be an acceleration to your previous plan for just a second acquisition in 2022.

So my question to you is are you seeing your pipeline improve a lot here now that you're public? And being public, is it making your conversations with sellers a lot better?

Alex, this is John Ho. I'll address the question in terms of the forecast that we presented when we took the company public, and then I'll hand it over to Mike to talk about some of the opportunities that we have in front of us. We had planned an acquisition in the first quarter of 2021, entering a new market for us, either Texas or Florida. And then we had planned a second one in the first of the year for 2022.

That was the forecasts that we had outlined. So we're still confident and remain consistent with our projections for 2021 is that that will include an M&A. That will bring, I think, as I mentioned, $85 million of revenue and $8 million of adjusted net income in 2021. In regards to the opportunities, I'll let Mike answer that.

Sure. Without a doubt, being public now certainly makes us a much more attractive suitor in the marketplaces in which we're out talking to potential targets. So it's just adding to the narrative, although we did have a very strong narrative prior to us going public, but it has definitely helped. We're getting lots of conversations, I'll be honest with you.

We've done a really, really good job of speaking to targets off market. Probably becoming public, we're bringing more attention from bankers who have targets looking to talk to us. So from that standpoint, we're probably adding another layer of opportunity on top of where we were before.

That sounds great. I've gotten a lot of inbound questions with regards to your New York City investments. Any chance you could just give us an update there on the timeline for liquidation and maybe quantify or project the expectation for changes to your balance sheet associated with those assets?

Sure. I'll address it from I think where we are with those assets and then I'll let Mike talk about the market as well. As it relates to -- I think we put out a press release maybe a day ago regarding our Avora asset that sits on the New Jersey Gold Coast. At the end of 2020, I think we had 35 unsold units there. We just put out a press release yesterday that we are now 90% sold out of that community of 184 units.

So you can see how rapidly the sales have really picked up pace there, and we really only have just under 20 units remaining there. So we're faster than we had thought for 2021 in terms of selling out there and then redeploying that capital into our core homebuilding business.

As it relates to our remaining asset in Manhattan on 14th and 6th, we plan to begin selling that in the really spring, summer. And again, that's average selling price of $2.5 million units. So it's really on the lower, I would say, spectrum of the pricing. And we feel very confident about the pace of sales of that project over the next two years.

Yeah, this is Mike. So the only thing that I would add is that with our premarketing activities so far as we seem to be getting some nice traction around 14th and 6th as well as 212 West 93rd. Both of those have their own unique attributes to it that respond we think generally to the pandemic and some of the elements.

At 212 West 93rd, those units are fairly sizable. They have many bedrooms. They've got beautiful extended terraces out in the front of the units, in some cases in the back. So it's providing a great family environment with lots of space. And it's a smaller building, so we're not having a lot of people go into a unit, which necessitates a lot of elevator rides up and down and those kinds of things that have been somewhat of a struggle here recently.

As it goes back to 14th and 6th that John was talking about, location is unique. Its pricing is very attractive. And as well, it has some really beautiful architectural articulation as we have extended terraces and patios off of those units as well. And we do have two bedrooms and three bedrooms that are providing some great utility space in those units.

At both of the buildings, we do have sales centers now that are completed and opened and being manned, and we are getting traffic, and we're getting good interest. And then generally, the information we're getting from the market, and I'm sorry, I can't recite the source right now. I'm forgetting exactly what it is, but we are seeing some, I would say, bouncy bottom, if you will, coming out of the New York, Manhattan marketplace today and across all price points.

So we're hopeful that as things are starting to settle down and people are getting more comfortable and we're getting vaccinated that -- I don't know exactly what normal will mean in New York City, but certainly there's a desire still to live and work in New York City as far as we can say.

That is helpful. And then if we use your year-end balance sheet and we adjust for the merger and the subsequent warrant exchange, I calculate a book value per share to be around $13. Does that math make sense?

Yeah. I would say think of it slightly below that because I think you are referring to be a SPAC proceeds, right?

Correct.

And then there's a combination. I think it would be lower than that. Probably, I think -- I have to get back to you on that, Alex, with the exact numbers, but the SPAC proceeds also have to deduct the transaction expenses. Also, we had used about $28 million reduced warrants essentially from 10 to one.

So some of that was used. So the actual additional equity would be less than $107 million net proceeds, and it should be in our S-1 filing. We'll have to get back to you on that specific number, Alex.

One last question, any comments on January, February activity for new home orders and/or lot purchases?

The market remains very strong. We are seeing outstanding activity at all of our communities at all price points. I can take me from Orinda in Northern California, we're relevé. We're in the fifth sales release; price points at the $1.7 million to out Arizona, where we're in surprise at the high-twos. And it seems like across the spectrum, we're seeing great activity in our markets.

Excellent. Thank you very much.

Josh Bederman, Westport Capital.

Thank you. Thanks for taking my call. Can you walk through a little bit -- I thought was really helpful how you described your M&A process. Can you walk through the timing of the sort of three stages on a typical basis? And when you, guys, are guiding for planned acquisitions in the first quarter '21 and the first quarter of '22, is that outright builder acquisitions, or is this going to be plus of land in new markets?

Yeah. This is Mike. So generally, the way that it goes is that we like to dip our toe in the water with a couple of smaller organic acquisitions, if you will. I mean that we're in the market, we're out there trafficking amongst the development community as well as the brokers and looking for what would -- shake down. I won't call it shake down, but opportunities there that makes some sense for us. And then to build a small skeleton crew around those acquisitions and then seek out targets for M&A to build up quickly.

We'd like to do this generally within a year's time. And if we can be and need to be, I would say, at least breakeven or profitable within that first year with that acquisition. That's what we're shooting for, on the size of that.

So I would say that from getting -- particularly markets like Arizona, Texas, Florida, the timeline can range anywhere from 12 to 16 months, where you really have entered into a market again, established yourself, planted a flag, identified a target, which by the way, a lot of this is parallel processing. So it's not totally linear in the approach to (technical difficulty). Then bringing in a target and then scaling up and being something relevant within that marketplace in that 12 to 18-month range.

Okay. Thanks. And so if we're thinking about your guidance on acquisition, do you, guys, have any flags planted in Texas and Florida at this stage?

We are very close. I mean, we're holding the flag. We're running to the ground to stick it in, and we're very, very close to that, so yes. We've been in that that market, Texas, Florida and again working at market now for well over two years as we've been preparing to go public and to take our next levels in terms of our expansion across the country, all the while, of course, tending to business in the markets in which we're operating right now. So we're really excited. I think we've got some really exciting things in front of us, and I wish I could say more, but that's about as far as I can go.

That's fine. That's really helpful. We'll await future news, and congrats on a great quarter. Thank you.

At this time, this concludes our question-and-answer session. I would like to turn the call over back to Mr. Ho for closing remarks.

Thank you. I'd like to thank everyone for listening to today's call, and we look forward to speaking with you when we report our first-quarter results in May. Thank you again for joining us.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.