TRI Pointe Homes, LLC (Form: S-1, Received: 12/21/2012 16:28:12)

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

As filed with the Securities and Exchange Commission on December 21, 2012

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

TRI POINTE HOMES, LLC

(to be converted into TRI Pointe Homes, Inc.)

(Exact name of registrant as specified in its charter)


Delaware	1531	27-3201111
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification Number)

19520 Jamboree Road, Suite 200

Irvine, California 92612

(949) 478-8600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Douglas F. Bauer

Chief Executive Officer and Manager

TRI Pointe Homes, LLC

19520 Jamboree Road, Suite 200

Irvine, California 92612

(949) 478-8600

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael A. Gordon, Esq.

Sidley Austin LLP

One South Dearborn Street

Chicago, Illinois 60603

Tel (312) 853-7000

Fax (312) 853-7036

J. Gerard Cummins, Esq.

Sidley Austin LLP

787 Seventh Avenue

New York, New York 10019

Tel (212) 839-5300

Fax (212) 839-5599

Dhiya El-Saden, Esq.

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California 90071

Tel (213) 229-7196

Fax (213) 229-6196

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price ⁽¹⁾⁽²⁾	Amount of Registration Fee
Common Stock, $0.01 par value per share	$172,500,000	$23,529

⁽¹⁾

Estimated solely for purposes of determining the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

⁽²⁾

Includes shares of common stock which may be purchased by the underwriters to cover their option to purchase additional shares of common stock.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 21, 2012

PRELIMINARY PROSPECTUS

LOGO

Shares

TRI Pointe Homes, Inc.

Common Stock

$ per share

This is the initial public offering of our common stock. We are selling shares of our common stock. We currently expect the initial public offering price to be between $ and $ per share of our common stock.

We have granted the underwriters an option to purchase up to additional shares of our common stock.

We have applied to list the shares of our common stock on the New York Stock Exchange under the symbol “TPH.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 17.

We are an “emerging growth company” under the federal securities laws and are eligible for reduced reporting requirements. See “Summary—Implications of Being an Emerging Growth Company.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


	Per Share	Total
Initial public offering price	$	$
Underwriting discount	$	$
Proceeds to us (before expenses)	$	$

The underwriters expect to deliver the shares to purchasers on or about , 2013 through the book-entry facilities of The Depository Trust Company.

Joint Book-Running Managers


Citigroup		Deutsche Bank Securities		FBR

Lead Manager


		Moelis & Company

, 2013

LOGO

We are responsible for the information contained in this prospectus. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

TABLE OF CONTENTS


	Page
Summary		1
Risk Factors		17
Cautionary Note Concerning Forward-Looking Statements		38
Use of Proceeds		39
Capitalization		40
Dilution		41
Dividend Policy		43
Selected Financial Data		44
Management’s Discussion and Analysis of Financial Condition and Results Of Operations		46
Market Opportunity		72
Our Business		110
Management		128
Executive and Director Compensation		136
Certain Relationships and Related Party Transactions		143
Conflicts of Interest		145
Principal Stockholders		146
Description of Capital Stock		150
Shares Eligible for Future Sale		154
Certain Material Federal Income Tax Considerations		156
Underwriting		161
Legal Matters		166
Experts		166
Where You Can Find More Information		166
Index to Consolidated Financial Statements		F-1

We use market data and industry forecasts and projections throughout this prospectus, and in particular in the sections entitled “Summary,” “Market Opportunity” and “Our Business.” We have obtained substantially all of this information from a market study prepared for us in connection with this offering by John Burns Real Estate Consulting, LLC (“JBREC”), an independent research provider and consulting firm. We have paid JBREC a fee of $24,600 for that market study, plus an amount charged at an hourly rate for additional information we may require from JBREC from time to time in connection with that market study. Such information is included in this prospectus in reliance on JBREC’s authority as an expert on such matters. Any forecasts prepared by JBREC are based on data (including third-party data), models and experience of various professionals, and are based on various assumptions (including the completeness and accuracy of third-party data), all of which are subject to change without notice. See “Experts.” In addition, certain market and industry data has been taken from publicly available industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. We have not independently verified the data obtained from these sources, and we cannot assure you of the accuracy or completeness of the data. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus.

Special Note on Ownership of Our Common Stock

As part of our formation transactions, the members of TRI Pointe Homes, LLC (the entity that will be converted into a Delaware corporation and renamed TRI Pointe Homes, Inc. as part of our formation transactions) (“TPH LLC”) will receive an aggregate of shares of our common stock. The members of TPH LLC include a private equity fund (which, together with its wholly-owned subsidiaries, we refer to as the “Starwood Fund”) managed by an affiliate of Starwood Capital Group Global, L.P., the members of our management team and a third-party investor. In addition to their membership interest in TPH LLC, members of our management team also hold incentive units in TPH LLC and we refer to them in their capacity as holders of incentive units as “Incentive Unit Holders.”

The allocation of the shares of our common stock among the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders depends on a calculation of an internal rate of return to the members of TPH LLC (other than the Incentive Unit Holders) resulting from this offering, which in turn depends upon the timing of this offering and the value per share of our common stock. Under the operating agreement of TPH LLC, that value per share of our common stock is based initially upon the midpoint of the price range set forth on the cover page of this prospectus. Such value is subject to adjustment following the completion of this offering such that the number of shares that are allocated to the members of TPH LLC (other than the Incentive Unit Holders), on the one hand, may increase or decrease and the number of shares that are allocated to the Incentive Unit Holders, on the other hand, may correspondingly decrease or increase, in an amount limited to up to 1.0% of the aggregate number of shares of our common stock outstanding immediately following the completion of this offering. The adjustment is based upon (1) the average of the closing price of the shares of our common stock on the New York Stock Exchange for the ten trading-day period initially following this offering and (2) the number of shares of our common stock outstanding on the date of the completion of this offering. Although the allocation of shares of our common stock among the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders is subject to a minor adjustment based on the foregoing, the number of shares of our common stock received by the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders in the aggregate will not change as a result of such adjustment. For a more detailed discussion regarding the numbers of shares of our common stock that will be received by the members of TPH LLC (other than the Incentive Unit Holders), on the one hand, and the Incentive Unit Holders, on the other hand, see “Principal Stockholders.”

SUMMARY

This summary highlights information contained elsewhere in this prospectus, but it does not contain all of the information that you may consider important in making your investment decision. Therefore, you should read this entire prospectus carefully, including, in particular, the “Risk Factors” section beginning on page 17 of this prospectus. As used in this prospectus, unless the context otherwise requires or indicates, references to “the Company,” “our company,” “we,” “our” and “us” (1) for periods prior to September 24, 2010, the date on which the Starwood Fund agreed to make its investment in us, refer to the entities through which we conducted our business during such periods, which we refer to collectively as “our predecessor,” (2) for periods from and after September 24, 2010 and prior to the completion of our formation transactions, refer to TRI Pointe Homes, LLC and its subsidiaries and affiliates, which we sometimes refer to as “TPH LLC,” and (3) following the completion of our formation transactions, refer to TRI Pointe Homes, Inc. and its subsidiaries and affiliates; references to “the Starwood Fund” refer to a private equity fund (together with its wholly-owned subsidiaries) managed by an affiliate of Starwood Capital Group; and references to “Starwood Capital Group” refer to Starwood Capital Group Global, L.P., its predecessors and owned affiliates.

Unless otherwise indicated, market data is derived from a market study prepared for us in connection with this offering by John Burns Real Estate Consulting, LLC (“JBREC”).

Unless the context otherwise requires, the information in this prospectus assumes that: (1) our formation transactions have been completed, (2) the shares of our common stock to be sold in this offering are sold at $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and (3) the underwriters’ option to purchase additional shares is not exercised.

Our Company

We are engaged in the design, construction and sale of innovative single-family homes in planned communities in major metropolitan areas located throughout Southern and Northern California. Our company was founded in April 2009, towards the end of an unprecedented downturn in the national homebuilding industry, by our current management team with over a century of collective industry experience. As a “next generation” regional homebuilder, we are focused on taking advantage of opportunities in selected markets in California and are prudently evaluating opportunities in other Southwestern states with improving local market conditions. Unburdened by underperforming assets or legacy issues, our growth strategy generally seeks to capitalize on high demand in selected “core” markets with favorable population and employment growth as a result of proximity to job centers or primary transportation corridors. Our current operations consist of 13 communities, eight of which are actively selling, containing 695 lots under various stages of development (including three communities, one of which is actively selling, containing 143 lots for our fee building projects, as described below) in Southern and Northern California.

Our company was founded by the members of our management team, who have worked together for over 20 years. They have firmly established our company’s core values of quality, integrity and excellence, which are the driving forces behind our innovative designs and strong customer commitment. Given our relative size and regional focus, our management team employs a disciplined, hands-on approach, leveraging strong local market relationships and established reputation to source acquisitions, achieve land entitlements (which provide basic development rights to the owner) and deliver quality homes on budget and on schedule.

Prior to this offering, we have operated our business through TRI Pointe Homes, LLC, which, immediately prior to the completion of this offering, will be converted into a Delaware corporation and renamed TRI Pointe Homes, Inc. The members of TRI Pointe Homes, LLC, which members include a fund affiliated with Starwood Capital Group, the members of our management team and a third-party investor, will receive an aggregate of shares of our common stock in connection with our conversion into a corporation.

Since our formation, we have sold over 350 homes (including fee building projects), a number of which are located in prestigious master planned communities in California, and we have forged relationships with several leading national land developers. Our construction expertise across an extensive product offering allows us flexibility to pursue a wide array of land acquisition opportunities and appeal to a broad range of potential homebuyers, including entry-level, move-up and higher income customers. As a result, we build across a variety of price points, ranging from approximately $300,000 to $1,500,000, and home sizes, ranging from approximately 1,250 to 4,300 square feet. Cutting edge product development as well as exemplary customer service are key components of the lifestyle connection we seek to establish with each individual homebuyer. Additionally, we believe our diversified product strategy enables us to adapt quickly to changing market conditions and to optimize returns while strategically reducing portfolio risk.

In September 2010, we received an equity commitment of $150 million from a fund affiliated with Starwood Capital Group, a private equity firm founded and controlled by Barry Sternlicht, the chairman of our board of directors. Starwood Capital Group is a key strategic partner, providing access to acquisition opportunities within our markets as well as a wide range of knowledge in all aspects of real estate finance and operations. As of September 30, 2012, the Starwood Fund had contributed the entire $150 million of its commitment to us, and it has no further obligation to contribute capital to us. The Starwood Fund’s investment has enabled us to acquire or control, through options or non-binding letters of intent, 1,436 lots in 20 current and future communities. Prior to the Starwood Fund’s investment, most of our operations consisted of “fee building projects” in which we built, marketed and sold homes for independent third-party property owners with whom we have revenue sharing agreements on projects typically marketed under the TRI Pointe Homes brand name.

Our home sales revenue has grown rapidly from $4.1 million in 2010 to $26.5 million in the twelve months ended September 30, 2012 and our business mix has shifted away from fee building. We have experienced losses since we were founded in 2009, including losses of $3.9 million and $4.6 million for the nine months ended September 30, 2012 and the year ended December 31, 2011, respectively. As of September 30, 2012, we owned 552 lots and controlled 841 lots (689 lots that are under land option contracts or purchase contracts, 91 lots that are under non-binding letters of intent and 61 additional lots that are under an option contract executed in October 2012), representing approximately two to three years of supply to support our current growth plan. We seek to invest only in land inventory that we can efficiently develop over a 24 to 36 month horizon in order to maximize our returns on capital and minimize our exposure to market risk. We continually evaluate new communities and have an attractive pipeline of land acquisition opportunities.

Industry Overview

National Housing Market

The U.S. housing market continues to show signs of stabilization and improvement from the cyclical low points reached during the 2008 – 2009 global recession. Between the 2005 – 2006 market peak and 2011, single family housing starts declined 75%, according to data compiled by the U.S. Census Bureau, and median home prices declined 34%, as measured by the S&P Case-Shiller Index. In 2012, as a result of an improving macroeconomic backdrop and modest improvement in unemployment, early signs of a recovery began to materialize in many markets around the country. In the nine months ended September 30, 2012, new housing permits increased 32% and the median single-family home price increased 6% over the same period in 2011. Growth in sales of new homes have outpaced growth in sales of existing homes over the same period, increasing 23% versus 8% for existing homes.

supply. Many markets across the U.S. are beginning to exhibit several of these positive characteristics. Relative to long-term historical averages, the U.S. economy is creating more jobs for every homebuilding permit issued, the inventory of resale and new unsold homes is relatively low and affordability is near its highest level in over 30 years, as measured by the ratio of homeownership costs to household income.

However, despite recent momentum, the U.S. housing market has not fully recovered from the 2008 – 2009 recession as consumer confidence remains below average levels, mortgage underwriting standards remain tight, and inventories of vacant and distressed homes remain elevated relative to historic averages. Additionally, real estate is a local industry and not all markets exhibit the same trends.

California Housing Market

California residential real estate markets are significantly more supply-constrained and have experienced deeper contraction than other regions in the U.S. during the most recent global economic recession. Between the peak in 2005 and the trough in 2011, annual single-family homebuilding permits in the state of California declined a total of 86% versus the national decline of 75%. Despite being one of the largest housing markets in the nation, having issued an average of over 86,500 single-family homebuilding permits annually between 2001 and 2011, California added fewer than 26,000 single-family permits annually from 2009 through 2011. For the nine months ended September 30, 2012, California homebuilding permits grew 32% over the same period of the prior year, in line with the national average of 32%. The median existing family home price increased by an average of 7.4% from one year prior versus the national average of 5.8%, with more accelerated rates of appreciation in recent months.

The Company’s “core” markets in Southern and Northern California are expected to exhibit strong absolute or relative population growth, a key indicator of housing demand. According to a JBREC study of the 65 largest markets in the country, based on absolute population growth for the years 2012 – 2016, Los Angeles, San Diego and Riverside-San Bernardino are expected to rank among the top 15 markets in the country, with Orange County and Denver expected to rank in the top 25 markets. Additionally, supply constraints and increasing demand present more opportunities to build higher-density, infill projects (which are projects to construct new homes on vacant or under-utilized lots among existing properties in established communities) in the coastal submarkets.

While California experienced some of the greatest distress and sharpest price declines during the downturn, it remains in the early stages of a potential recovery. In 2011, unemployment was approximately 2.8 percentage points above the national average of 8.9%, a gap that widened from less than one percentage point in 2007. A reversion to long-term historical averages in terms of housing permits and sales volumes would represent meaningful improvement to current market conditions in many California markets. However, the Company’s “core” markets possess many positive attributes critical for a healthy housing market and are expected to exhibit solid growth.

Our Competitive Strengths

We believe the following strengths will provide us with a significant competitive advantage in implementing our business strategy:

Experienced and Proven Leadership

Douglas Bauer, our Chief Executive Officer, Thomas Mitchell, our President and Chief Operating Officer, and Michael Grubbs, our Chief Financial Officer, have worked together for over 20 years and have a successful track record of managing and growing a public homebuilding company. Their combined real estate industry experience includes land acquisition, financing, entitlement, development, construction, marketing and sales of single-family detached and attached homes in communities in a variety of markets. Prior to forming our company in 2009, Messrs. Bauer, Mitchell and Grubbs worked together for 17 years at William Lyon Homes from its formation in 1992, ultimately serving as its President and Chief Operating Officer, Executive Vice President and Senior Vice President and Chief Financial Officer, respectively. William Lyon Homes was formed with a nominal investment, and listed its shares on the New York Stock Exchange in 1999 until the company was taken private in 2006. During their tenure at William Lyon Homes, the company focused its operations in California, Arizona and Nevada. During its public operating period, the company delivered over 2,800 homes per year on average, generated revenues averaging over $1.0 billion per year and increased shareholders’ equity from $53 million to over $600 million. We believe that our management team’s prior experience, extensive relationships and strong local reputation provide us with a competitive advantage in being able to secure projects, obtain entitlements, build quality homes and complete projects on schedule.

Focus on High Growth Core Markets in California and Other Southwestern States

Our business is well-positioned to capitalize on the broader national housing market recovery. We are focused on the design, construction and sale of innovative single-family detached and attached homes in planned communities in major metropolitan areas in Southern and Northern California and, more recently, in Colorado (where we have land under a purchase contract). Additionally, we plan to evaluate expansion opportunities on an opportunistic basis in other markets in the Southwestern United States. According to JBREC, the Southwestern region represents some of the largest single family housing markets in the country, as defined by sales, starts and building permits. In Southern California, we principally operate in the counties of Los Angeles, Orange, San Diego, Ventura and Riverside-San Bernardino, and in Northern California, we principally operate in the counties of Santa Clara, San Mateo and Alameda. In Colorado, we anticipate that we will principally operate in the counties of Douglas, Denver, Arapahoe and Jefferson. These markets are generally characterized by high job growth and increasing populations, creating strong demand for new housing, and we believe they represent attractive homebuilding markets with opportunities for long-term growth. Moreover, our management team has deep local market knowledge of the California and Colorado homebuilding and development industries. We believe this experience and strong relationships with local market participants enable us to efficiently source, entitle and close on land.

Attractive Land Positions to Support Future Growth

We believe that we have strong land positions strategically located within our core markets, all of which have been acquired since 2010. We select communities with convenient access to metropolitan areas that are generally characterized by diverse economic and employment bases and demographics that we believe will support long-term growth. Our Southern California assets are well located along key transportation corridors in major job centers in our submarkets. In Northern California, our assets are located within and around the Silicon Valley, a major employment center. Additionally, our planned project in Castle Rock, Colorado is conveniently located near the hub of the Denver Tech Center, a major employment center in Denver, with a concentration of larger technology and communications companies and excellent schools.

As of September 30, 2012, we owned 552 lots in California in which we had commenced development, held options or were under contract to acquire an additional 689 lots in eight new communities in California and Colorado and had entered into non-binding letters of intent to acquire an additional 91 lots in one new and one existing community in Southern California. In October 2012, we entered into an option contract to acquire an additional 61 lots in Southern California. We closed the purchase of an aggregate of 164 of the controlled lots in our inventory in November 2012 for an aggregate purchase price of $40.7 million (including the application of $6.5 million of previously paid deposits). However, there can be no assurance that we will acquire any of the remaining land parcels on the terms or timing anticipated or at all or that we will proceed to build and sell homes on any of this land. See “—Pending Acquisitions” below.

Strong Operational Discipline and Controls

Our management team possesses significant operating expertise, including running a much larger public homebuilder. The perspective gained from that experience has helped shape the strict discipline and hands-on approach with which our company is managed. From monthly financial and operating performance “dashboard” updates on each project to quarterly operating committee review and financial accountability at the project management level, our strict operating discipline is a key part of our strategy to maximize returns while minimizing risk.

Our Relationship with Starwood Capital Group

We believe that our relationship with Starwood Capital Group, which has approximately $20 billion of real estate-related assets under management, gives us a strong competitive advantage, in particular by providing us with access to the personnel, relationships and the investing and operational expertise of Starwood Capital Group. Additionally, Barry Sternlicht, the Chairman and Chief Executive Officer of Starwood Capital Group, is also the chairman of our board. As a former Chairman and Chief Executive Officer of Starwood Hotels & Resorts Worldwide, Inc., a Fortune 500 company, and current Chairman and Chief Executive Officer of Starwood Property Trust, Inc., a commercial real estate finance company, Mr. Sternlicht brings a unique perspective on building a world class real estate operating business to the chairman position.

Through our relationship with Starwood Capital Group, our management team has drawn upon the deep real estate knowledge base of Starwood Capital Group’s personnel and its established track record of investing in real estate operating companies. On behalf of funds sponsored by Starwood Capital Group, members of its executive team have created or taken public three successful companies, including Starwood Hotels & Resorts Worldwide, Inc., Starwood Property Trust, Inc. and iS tar Financial, Inc. They also participated in the formation of Equity Residential Properties Trust, one of the premier U.S. multi-family REITs. We believe the breadth of experience and the relationships that Starwood Capital Group has fostered since its inception, particularly in the residential land business, will provide us with competitive advantages in acquiring land and developing homes. Over the past five years, affiliates of Starwood Capital Group have purchased over 19,400 residential lots in targeted markets. As of September 30, 2012, affiliates of Starwood Capital Group controlled more than 21,100 residential lots across the United States, including approximately 9,600 lots in California, Arizona and Colorado. Affiliates of Starwood Capital Group may make available to us for purchase, at market prices, certain of their owned residential land holdings.

No Legacy Issues

after the downturn commenced, whereas many of our competitors continue to own legacy properties in economically stagnant locations or land options either on undesirable properties or with unfavorable terms. The absence of legacy issues has also allowed us to hire experienced and talented real estate development personnel who became available during the downturn. We believe that our strong balance sheet and absence of legacy issues enables us to focus on future growth, as opposed to having resources diverted to manage troubled assets.

Our Business Strategy

Acquire Attractive Land Positions While Reducing Risk

We believe that our reputation and extensive relationships with land sellers, master plan developers, financial institutions, brokers and other builders, as well as our relationship with Starwood Capital Group, will enable us to continue to acquire well-positioned land parcels in our target markets in Southern and Northern California, Colorado and other Southwestern markets and provide us access to a greater number of acquisition opportunities. We believe our expertise in land development and planning enables us to create desirable communities that meet or exceed our target customer’s expectations, while operating at competitive costs. We also believe that our strategy of holding an inventory of land that will provide us with a two to three year supply of developed lots and focusing on the development of entitled parcels that we can complete within approximately 24 to 36 months from the start of sales allows us to limit exposure to land development and market cycle risk while pursuing attractive returns on our capital. We also seek to minimize our exposure to land risk through disciplined management of entitlements, as well as the use of land options and other flexible land acquisition arrangements.

Increase Market Position in Growth Markets

We believe that there are significant opportunities to profitably expand in our existing and target markets, and we continually review our selection of markets based on both aggregate demographic information and our own operating results. We use the results of these reviews to re-allocate our investments to those markets where we believe we can maximize our profitability and return on capital over the next several years. While our primary growth strategy will focus on increasing our market position in our existing markets, we may, on an opportunistic basis, explore expansion into other markets through organic growth or acquisition.

Provide Superior Design and Homeowner Experience and Service

We consider ourselves a “progressive” homebuilder driven by exemplary customer experience, cutting-edge product development and exceptional execution. Our core operating philosophy is to provide a positive, memorable experience to our homeowners through active engagement in the building process, tailoring our product to the buyer’s lifestyle needs and enhancing communication, knowledge and satisfaction. We believe that the new generation of home buying families has different ideas about the kind of home buying experience it wants. As a result, our selling process focuses on the homes’ features, benefits, quality and design in addition to the traditional metrics of price and square footage. In addition, we devote significant resources to the research and design of our homes to better meet the needs of our buyers. Through our “TRI-e ³ Green” platform, we provide homes that we believe are earth-friendly, enhance homeowners’ comfort, promote a healthier lifestyle and deliver tangible operating cost savings versus less efficient resale homes. Collectively, we believe these steps enhance the selling process, lead to a more satisfied homeowner and increase the number of buyers referred to our communities.

Offer a Diverse Range of Products

We are a builder with a wide variety of product lines that enable us to meet the specific needs of each of our core markets, which we believe provides us with a balanced portfolio and an opportunity to increase market share. We have demonstrated expertise in effectively building homes across product offerings from entry-level through first-time and second-time “move-up” housing. We spend extensive time studying and designing our products through the use of architects, consultants and homeowner focus groups for all levels and price points in our target markets. We believe our diversified product strategy enables us to best serve a wide range of buyers, adapt quickly to changing market conditions and optimize performance and returns while strategically reducing portfolio risk. Within each of our core markets we determine the profile of buyers we hope to address and design neighborhoods and homes with the specific needs of those buyers in mind.

Focus on Efficient Cost Structure and Target Attractive Returns

We believe that our homebuilding platform, which carries no legacy assets or liabilities, and our focus on controlling costs position us well to generate attractive returns for our investors. Our experienced management team is vigilant in maintaining its focus on controlling costs. We competitively bid each phase of development while maintaining strong relationships with our trade partners by managing production schedules closely and paying our vendors on time.

We combine decentralized management in those aspects of our business where we believe detailed knowledge of local market conditions is critical (such as governmental processing, construction, land development and sales and marketing), with centralized management in those functions where we believe central control is required (such as approval of land acquisitions, financial, treasury, human resources and legal matters). We have also made significant investments in systems and infrastructure to operate our business efficiently and to support the planned future growth of our company as a result of executing our expansion strategy.

Utilize Prudent Leverage

Project Sales by Market

The following table sets forth home sales revenue and units delivered by market for our owned projects, in which we built and sold the homes for our own account, during the nine months ended September 30, 2012 and the preceding two calendar years. In addition, the following table sets forth units delivered by market for our fee building projects, in which we built the homes for independent third-party property owners. In our fee building business, we receive management fees for homes we build for independent third-party property owners and do not record the home sales revenue from the homes sold.


	Nine Months Ended September 30, 2012				Year Ended December 31,
	Nine Months Ended September 30, 2012				2011				2010 ⁽¹⁾
	Home Sales		Units Delivered		Home Sales		Units Delivered		Home Sales		Units Delivered
	(dollars in thousands)
Southern California
*Owned Projects*
Riverside County:
Amberview, Riverside	$	4,412		10	$	—		—	$	—		—
Topazridge, Riverside		3,481		8		—		—		—		—
Sagebluff, Riverside		4,946		14		—		—		—		—
Castlerock, Riverside		—		—		7,117		21		2,728		8
San Diego County:
Eagle Ridge, Oceanside		4,970		12		6,408		15		1,415		3
Los Angeles County:
Los Arboles, Simi Valley		4,468		11		—		—		—		—

Total—Owned Projects	$	22,277		55	$	13,525		36	$	4,143		11

*Fee Building Projects*
Orange County:
Andalucia, Irvine ⁽²⁾				—				—				3
Sonoma, Irvine ⁽²⁾				—				19				76
San Marino, Irvine ⁽³⁾				16				20				—
San Diego County:
Patria, Chula Vista ⁽²⁾				—				29				23

Total—Fee Building Projects				16				68				102

Total—Company				71				104				113

⁽¹⁾

Included in the table for the year ended December 31, 2010 are 46 units related to fee building projects completed prior to the Starwood Fund’s investment in us on September 24, 2010. Since the Starwood Fund’s investment in us, we have focused primarily on building and selling homes for our own account.

⁽²⁾

We entered into a construction management agreement to build, sell and market homes in this community for an independent third-party property owner. This project is marketed under the TRI Pointe Homes brand name.

⁽³⁾

We entered into a construction management agreement to only build homes in this community for an independent third-party property owner. This project is marketed under the independent third-party property owner’s name.

Description of Completed Projects and Communities under Development

Our homebuilding projects usually take approximately 24 to 36 months to complete from the start of sales. The following table presents project information relating to each of our markets as of September 30, 2012 and includes information for all completed projects from our inception and current projects under development where we are building and selling homes for our own account and all completed projects from our inception and current projects under development where we are acting as a fee builder.


County, Project, City	Year of First Delivery ⁽¹⁾		Total Number of Homes ⁽²⁾		Cumulative Units Closed as of September 30, 2012		Backlog at September 30, 2012 ⁽³⁾⁽⁴⁾		Lots as of September 30, 2012 ⁽⁵⁾		Sales Price Range (in 000’s) ⁽⁶⁾		Home Size Range (sq. ft.)
*Owned Projects*
Southern California
Orange County:
Brio, La Habra		2013		91		—		—		91	$	410 – $445		1,744 – 2,259
San Diego County:
Eagle Ridge, Oceanside		2010		30		30		—		—	$	425 – $435		2,362 – 2,495
Candera, San Marcos		2012		50		—		22		50	$	297 – $357		1,524 – 2,014
Candera, San Marcos		2012		8		—		5		8	$	440 – $490		2,361 – 2,929
Civita, San Diego		2013		45		—		—		45	$	570 – $630		1,615 – 2,017
Riverside County:
Castlerock, Riverside		2010		29		29		—		—	$	315 – $335		2,336 – 2,661
Amberview, Riverside		2012		11		10		1		1	$	390 – $440		2,713 – 4,291
Topazridge, Riverside		2012		68		8		5		60	$	390 – $440		2,567 – 3,773
Sagebluff, Riverside		2012		47		14		9		33	$	350 – $380		2,866 – 3,206
Los Angeles County:
Los Arboles, Simi Valley		2012		43		11		12		32	$	385 – $420		1,300 – 1,521
Tamarind Lane, Azusa		2012		62		—		6		62	$	425 – $450		2,015 – 2,098

Southern California Total				484		102		60		382

Northern California
Santa Clara County:
Chantrea, San Jose		2012		38		—		13		38	$	1,245– $1,465		3,390 – 4,250
Ironhorse South, Morgan Hill		2012		37		—		9		37	$	500 – $676		1,818 – 2,672
Ironhorse North, Morgan Hill		2013		32		—		—		32	$	500 – $676		1,818 – 2,672
San Mateo County:
Amelia, San Mateo		2013		63		—		—		63	$	690 – $1,030		1,256 – 2,521

Northern California Total				170		—		22		170

Company Total—Owned Projects				654		102		82		552

*Fee Building Projects*
Southern California
Orange County:
Andalucia, Irvine ⁽⁷⁾		2010		3		3		—		—	$	849 – $1,028		1,961 – 2,596
Sonoma, Irvine ⁽⁷⁾		2010		95		95		—		—	$	755 – $900		2,330 – 2,622
San Marino, Irvine ⁽⁸⁾		2011		39		36		—		3		N/A		2,808 – 3,121
San Diego County:
Patria, Chula Vista ⁽⁷⁾		2010		52		52		—		—	$	503 – $553		2,687 – 3,341
Ventura County:
Meridian Hills, Moorpark ⁽⁷⁾		2013		83		—		—		83	$	620 – $775		2,650 – 3,883
Lagunitas, Carpinteria ⁽⁹⁾		2013		57		—		3		57	$	450 – $815		1,360 – 2,605

Southern California Total				329		186		3		143

Company Total—Fee Building Projects				329		186		3		143

Grand Totals:
Owned Projects				654		102		82		552
Fee Building Projects				329		186		3		143

				983		288		85		695

⁽¹⁾

Year of first delivery for future periods is based upon management’s estimates and is subject to change.

⁽²⁾

The number of homes to be built at completion is subject to change, and there can be no assurance that we will build these homes.

⁽³⁾

Backlog consists of homes under sales contracts that had not yet closed, and there can be no assurance that closings of sold homes will occur.

⁽⁴⁾

Of the total homes subject to pending sales contracts that have not closed as of September 30, 2012, 82 represent homes completed or under construction on our owned projects and three represent homes completed on our fee building projects.

⁽⁵⁾

Owned lots and fee building lots as of September 30, 2012 include owned lots and fee building lots in backlog as of September 30, 2012.

⁽⁶⁾

Sales price range reflects base price only and excludes any lot premium, buyer incentives and buyer selected options, which may vary from project to project. Sales prices for homes required to be sold pursuant to affordable housing requirements are excluded from sales price range.

⁽⁷⁾

⁽⁸⁾

⁽⁹⁾

We entered into a non-binding letter of intent to only build homes in this community for an independent third-party property owner. There can be no assurance that we will enter into a binding agreement or that we will complete this project as planned.

Pending Acquisitions

As of September 30, 2012, we had options or were under contract to acquire land for an aggregate purchase price of approximately $109.3 million (net of deposits) on which we expect to build 689 homes in eight new communities in California and Colorado. These projects are located in Rancho Mission Viejo (Orange County), Huntington Beach (Orange County) (two communities), Mountain View (Santa Clara County), Alameda (Alameda County) (three communities) and in Castle Rock (Douglas County, Colorado). As of September 30, 2012, we had paid $16.5 million in non-refundable deposits relating to these pending acquisitions. We have also entered into non-binding letters of intent, and, in October 2012, entered into an option contract, to acquire land for an aggregate purchase price of $56.0 million on which we expect to build 152 homes in two new communities and one existing community. The following table presents certain information with respect to each of these pending acquisitions as of September 30, 2012 ⁽¹⁾ .


Market	Total Lots Controlled ⁽¹⁾		Communities		Aggregate Purchase Price, Net ⁽²⁾
Southern California		387		5	$	103,875,000
Northern California		305		4		52,850,000
Colorado		149		1		8,579,000

Company total		841		10	$	165,304,000

⁽¹⁾

Includes (i) 689 lots that are under land option contracts or purchase contracts, (ii) 91 lots that are under non-binding letters of intent and (iii) 61 lots that are under an option contract executed in October 2012. The aggregate purchase price of the lots under non-binding letters of intent and the option contract executed in October 2012 is $56.0 million. With respect to the lots under non-binding letters of intent, there can be no assurance that we will enter into binding agreements or as to the terms thereof.

⁽²⁾

Includes the estimated aggregate purchase price of all the lots per region less aggregate deposits paid of $16.5 million as of September 30, 2012.

We closed on an aggregate of 164 of the controlled lots in our inventory in November 2012, located in Rancho Mission Viejo (Orange County) and Mountain View (Santa Clara County), for an aggregate purchase price of $40.7 million (including the application of $6.5 million of previously paid deposits). However, there can be no assurance that we will acquire any of the remaining land parcels on the terms or timing anticipated or at all or that we will proceed to build and sell homes on any of this land.

Owned and Controlled Lots

As of September 30, 2012, we owned or controlled, pursuant to option contracts, purchase contracts or non-binding letters of intent, an aggregate of 1,393 lots. The following table presents certain information with respect to our owned and controlled lots as of September 30, 2012 ⁽¹⁾ .


Market	Lots Owned		Lots Controlled ⁽¹⁾		Lots Owned and Controlled ⁽¹⁾
Southern California		382		387		769
Northern California		170		305		475
Colorado		—		149		149

Company total		552		841		1,393

⁽¹⁾

Includes (i) 689 lots that are under land option contracts or purchase contracts, (ii) 91 lots that are under non-binding letters of intent and (iii) 61 lots that are under an option contract executed in October 2012. With respect to the lots under non-binding letters of intent, there can be no assurance that we will enter into binding agreements or as to the terms thereof. In November 2012, we closed the purchase of an aggregate of 164 of the controlled lots in our inventory.

Summary Risk Factors

An investment in the shares of our common stock involves risks. You should consider carefully the risks discussed below and described more fully along with other risks under “Risk Factors” in this prospectus before investing in our common stock.

•

Our long-term growth depends upon our ability to successfully identify and acquire desirable land parcels for residential buildout.

•

Adverse changes in general economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.

•

Our geographic concentration could materially and adversely affect us if the homebuilding industry in our markets should decline.

•

Because most of our homebuyers finance the purchase of their homes, the terms and availability of mortgage financing can affect the demand for and the ability to complete the purchase of a home, which could materially and adversely affect us.

•

Interest rate increases or changes in federal lending programs or other regulations could lower demand for our homes, which could materially and adversely affect us.

•

Our business and results of operations are dependent on the availability and skill of subcontractors.

•

Fluctuations in real estate values may require us to write-down the book value of our real estate assets.

•

The Starwood Fund holds a majority equity interest in our company and its interests may not be aligned with yours, and as a result of Starwood Capital Group’s relationship with us, conflicts of interests may arise with respect to transactions involving or with Starwood Capital Group or its affiliates.

•

We have no contractual right to access the personnel, relationships or the investing and operational expertise of Starwood Capital Group, which may be withheld from us at any time, and we are likely to lose such access if and when the Starwood Fund ceases to hold a material investment in our company. Starwood Capital Group may pursue competing transactions.

•

We expect to use leverage in executing our business strategy, which may adversely affect the return on our assets.

•

We have a limited operating history and we may not be able to successfully operate our business.

•

There is currently no public market for shares of our common stock, a trading market for our common stock may never develop following this offering and our common stock prices may be volatile and could decline substantially following this offering.

•

The offering price per share of our common stock offered under this prospectus may not accurately reflect the value of your investment.

Our Offices

Our principal executive offices are located at 19520 Jamboree Road, Suite 200, Irvine, California 92612. Our main telephone number is (949) 478-8600. Our internet website is www.tripointehomes.com. The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this prospectus.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These provisions include, among other matters:

•

an exemption to provide fewer years of financial statements and other financial data in an initial public offering registration statement;

•

an exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting;

•

an exemption from new or revised financial accounting standards until they would apply to private companies and from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation;

•

reduced disclosure about the emerging growth company’s executive compensation arrangements; and

•

no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements.

We have determined to opt out of the exemption from compliance with new or revised financial accounting standards. Our decision to opt out of this exemption is irrevocable.

We have elected to adopt the reduced disclosure requirements available to emerging growth companies. As a result of these elections, the information that we provide in this prospectus may be different than the information you may receive from other public companies in which you hold equity interests. In addition, it is possible that some investors will find our common stock less attractive as a result of our elections, which may cause a less active trading market for our common stock and more volatility in our stock price.

We will remain an “emerging growth company” until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30 ^th , and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

The Offering

Common stock offered

Common stock to be outstanding immediately following this offering

shares ⁽¹⁾

Underwriters’ option

Up to shares

Use of proceeds

We expect to receive net proceeds from this offering of approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus), after deducting the underwriting discount and estimated offering expenses payable by us.

We intend to use the net proceeds from this offering (including any additional proceeds that we may receive if the underwriters exercise their option to purchase additional shares) primarily for the acquisition of land, including the land described above under “—Pending Acquisitions,” and for development, home construction and other related purposes. See “Use of Proceeds.”

Dividend policy

New York Stock Exchange symbol

We have applied to list the shares of our common stock on the New York Stock Exchange under the symbol “TPH.”

Risk factors

Investing in our common stock involves a high degree of risk. For a discussion of factors you should consider in making an investment, see “Risk Factors” beginning on page 17 of this prospectus.

⁽¹⁾

Excludes: (i) an aggregate of restricted stock units to be granted to our executive officers and director nominees upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan; (ii) options to purchase an aggregate of shares of our common stock to be granted to our executive officers upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan; (iii) shares of our common stock reserved for future issuance under our 2013 Long-Term Incentive Plan; and (iv) up to shares of our common stock issuable upon the exercise by the underwriters of their option to purchase additional shares.

Summary of Selected Financial Data

The following sets forth our summary of selected financial and operating data on a historical basis. You should read the following summary of selected financial data in conjunction with our consolidated historical financial statements and the related notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this prospectus.

Our historical consolidated statements of operations information for the year ended December 31, 2011, the period from September 24, 2010 (inception date of TRI Pointe Homes, LLC) through December 31, 2010 and the period from January 1, 2010 through September 23, 2010 (our predecessor) have been derived from the historical consolidated financial statements audited by Ernst & Young LLP, independent auditors, whose report with respect thereto is included elsewhere in this prospectus. From April 2009 to September 23, 2010, our principals were engaged primarily in the business of constructing homes for independent third-party property owners through a number of different entities.

Our unaudited historical consolidated balance sheet information as of September 30, 2012 and consolidated statements of operations information for the nine-month periods ended September 30, 2012 and 2011 are derived from our unaudited historical consolidated financial statements, which we believe include all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. Our results of operations for the interim period ended September 30, 2012 are not necessarily indicative of the results to be obtained for the full calendar year.


										Period From			Our Predecessor
	Nine Months Ended September 30,						Year Ended December 31, 2011			September 24, 2010 (Inception) Through December 31, 2010			Period From January 1, 2010 Through September 23, 2010
	2012			2011			Year Ended December 31, 2011
	(unaudited)
Statement of Operations Data
Home sales	$	22,277,000		$	9,279,000		$	13,525,000		$	4,143,000		$	—
Cost of home sales		(19,663,000	)		(8,408,000	)		(12,075,000	)		(3,773,000	)		—

Homebuilding gross profit		2,614,000			871,000			1,450,000			370,000			—
Fee building gross margin		38,000			198,000			150,000			814,000			2,665,000
Sales and marketing		(2,351,000	)		(1,062,000	)		(1,553,000	)		(408,000	)		(136,000	)
General and administrative		(4,155,000	)		(3,112,000	)		(4,620,000	)		(1,875,000	)		(1,401,000	)
Organizational costs		—			—			—			(1,061,000	)		—
Other income (expense), net		(86,000	)		(41,000	)		(20,000	)		(15,000	)		(43,000	)

Net income (loss)	$	(3,940,000	)	$	(3,146,000	)	$	(4,593,000	)	$	(2,175,000	)	$	1,085,000

Unaudited pro forma loss per share
Basic	$						$

Diluted	$						$

Operating Data-Owned Projects
Net new home orders		129			34			42			9			4
New homes delivered		55			26			36			11			—
Average sales price of homes delivered	$	405,000		$	357,000		$	376,000		$	377,000		$	—
Cancellation rate		17	%		8	%		13	%		19	%		20	%
Average selling communities		5			2			2			2			1
Selling communities at end of period		7			2			3			2			1
Backlog at end of period, number of homes		82			10			8			2			4
Backlog at end of period, aggregate sales value	$	46,126,000		$	4,004,000		$	3,364,000		$	696,000		$	1,392,000
Operating Data-Fee Building Projects
Net new home orders		17			31			34			24			114
New homes delivered		16			65			68			56			46
Average sales price of homes delivered	$	1,020,000		$	775,000		$	786,000		$	794,000		$	787,000


	As of September 30, 2012
	Actual		As Adjusted ⁽¹⁾
Balance Sheet Data (at period end)
Cash and cash equivalents	$	45,242,000	$
Real estate inventories	$	148,468,000	$	148,468,000
Total assets	$	195,514,000	$
Notes payable	$	46,436,000	$	46,436,000
Total liabilities	$	52,924,000	$
Common units subject to redemption ⁽²⁾	$	37,000,000	$
Members’ equity	$	105,590,000	$	—
Stockholders’ equity	$	—	$

⁽¹⁾

This column gives effect to (i) our formation transactions, (ii) the sale of shares of our common stock in this offering, assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us (and assuming no exercise of the underwriters’ option to purchase additional shares), and (iii) the application of the net proceeds from this offering.

⁽²⁾

During the period ended September 30, 2012, the Starwood Fund made an additional capital contribution to TPH LLC in the amount of $37 million, representing the contribution of the remainder of its $150 million equity commitment to TPH LLC, in exchange for additional common units. As of September 30, 2012, we were required to return this $37 million capital contribution (or a lesser amount specified by the Starwood Fund) to the Starwood Fund if this offering were not to close by February 28, 2013, or if this offering were to terminate prior to that time. In November 2012, we obtained written approval from the Starwood Fund, pursuant to an amendment of the operating agreement of TPH LLC, to remove the redemption feature of the $37 million of common units.

RISK FACTORS

An investment in our common stock involves a high degree of risk and should be considered highly speculative. Before making an investment decision, you should carefully consider the following risk factors, which address the material risks concerning our business and an investment in our common stock, together with the other information contained in this prospectus. If any of the risks discussed in this prospectus occur, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected, in which case the trading price of our common stock could decline significantly and you could lose all or a part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Concerning Forward-Looking Statements.”

Risks Related to Our Business

Our long-term growth depends upon our ability to successfully identify and acquire desirable land parcels for residential buildout.

Our future growth depends upon our ability to successfully identify and acquire attractive land parcels for development of our single-family homes at reasonable prices and with terms that meet our underwriting criteria. Our ability to acquire land parcels for new single-family homes may be adversely affected by changes in the general availability of land parcels, the willingness of land sellers to sell land parcels at reasonable prices, competition for available land parcels, availability of financing to acquire land parcels, zoning and other market conditions. If the supply of land parcels appropriate for development of single-family homes is limited because of these factors, or for any other reason, our ability to grow could be significantly limited, and the number of homes that we build and sell could decline. Additionally, our ability to begin new projects could be impacted if we elect not to purchase land parcels under option contracts. To the extent that we are unable to purchase land parcels timely or enter into new contracts for the purchase of land parcels at reasonable prices, our home sales revenue and results of operations could be negatively impacted.

Adverse changes in general economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.

The residential homebuilding industry is cyclical and is highly sensitive to changes in general economic conditions such as levels of employment, consumer confidence and income, availability of financing for acquisitions, construction and permanent mortgages, interest rate levels, inflation and demand for housing. Since early 2006, the U.S. housing market has been negatively impacted by declining consumer confidence, restrictive mortgage standards and large supplies of foreclosures, resales and new homes, among other factors. When combined with a prolonged economic downturn, high unemployment levels, increases in the rate of inflation and uncertainty in the U.S. economy, these conditions have contributed to decreased demand for housing, declining sales prices and increasing pricing pressure. In the event that these economic and business trends continue or decline further, we could experience declines in the market value of our inventory and demand for our homes, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

The health of the residential homebuilding industry may also be significantly affected by “shadow inventory” levels. “Shadow inventory” refers to the number of homes with a mortgage that are in some form of distress but that have not yet been listed for sale. Shadow inventory can occur when lenders put properties that have been foreclosed or forfeited to lenders on the market gradually, rather than all at once, or delay the foreclosure process. They may choose to do so because of regulations and foreclosure moratoriums, because of the additional costs and resources required to process and sell foreclosed properties, or because they want to avoid depressing housing prices further by putting many distressed properties up for sale at the same time. A significant shadow inventory in our markets could, were it to be released into our markets, adversely impact

home prices and demand for our homes, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

In addition, an important segment of our customer base consists of first time and second time “move-up” buyers, who often purchase homes subject to contingencies related to the sale of their existing homes. The difficulties facing these buyers in selling their homes during recessionary periods may adversely affect our sales. Moreover, during such periods, we may need to reduce our sales prices and offer greater incentives to buyers to compete for sales that may result in reduced margins.

Our geographic concentration could materially and adversely affect us if the homebuilding industry in our current markets should decline.

Our business strategy is focused on the design, construction and sale of innovative single-family detached and attached homes in planned communities in major metropolitan areas in Southern and Northern California and, more recently, Colorado (where we have land under a purchase contract with an entity managed by an affiliate of Starwood Capital Group but no current real estate ownership), as well as the eventual entry into other Southwestern markets. In Southern California, we principally operate in the counties of Los Angeles, Orange, San Diego, Ventura and Riverside-San Bernardino, and in Northern California, we principally operate in the counties of Santa Clara, San Mateo and Alameda. In Colorado, we anticipate that we will principally operate in the counties of Douglas, Denver, Arapahoe and Jefferson. Because our operations are concentrated in these areas, a prolonged economic downturn in one or more of these areas, particularly within California, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations, and a disproportionately greater impact on us than other homebuilders with more diversified operations. For the nine months ended September 30, 2012, we generated all of our revenues from our California real estate inventory. During the downturn from 2008 to 2010, land values, the demand for new homes and home prices declined substantially in California. In addition, the state of California is experiencing severe budget shortfalls and is considering raising taxes and increasing fees to offset the deficit. If these conditions in California persist or worsen, it could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. If the current, relatively weak buyer demand for new homes in California continues or worsens, home prices could stagnate or continue to decline, which would have a material adverse effect on us.

Our business depends on the ability of our homebuyers to obtain financing for the purchase of their homes. Many of our homebuyers must sell their existing homes in order to buy a home from us. Since 2009, the U.S. residential mortgage market as a whole has experienced significant instability due to, among other things, defaults on subprime and other loans, resulting in the declining market value of such loans. In light of these developments, lenders, investors, regulators and other third parties questioned the adequacy of lending standards and other credit requirements for several loan programs made available to borrowers in recent years. This has led to tightened credit requirements and an increase in indemnity claims for mortgages. Deterioration in credit quality among subprime and other nonconforming loans has caused most lenders to eliminate subprime mortgages and most other loan products that do not conform to Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal Housing Administration (the “FHA”) or Veterans Administration (the “VA”) standards. Fewer loan products and tighter loan qualifications, in turn, make it more difficult for a borrower to finance the purchase of a new home or the purchase of an existing home from a potential “move-up” buyer who wishes to purchase one of our homes. In general, these developments have delayed any general improvement in the housing market. If our potential homebuyers or the buyers of our homebuyers’ existing homes cannot obtain suitable financing, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected.

Interest rate increases or changes in federal lending programs or other regulations could lower demand for our homes, which could materially and adversely affect us.

Substantially all purchasers of our homes finance their acquisitions with mortgage financing. Rising interest rates, decreased availability of mortgage financing or of certain mortgage programs, higher down payment requirements or increased monthly mortgage costs may lead to reduced demand for our homes and mortgage loans. Increased interest rates can also hinder our ability to realize our backlog because our home purchase contracts provide customers with a financing contingency. Financing contingencies allow customers to cancel their home purchase contracts in the event that they cannot arrange for adequate financing. As a result, rising interest rates can decrease our home sales and mortgage originations. Any of these factors could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

In addition, as a result of the turbulence in the credit markets and mortgage finance industry, the federal government has taken on a significant role in supporting mortgage lending through its conservatorship of Fannie Mae and Freddie Mac, both of which purchase home mortgages and mortgage-backed securities originated by mortgage lenders, and its insurance of mortgages originated by lenders through the FHA and the VA. The availability and affordability of mortgage loans, including consumer interest rates for such loans, could be adversely affected by a curtailment or cessation of the federal government’s mortgage-related programs or policies. The FHA may continue to impose stricter loan qualification standards, raise minimum down payment requirements, impose higher mortgage insurance premiums and other costs, and/or limit the number of mortgages it insures. Due to growing federal budget deficits, the U.S. Treasury may not be able to continue supporting the mortgage-related activities of Fannie Mae, Freddie Mac, the FHA and the VA at present levels, or it may revise significantly the federal government’s participation in and support of the residential mortgage market. Because the availability of Fannie Mae, Freddie Mac, FHA- and VA-backed mortgage financing is an important factor in marketing and selling many of our homes, any limitations, restrictions or changes in the availability of such government-backed financing could reduce our home sales, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Furthermore, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. This legislation provides for a number of new requirements relating to residential mortgages and mortgage lending practices, many of which are to be developed further by implementing rules. These include, among others, minimum standards for mortgages and lender practices in making mortgages, limitations on certain fees and incentive arrangements, retention of credit risk and remedies for borrowers in foreclosure proceedings. The effect of such provisions on lending institutions will depend on the rules that are ultimately enacted. However, these requirements, as and when implemented, are expected to reduce the availability of loans to borrowers and/or increase the costs to borrowers to obtain such loans. Any such reduction could result in a decline of our home sales, which could materially and adversely affect us.

Any limitation on, or reduction or elimination of, tax benefits associated with owning a home would have an adverse effect upon the demand for our home products, which could be material to our business.

Changes in federal income tax laws may affect demand for new homes. Current tax laws generally permit significant expenses associated with owning a home, primarily mortgage interest expense and real estate taxes, to be deducted for the purpose of calculating an individual’s federal, and in many cases, state, taxable income. Various proposals have been publicly discussed to limit mortgage interest deductions and to limit the exclusion of gain from the sale of a principal residence. If such proposals were enacted without offsetting provisions, the after-tax cost of owning a new home would increase for many of our potential customers. Enactment of any such proposal may have an adverse effect on the homebuilding industry in general, as the loss or reduction of homeowner tax deductions could decrease the demand for new homes.

Difficulty in obtaining sufficient capital could result in an inability to acquire land for our developments or increased costs and delays in the completion of development projects.

The homebuilding industry is capital-intensive and requires significant up-front expenditures to acquire land parcels and begin development. If internally generated funds are not sufficient, we may seek additional capital in the form of equity or debt financing from a variety of potential sources, including additional bank financings and/or securities offerings. The availability of borrowed funds, especially for land acquisition and construction financing, may be greatly reduced nationally, and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans. The credit and capital markets have recently experienced significant volatility. If we are required to seek additional financing to fund our operations, continued volatility in these markets may restrict our flexibility to access such financing. If we are not successful in obtaining sufficient capital to fund our planned capital and other expenditures, we may be unable to acquire land for our housing developments and/or to develop the housing. Additionally, if we cannot obtain additional financing to fund the purchase of land under our option contracts or purchase contracts, we may incur contractual penalties and fees. Any difficulty in obtaining sufficient capital for planned development expenditures could also cause project delays and any such delay could result in cost increases. Any one or more of the foregoing events could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

We face potentially substantial risk with respect to our land and lot inventory.

We intend to acquire land parcels for replacement and expansion of land inventory within our current and any new markets. The risks inherent in purchasing and developing land parcels increase as consumer demand for housing decreases. As a result, we may buy and develop land parcels on which homes cannot be profitably built and sold. The market value of land parcels, building lots and housing inventories can fluctuate significantly as a result of changing market conditions, and the measures we employ to manage inventory risk may not be adequate to insulate our operations from a severe drop in inventory values. When market conditions are such that land values are not appreciating, previously entered into option agreements may become less desirable, at which time we may elect to forego deposits and pre-acquisition costs and terminate the agreements. In addition, inventory carrying costs can be significant and can result in losses in a poorly performing project or market. In the event of significant changes in economic or market conditions, we may have to sell homes at significantly lower margins or at a loss, if we are able to sell them at all.

Adverse weather and geological conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us.

As a homebuilder, we are subject to numerous risks, many of which are beyond our management’s control, such as droughts, floods, wildfires, landslides, soil subsidence, earthquakes and other weather-related and geologic events which could damage projects, cause delays in completion of projects, or reduce consumer demand for housing, and shortages in labor or raw materials, which could delay project completion and cause increases in the prices for labor or raw materials, thereby affecting our sales and profitability. Our current markets are primarily in Southern and Northern California, areas which have historically experienced significant earthquake activity and seasonal wildfires. Areas in Colorado (where we have land under a purchase contract with an entity managed by an affiliate of Starwood Capital Group but no current real estate ownership) have also been subjected to seasonal wildfires and soil subsidence. In addition to directly damaging our projects, earthquakes, wildfires or other geologic events could damage roads and highways providing access to those projects, thereby adversely affecting our ability to market homes in those areas and possibly increasing the costs of completion.

There are some risks of loss for which we may be unable to purchase insurance coverage. For example, losses associated with landslides, earthquakes and other geologic events may not be insurable and other losses, such as those arising from terrorism, may not be economically insurable. A sizeable uninsured loss could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

Our business and results of operations are dependent on the availability and skill of subcontractors.

Substantially all of our construction work is done by third-party subcontractors with us acting as the general contractor. Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors. While we anticipate being able to obtain sufficient materials and reliable subcontractors during times of material shortages and believe that our relationships with subcontractors are good, we do not have long-term contractual commitments with any subcontractors, and there can be no assurance that skilled subcontractors will continue to be available at reasonable rates and in the areas in which we conduct our operations. Certain of the subcontractors engaged by us are represented by labor unions or are subject to collective bargaining arrangements. A strike or other work stoppage involving any of our subcontractors could also make it difficult for us to retain subcontractors for our construction work. In addition, union activity could result in higher costs to retain our subcontractors. The inability to contract with skilled subcontractors at reasonable costs on a timely basis could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

In addition, despite our quality control efforts, we may discover that our subcontractors were engaging in improper construction practices or installing defective materials in our homes. When we discover these issues, we, generally through our subcontractors, repair the homes in accordance with our new home warranty and as required by law. We reserve up to 1.0% of the sales price of each home we sell to provide the customer service to our homebuyers. These reserves are established based on market practices, our historical experiences, and our judgment of the qualitative risks associated with the types of homes built. However, the cost of satisfying our warranty and other legal obligations in these instances may be significantly higher than our warranty reserves, and we may be unable to recover the cost of repair from such subcontractors. Regardless of the steps we take, we can in some instances be subject to fines or other penalties, and our reputation may be injured.

Labor and raw material shortages and price fluctuations could delay or increase the cost of home construction, which could materially and adversely affect us.

The residential construction industry experiences serious labor and raw material shortages from time to time, including shortages in qualified tradespeople, and supplies of insulation, drywall, cement, steel and lumber. These labor and raw material shortages can be more severe during periods of strong demand for housing or during periods where the regions in which we operate experience natural disasters that have a significant impact on existing residential and commercial structures. The cost of labor and raw materials may also be adversely affected during periods of shortage or high inflation. During the recent economic downturn, a large number of qualified tradespeople went out of business or otherwise exited the market. A reduction in available tradespeople will likely exacerbate labor shortages when demand for new housing increases. Shortages and price increases could cause delays in and increase our costs of home construction, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Utility shortages or price increases could have an adverse impact on operations.

Certain of the areas in which we operate, particularly in Southern and Northern California, have experienced power shortages, including mandatory periods without electrical power, as well as significant increases in utility costs. We may incur additional costs and may not be able to complete construction on a timely basis if such power shortages and utility rate increases continue. In addition, power shortages and rate increases may adversely affect the local economies in which we operate, which may reduce demand for housing in our markets. Our operations may be adversely impacted if further rate increases and/or power shortages occur.

New and existing laws and regulations or other governmental actions may increase our expenses, limit the number of homes that we can build or delay completion of our projects.

boundaries of a particular area. Projects that are not entitled may be subjected to periodic delays, changes in use, less intensive development or elimination of development in certain specific areas due to government regulations. We may also be subject to periodic delays or may be precluded entirely from developing in certain communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Local governments also have broad discretion regarding the imposition of development fees and exactions for projects in their jurisdiction. Projects for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process and can also be impacted adversely by unforeseen health, safety and welfare issues, which can further delay these projects or prevent their development. As a result, home sales could decline and costs increase, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

We may be unable to obtain suitable bonding for the development of our housing projects.

We are often required to provide bonds to governmental authorities and others to ensure the completion of our projects. As a result of market conditions, surety providers have been reluctant to issue new bonds and some providers are requesting credit enhancements (such as cash deposits or letters of credit) in order to maintain existing bonds or to issue new bonds. If we are unable to obtain required bonds in the future for our projects, or if we are required to provide credit enhancements with respect to our current or future bonds, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected.

We are subject to environmental laws and regulations, which may increase our costs, limit the areas in which we can build homes and delay completion of our projects.

We are subject to a variety of local, state, federal and other statutes, ordinances, rules and regulations concerning the environment. The particular environmental laws which apply to any given homebuilding site vary according to multiple factors, including the site’s location, its environmental conditions and the present and former uses of the site, as well as adjoining properties. Environmental laws and conditions may result in delays, may cause us to incur substantial compliance and other costs, and can prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas. In addition, in those cases where an endangered or threatened species is involved, environmental rules and regulations can result in the restriction or elimination of development in identified environmentally sensitive areas. From time to time, the United States Environmental Protection Agency (the “EPA”) and similar federal or state agencies review homebuilders’ compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures. Any such actions taken with respect to us may increase our costs. Further, we expect that increasingly stringent requirements will be imposed on homebuilders in the future. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber. California is especially susceptible to restrictive government regulations and environmental laws.

Under various environmental laws, current or former owners of real estate, as well as certain other categories of parties, may be required to investigate and clean up hazardous or toxic substances or petroleum product releases, and may be held liable to a governmental entity or to third parties for related damages, including for bodily injury, and for investigation and clean-up costs incurred by such parties in connection with the contamination. A mitigation system may be installed during the construction of a home if a cleanup does not remove all contaminants of concern or to address a naturally occurring condition such as methane. Some buyers may not want to purchase a home with a mitigation system.

We may not be able to compete effectively against competitors in the homebuilding industry.

from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder our market share expansion, and lead to pricing pressures on our homes that may adversely impact our margins and revenues. If we are unable to successfully compete, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected. Our competitors may independently develop land and construct housing units that are superior or substantially similar to our products. Furthermore, a number of our primary competitors are significantly larger, have a longer operating history and may have greater resources or lower cost of capital than ours; accordingly, they may be able to compete more effectively in one or more of the markets in which we operate. Many of these competitors also have longstanding relationships with subcontractors and suppliers in the markets in which we operate. We also compete for sales with individual resales of existing homes and with available rental housing.

Increases in our cancellation rate could have a negative impact on our home sales revenue and homebuilding margins.

The cancellation rate of buyers for our owned projects who contracted to buy a home but did not close escrow (as a percentage of overall orders) was approximately 17% during the nine months ended September 30, 2012 and 13% during the year ended December 31, 2011. Home order cancellations negatively impact the number of closed homes, net new home orders, home sales revenue and results of operations, as well as the number of homes in backlog. Home order cancellations can result from a number of factors, including declines or slow appreciation in the market value of homes, increases in the supply of homes available to be purchased, increased competition, higher mortgage interest rates, homebuyers’ inability to sell their existing homes, homebuyers’ inability to obtain suitable financing, including providing sufficient down payments, and adverse changes in economic conditions. Upon a home order cancellation, the homebuyer’s escrow deposit is returned to the homebuyer (other than with respect to certain design-related deposits, which we retain). An increase in the level of our home order cancellations could have a negative impact on our business, prospects, liquidity, financial condition and results of operations.

We are subject to product liability and warranty claims arising in the ordinary course of business.

As a homebuilder, we are subject to construction defect, product liability and home warranty claims, including moisture intrusion and related claims, arising in the ordinary course of business. While we maintain general liability insurance and generally seek to require our subcontractors and design professionals to indemnify us for some portion of the liabilities arising from their work, there can be no assurance that these insurance rights and indemnities will be collectable or adequate to cover any or all construction defect and warranty claims for which we may be liable. For example, contractual indemnities can be difficult to enforce, we are often responsible for applicable self-insured retentions (particularly in markets where we include our subcontractors on our general liability insurance and our ability to seek indemnity for insured claims is significantly limited), certain claims may not be covered by insurance or may exceed applicable coverage limits, and one or more of our insurance carriers could become insolvent. Additionally, in the event we determine to obtain product liability insurance, the coverage offered by and availability of such insurance for construction defects is limited and costly. There can be no assurance that coverage will not be further restricted, become more costly or even be available. Furthermore, any product liability or warranty claims made against us, whether or not they are viable, may lead to negative publicity, which could impact our reputation and our home sales.

In addition, we conduct the substantial portion of our business in California, one of the most highly regulated and litigious jurisdictions in the United States, which imposes a ten year, strict liability tail on many construction liability claims. As a result, our potential losses and expenses due to litigation, new laws and regulations may be greater than those of our competitors who have smaller California operations.

Our operating performance is subject to risks associated with the real estate industry.

Real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond our control. Certain events may decrease cash available for operations, as well as the value of our real estate assets. These events include, but are not limited to:

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adverse changes in international, national or local economic and demographic conditions;

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adverse changes in financial conditions of buyers and sellers of properties, particularly residential homes and land suitable for development of residential homes;

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competition from other real estate investors with significant capital, including other real estate operating companies and developers and institutional investment funds;

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reductions in the level of demand for and increases in the supply of land suitable for development;

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fluctuations in interest rates, which could adversely affect our ability, or the ability of homebuyers, to obtain financing on favorable terms or at all;

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unanticipated increases in expenses, including, without limitation, insurance costs, development costs, real estate assessments and other taxes and costs of compliance with laws, regulations and governmental policies; and

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changes in enforcement of laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws, governmental fiscal policies and the Americans with Disabilities Act of 1990.

In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in the purchase of homes or an increased incidence of home order cancellations. If we cannot successfully implement our business strategy, our business, prospects, liquidity, financial condition and results of operations will be adversely affected.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties for reasonable prices in response to changing economic, financial and investment conditions may be limited and we may be forced to hold non-income producing properties for extended periods of time.

Real estate investments are relatively difficult to sell quickly. As a result, our ability to promptly sell one or more properties in response to changing economic, financial and investment conditions is limited and we may be forced to hold non-income producing assets for an extended period of time. We cannot predict whether we will be able to sell any property for the price or on the terms that we set or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.

Fluctuations in real estate values may require us to write-down the book value of our real estate assets.

The homebuilding industry is subject to significant variability and fluctuations in real estate values. As a result, we may be required to write-down the book value of our real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”), and some of those write-downs could be material. Any material write-downs of assets could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Inflation could adversely affect our business and financial results.

Inflation could adversely affect us by increasing the costs of land, raw materials and labor needed to operate our business. If the market continues to have an oversupply of homes relative to demand, we may be unable to offset any such increases in costs with corresponding higher sales prices for our homes. Inflation may also

accompany higher interests rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby further decreasing demand. If we are unable to raise the prices of our homes to offset the increasing costs of our operations, our margins could decrease. Furthermore, if we need to lower the price of our homes to meet demand, the value of our land inventory may decrease. Inflation may also raise our costs of capital and decrease our purchasing power, making it more difficult to maintain sufficient funds to operate our business.

Acts of war or terrorism may seriously harm our business.

Acts of war, any outbreak or escalation of hostilities between the United States and any foreign power or acts of terrorism may cause disruption to the U.S. economy, or the local economies of the markets in which we operate, cause shortages of building materials, increase costs associated with obtaining building materials, result in building code changes that could increase costs of construction, affect job growth and consumer confidence, or cause economic changes that we cannot anticipate, all of which could reduce demand for our homes and adversely impact our business, prospects, liquidity, financial condition and results of operations.

Risks Related to Conflicts of Interest

The Starwood Fund holds a majority equity interest in our company and its interests may not be aligned with yours.

Upon the completion of this offering, the Starwood Fund will beneficially own shares of our common stock, which will represent % of our common stock outstanding immediately after this offering, or % if the underwriters exercise their option to purchase additional shares in full (in each case, based upon the midpoint of the price range set forth on the cover page of this prospectus and assuming this offering closes on , 2013). See “Principal Stockholders.” The Starwood Fund is managed by an affiliate of Starwood Capital Group. For so long as the Starwood Fund continues to beneficially own a controlling stake in us, the Starwood Fund will have the power to elect and remove all of our directors and to approve any action requiring the majority approval of our stockholders. The Starwood Fund’s interests may not be fully aligned with yours and this could lead to a strategy that is not in your best interests. In addition, the Starwood Fund’s significant ownership in us and resulting ability to effectively control us may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our common stock might otherwise receive a premium for your shares over the then-current market price.

Moreover, for as long as the Starwood Fund’s beneficial ownership of our common stock continues to exceed 50%, we may elect to be treated as a “controlled company” for purposes of the New York Stock Exchange, which would allow us to opt out of certain corporate governance requirements, including requirements that a majority of the board of directors consist of independent directors and that the compensation committee and nominating committee be composed entirely of independent directors. We do not currently rely on the controlled company exemptions; however, to the extent we continue to qualify, we may choose to take advantage of these exemptions in the future.

As a result of Starwood Capital Group’s relationship with our company, conflicts of interest may arise with respect to any transactions involving or with Starwood Capital Group or its affiliates.

Barry Sternlicht, the chairman of our board, is the Chairman and Chief Executive Officer, and J. Marc Perrin, a member of our board, is a Managing Director, of Starwood Capital Group. As a result of our relationship with Starwood Capital Group, there may be transactions between us and Starwood Capital Group that could present an actual or perceived conflict of interest. These conflicts of interest may lead Mr. Sternlicht and Mr. Perrin to recuse themselves from actions of our board of directors with respect to any transactions involving or with Starwood Capital Group or its affiliates, or with Starwood Property Trust, Inc., a New York Stock Exchange-listed public mortgage REIT managed by an affiliate of Starwood Capital Group. In addition, Mr. Sternlicht and Mr. Perrin will

devote only a portion of their business time to their duties with our board of directors, and they will devote the majority of their time to their duties with Starwood Capital Group and other commitments.

In addition to the acquisition of lots in Castle Rock, Colorado from an entity managed by an affiliate of Starwood Capital Group referred to under “Certain Relationships and Related Party Transactions,” we may in the future acquire additional land from affiliates of Starwood Capital Group. Any such acquisitions will be separately considered for approval by our independent directors.

We believe that our relationship with Starwood Capital Group provides us with a competitive advantage by providing us with access to the personnel, relationships and the investing and operational expertise of Starwood Capital Group. However, we have not entered into, nor do we anticipate entering into, any exclusivity agreements with Starwood Capital Group, and we have no contractual right to access Starwood Capital Group’s personnel, relationships or expertise. Starwood Capital Group may cease to provide us with access to its personnel, relationships and expertise at any time, or from time to time, and we are likely to lose such access if and when the Starwood Fund ceases to hold a material investment in our company. Our inability to access Starwood Capital Group’s personnel, relationships or expertise as we currently expect, or the loss of such access in the future, could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations. For example, we believe that our relationship with Starwood Capital Group provides us with access to a greater number of acquisition opportunities than our competitors, and if we do not have access to those opportunities as we currently expect, our ability to grow could be significantly limited, and the number of homes that we build and sell could be materially lower than what we currently anticipate.

In addition, Starwood Capital Group is under no obligation to engage in any transactions with us, to present any acquisition opportunities to us or to assist us in any way in acquiring land parcels. As a result, Starwood Capital Group may pursue transactions that are competitive with our business, including engaging in acquisitions and/or sales of land and other residential properties for its own benefit, or for the benefit of entities that its affiliates manage, with third parties. In addition, Starwood Capital Group may sell land suitable for residential buildout in our current or target markets to our competitors. Any of the foregoing activities by Starwood Capital Group could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

Although we do not pay any fees to Starwood Capital Group or its affiliates, we have reimbursed Starwood Capital Group for certain due diligence expenses, and for the out-of-pocket travel and lodging expenses of representatives of the Starwood Fund for their attendance at board and other meetings and in connection with site visits or other business of our company. We reimbursed Starwood Capital Group $3,966, $79,464 and $0 during the nine-month period ended September 30, 2012 and the years ended December 31, 2011 and 2010, respectively.

The employment agreements of our executive officers were not negotiated on an arm’s length basis and we may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with them.

We will enter into new employment agreements with Douglas Bauer, our Chief Executive Officer, Thomas Mitchell, our President and Chief Operating Officer, and Michael Grubbs, our Chief Financial Officer, effective upon the completion of this offering, pursuant to which they will devote their full business time and attention to our affairs. See “Executive and Director Compensation—Employment Agreements.” These employment agreements were not negotiated on an arm’s-length basis. We may choose not to enforce, or to enforce less

vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with the individuals party to these agreements.

Risks Related to Our Indebtedness

We expect to use leverage in executing our business strategy, which may adversely affect the return on our assets.

We expect to employ prudent levels of leverage to finance the acquisition and development of our lots and construction of our homes. Our existing indebtedness is recourse to us and we anticipate that future indebtedness will likewise be recourse. As of September 30, 2012, we had approximately $86.0 million of aggregate loan commitments, of which $46.4 million was outstanding. Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service. As a means of sustaining our long-term financial health and limiting our exposure to unforeseen dislocations in the debt and financing markets, we currently expect to remain conservatively capitalized. However, our charter does not contain a limitation on the amount of debt we may incur and our board of directors may change our target debt levels at any time without the approval of our stockholders.

Incurring substantial debt could subject us to many risks that, if realized, would adversely affect us, including the risk that:

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our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt which is likely to result in acceleration of such debt;

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our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase with higher financing cost;

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we may be required to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations and capital expenditures, future investment opportunities or other purposes; and

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the terms of any refinancing may not be as favorable as the terms of the debt being refinanced.

If we do not have sufficient funds to repay our debt at maturity, it may be necessary to refinance the debt through additional debt or additional equity financings. If, at the time of any refinancing, prevailing interest rates or other factors result in higher interest rates on refinancings, increases in interest expense could adversely affect our cash flows and results of operations. If we are unable to refinance our debt on acceptable terms, we may be forced to dispose of our assets on disadvantageous terms, potentially resulting in losses. To the extent we cannot meet any future debt service obligations, we will risk losing some or all of our assets that may be pledged to secure our obligations to foreclosure. Unsecured debt agreements may contain specific cross-default provisions with respect to specified other indebtedness, giving the unsecured lenders the right to declare a default if we are in default under other loans in some circumstances. Defaults under our debt agreements could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Access to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could adversely affect our ability to maximize our returns.

commitments, of which $46.4 million was outstanding. Our access to additional third-party sources of financing will depend, in part, on:

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general market conditions;

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the market’s perception of our growth potential;

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with respect to acquisition and/or development financing, the market’s perception of the value of the land parcels to be acquired and/or developed;

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our current debt levels;

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our current and expected future earnings;

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our cash flow; and

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the market price per share of our common stock.

Recently, domestic financial markets have experienced unusual volatility, uncertainty and a tightening of liquidity in both the investment grade debt and equity capital markets. Credit spreads for major sources of capital widened significantly during the U.S. credit crisis as investors demanded a higher risk premium. Given the current volatility and weakness in the capital and credit markets, potential lenders may be unwilling or unable to provide us with financing that is attractive to us or may charge us prohibitively high fees in order to obtain financing. Consequently, there is greater uncertainty regarding our ability to access the credit market in order to attract financing on reasonable terms. Investment returns on our assets and our ability to make acquisitions could be adversely affected by our inability to secure additional financing on reasonable terms, if at all.

Depending on market conditions at the relevant time, we may have to rely more heavily on additional equity financings or on less efficient forms of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities and other purposes. We may not have access to such equity or debt capital on favorable terms at the desired times, or at all.

Our current financing arrangements contain, and our future financing arrangements likely will contain, restrictive covenants relating to our operations.

Our current financing arrangements contain, and the financing arrangements we enter into in the future likely will contain, covenants (financial and otherwise) affecting our ability to incur additional debt, make certain investments, reduce liquidity below certain levels, make distributions to our stockholders and otherwise affect our operating policies. If we fail to meet or satisfy any of these covenants in our debt agreements, we would be in default under these agreements, which could result in a cross-default under other debt agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. A default also could limit significantly our financing alternatives, which could cause us to curtail our investment activities and/or dispose of assets when we otherwise would not choose to do so. If we default on several of our debt agreements or any single significant debt agreement, it could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Secured indebtedness exposes us to the possibility of foreclosure on our ownership interests in our land parcels.

Incurring mortgage and other secured indebtedness increases our risk of loss of our ownership interests in our land parcels or other assets because defaults thereunder, and the inability to refinance such indebtedness, may result in foreclosure action initiated by lenders.

Interest expense on debt we incur may limit our cash available to fund our growth strategies.

As of September 30, 2012, we had approximately $86.0 million of aggregate loan commitments, of which $46.4 million was outstanding. As part of our financing strategy, we may incur a significant amount of additional debt. Our current debt has, and any additional debt we subsequently incur may have, a floating rate of interest. Higher interest rates could increase debt service requirements on our current floating rate debt and on any floating rate debt we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes. If we need to repay existing debt during periods of rising interest rates, we could be required to refinance our then-existing debt on unfavorable terms or liquidate one or more of our assets to repay such debt at times which may not permit realization of the maximum return on such assets and could result in a loss. The occurrence of either such event or both could materially and adversely affect our cash flows and results of operations.

Failure to hedge effectively against interest rate changes may adversely affect us.

We may obtain in the future one or more forms of interest rate protection—in the form of swap agreements, interest rate cap contracts or similar agreements—to hedge against the possible negative effects of interest rate fluctuations. However, we cannot assure you that any hedging will adequately relieve the adverse effects of interest rate increases or that counterparties under these agreements will honor their obligations thereunder. In addition, we may be subject to risks of default by hedging counterparties. Adverse economic conditions could also cause the terms on which we borrow to be unfavorable. We could be required to liquidate one or more of our assets at times which may not permit us to receive an attractive return on our assets in order to meet our debt service obligations.

Risks Related to Our Organization and Structure

We have a limited operating history and we may not be able to successfully operate our business.

Our predecessor was formed in April 2009 and TPH LLC was formed in September 2010. Prior to the completion of this offering, TRI Pointe Homes, LLC will be converted from a Delaware limited liability company into a Delaware corporation and renamed TRI Pointe Homes, Inc. Given our limited operating history, you will have little historical information upon which to evaluate our prospects, including our ability to acquire desirable land parcels, develop such land and market our homes. In addition, we cannot assure you that our past experience will be sufficient to enable us to operate our business successfully or implement our operating policies and business strategies as described in this prospectus. Furthermore, we may not be able to generate sufficient operating cash flows to pay our operating expenses or service our indebtedness. You should not rely upon the past performance of our management team, as past performance may not be indicative of our future results.

We depend on key personnel.

Our success depends to a significant degree upon the contributions of certain key personnel including, but not limited to, Douglas Bauer, our Chief Executive Officer, Thomas Mitchell, our President and Chief Operating Officer, and Michael Grubbs, our Chief Financial Officer, each of whom would be difficult to replace. Although we will enter into new employment agreements with Messrs. Bauer, Mitchell and Grubbs upon the completion of this offering, there is no guarantee that these executives will remain employed with us. If any of our key personnel were to cease employment with us, our operating results could suffer. Our ability to retain our key personnel or to attract suitable replacements should any members of our management team leave is dependent on the competitive nature of the employment market. The loss of services from key personnel or a limitation in their availability could materially and adversely impact our business, prospects, liquidity, financial condition and results of operations. Further, such a loss could be negatively perceived in the capital markets. Although we are currently considering our coverages, we have not obtained key man life insurance that would provide us with proceeds in the event of death or disability of any of our key personnel.

Termination of the employment agreements with the members of our management team could be costly and prevent a change in control of our company.

The employment agreements we will enter into with Douglas Bauer, our Chief Executive Officer, Thomas Mitchell, our President and Chief Operating Officer, and Michael Grubbs, our Chief Financial Officer, upon the completion of this offering each provide that if their employment with us terminates under certain circumstances, we may be required to pay them significant amounts of severance compensation, thereby making it costly to terminate their employment. Furthermore, these provisions could delay or prevent a transaction or a change in control of our company that might involve a premium paid for shares of our common stock or otherwise be in the best interests of our stockholders, which could adversely affect the market price of our common stock.

Certain anti-takeover defenses and applicable law may limit the ability of a third-party to acquire control of us.

Our charter and bylaws and Delaware law contain provisions that may delay or prevent a transaction or a change in control of our company that might involve a premium paid for shares of our common stock or otherwise be in the best interests of our stockholders, which could adversely affect the market price of our common stock. Certain of these provisions are described below.

Selected provisions of our charter and bylaws . Our charter and/or bylaws contain anti-takeover provisions that:

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authorize our board of directors, without further action by the stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series, and with respect to each series, to fix the number of shares constituting that series and establish the rights and other terms of that series;

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require that actions to be taken by our stockholders may be taken only at an annual or special meeting of our stockholders and not by written consent;

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specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors or our chief executive officer;

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establish advance notice procedures for stockholders to submit nominations of candidates for election to our board of directors and other proposals to be brought before a stockholders meeting;

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provide that our bylaws may be amended by our board of directors without stockholder approval;

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allow our directors to establish the size of our board of directors by action of our board, subject to a minimum of three members;

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provide that vacancies on our board of directors or newly created directorships resulting from an increase in the number of our directors may be filled only by a majority of directors then in office, even though less than a quorum;

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do not give the holders of our common stock cumulative voting rights with respect to the election of directors; and

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prohibit us from engaging in certain business combinations with any “interested stockholder” unless specified conditions are satisfied as described below under “—Selected provisions of Delaware law.”

Selected provisions of Delaware law. We have opted out of Section 203 of the Delaware General Corporation Law (the “DGCL”), which regulates corporate takeovers. However, our charter contains provisions that are similar to Section 203 of the DGCL. Specifically, our charter provides that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the person became an interested stockholder, unless:

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prior to the time that person became an interested stockholder, our board of directors approved either the business combination or the transaction which resulted in the person becoming an interested stockholder;

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upon consummation of the transaction which resulted in the person becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding certain shares; or

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at or subsequent to the time the person became an interested stockholder, the business combination is approved by our board of directors and by the affirmative vote of at least 66 ² / ₃ % of the outstanding voting stock which is not owned by the interested stockholder.

Generally, a business combination includes a merger, consolidation, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an interested stockholder is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock. However, in the case of our company, the Starwood Fund and any of its affiliates and subsidiaries and any of their permitted transferees receiving 15% or more of our voting stock will not be deemed to be interested stockholders regardless of the percentage of our voting stock owned by them. This provision could prohibit or delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us.

We may change our operational policies, investment guidelines and our business and growth strategies without stockholder consent, which may subject us to different and more significant risks in the future.

Our board of directors will determine our operational policies, investment guidelines and our business and growth strategies. Our board of directors may make changes to, or approve transactions that deviate from, those policies, guidelines and strategies without a vote of, or notice to, our stockholders. This could result in us conducting operational matters, making investments or pursuing different business or growth strategies than those contemplated in this prospectus. Under any of these circumstances, we may expose ourselves to different and more significant risks in the future, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

The obligations associated with being a public company will require significant resources and management attention.

As a public company with listed equity securities, we will need to comply with new laws, regulations and requirements, including the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), related regulations of the Securities and Exchange Commission (the “SEC”) and requirements of the New York Stock Exchange, with which we were not required to comply as a private company. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting.

Section 404 of the Sarbanes-Oxley Act requires our management and independent auditors to report annually on the effectiveness of our internal control over financial reporting. However, we are an “emerging growth company,” as defined in the JOBS Act, and, so for as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent auditors on the effectiveness of our internal control over financial reporting.

These reporting and other obligations will place significant demands on our management, administrative, operational and accounting resources and will cause us to incur significant expenses. We may need to upgrade

our systems or create new systems, implement additional financial and management controls, reporting systems and procedures, create or outsource an internal audit function, and hire additional accounting and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

If we fail to implement and maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which could materially and adversely affect us.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We may in the future discover areas of our internal controls that need improvement. We cannot be certain that we will be successful in implementing or maintaining adequate internal control over our financial reporting and financial processes. Furthermore, as we grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective. Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.

We are an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, a requirement to present only two years of audited financial statements, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies, reduced disclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companies and no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements. We have elected to adopt these reduced disclosure requirements. We could be an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of this offering, although a variety of circumstances could cause us to lose that status earlier. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised financial accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have determined to opt out of such extended transition period and, as a result, we will comply with new or revised financial accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised financial accounting standards is irrevocable.

Changes in accounting rules, assumptions and/or judgments could materially and adversely affect us.

Accounting rules and interpretations for certain aspects of our operations are highly complex and involve significant assumptions and judgment. These complexities could lead to a delay in the preparation and dissemination of our financial statements. Furthermore, changes in accounting rules and interpretations or in our accounting assumptions and/or judgments, such as asset impairments, could significantly impact our financial statements. In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements. Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Any joint venture investments that we make could be adversely affected by our lack of sole decision making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers.

We may co-invest in the future with third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a land acquisition and/or a development. In this event, we would not be in a position to exercise sole decision-making authority regarding the acquisition and/or development, and our investment may be illiquid due to our lack of control. Investments in partnerships, joint ventures, or other entities may, under certain circumstances, involve risks not present were a third-party not involved, including the possibility that partners or co-venturers might become bankrupt, fail to fund their share of required capital contributions, make poor business decisions or block or delay necessary decisions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers.

We may become subject to litigation, which could materially and adversely affect us.

In the future we may become subject to litigation, including claims relating to our operations, security offerings and otherwise in the ordinary course of business. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to vigorously defend ourselves. However, we cannot be certain of the ultimate outcomes of any claims that may arise in the future. Resolution of these types of matters against us may result in our having to pay significant fines, judgments, or settlements, which, if uninsured, or if the fines, judgments and settlements exceed insured levels, could adversely impact our earnings and cash flows, thereby materially and adversely affecting us. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could materially and adversely impact us, expose us to increased risks that would be uninsured, and materially and adversely impact our ability to attract directors and officers.

An information systems interruption or breach in security could adversely affect us.

We rely on fully integrated accounting, financial and operational management information systems to conduct our operations. Any disruption in these systems could adversely affect our ability to conduct our business. Furthermore, any security breach of information systems or data could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

Risks Related to this Offering and Ownership of Our Common Stock

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the likelihood that an active trading market for shares of our common stock will develop or be sustained;

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the liquidity of any such market;

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the ability of our stockholders to sell their shares of common stock; or

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the price that our stockholders may obtain for their common stock.

If an active market does not develop or is not maintained, the market price of our common stock may decline and you may not be able to sell your shares. Even if an active trading market develops for our common stock subsequent to this offering, the market price of our common stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock.

Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include:

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actual or anticipated variations in our quarterly operating results;

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changes in market valuations of similar companies;

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adverse market reaction to the level of our indebtedness;

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additions or departures of key personnel;

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actions by stockholders;

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speculation in the press or investment community;

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general market, economic and political conditions, including an economic slowdown or dislocation in the global credit markets;

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our operating performance and the performance of other similar companies;

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changes in accounting principles; and

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passage of legislation or other regulatory developments that adversely affect us or the homebuilding industry.

The offering price per share of our common stock offered under this prospectus may not accurately reflect the value of your investment.

Prior to this offering there has been no market for our common stock. The offering price per share of our common stock offered by this prospectus was negotiated between us and the underwriters. Factors considered in determining the price of our common stock include:

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the history and prospects of companies whose principal business is the design, construction and sale of single-family homes;

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prior offerings of those companies;

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our prospects for acquiring land parcels for development at attractive values;

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our capital structure;

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an assessment of our management and its experience in acquiring land parcels and designing, constructing and selling homes;

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general conditions of the securities markets at the time of this offering; and

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other factors we deemed relevant.

The offering price may not accurately reflect the value of our common stock and may not be realized upon any subsequent disposition of the shares.

If you purchase common stock in this offering, you will experience immediate dilution.

The offering price of our common stock is higher than the net tangible book value per share of our common stock outstanding upon the completion of this offering. Accordingly, if you purchase common stock in this offering, you will experience immediate dilution of approximately $ in the net tangible book value per share of our common stock, based on the midpoint of the price range set forth on the cover page of this prospectus. This means that investors that purchase shares of our common stock in this offering will pay a price per share that exceeds the per share net tangible book value of our assets.

We do not intend to pay dividends on our common stock for the foreseeable future.

We currently intend to retain our future earnings, if any, to finance the development and expansion of our business and, therefore, do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments and such other factors as our board of directors deems relevant. Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them.

Future sales of our common stock or other securities convertible into our common stock could cause the market value of our common stock to decline and could result in dilution of your shares.

Our board of directors is authorized, without your approval, to cause us to issue additional shares of our common stock or to raise capital through the issuance of preferred stock (including equity or debt securities convertible into common stock), options, warrants and other rights, on terms and for consideration as our board of directors in its sole discretion may determine. Sales of substantial amounts of our common stock could cause the market price of our common stock to decrease significantly. We cannot predict the effect, if any, of future sales of our common stock, or the availability of our common stock for future sales, on the value of our common stock. Sales of substantial amounts of our common stock by the Starwood Fund or another large stockholder or otherwise, or the perception that such sales could occur, may adversely affect the market price of our common stock.

We are offering shares of our common stock as described in this prospectus (excluding the underwriters’ option to purchase up to an additional shares). Upon the completion of this offering, the members of our management team will collectively beneficially own shares of our common stock (excluding grants of restricted stock units and options to purchase shares of our common stock), which will represent % of our common stock outstanding immediately after this offering, or % if the underwriters exercise their option to purchase additional shares in full (in each case, based upon the midpoint of the price range set forth on the cover page of this prospectus and assuming this offering closes on , 2013). See “Principal Stockholders.” In addition, the members of our management team will be granted an aggregate of restricted stock units and options to purchase an aggregate of shares of our common stock upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan, and our director nominees will be granted an aggregate of restricted stock units upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan. Further, upon the completion of this offering, the Starwood Fund will beneficially

own shares of our common stock, which will represent % of our common stock outstanding immediately after this offering, or % if the underwriters exercise their option to purchase additional shares in full (in each case, based upon the midpoint of the price range set forth on the cover page of this prospectus and assuming this offering closes on , 2013). See “Principal Stockholders.” In connection with this offering, we, our officers and directors, the Starwood Fund and the third-party investor in TPH LLC have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Citigroup Global Markets Inc., dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock, subject to certain exceptions. Citigroup Global Markets Inc. in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice. If the restrictions under the lock-up agreements are waived, shares of our common stock may become available for resale into the market, subject to applicable law, which could reduce the market price for our common stock.

Pursuant to his employment agreement, each member of our management team will agree that, for a period of 36 months following the completion of this offering, during any calendar quarter, he will not sell shares of our common stock in an amount exceeding the greater of (1) 10% of the shares of our common stock owned by him on the date of the completion of this offering and (2) the percentage of shares of our common stock that has been sold or otherwise disposed of by the Starwood Fund during such calendar quarter. Any sales of shares of our common stock made pursuant to the foregoing will be subject to the restrictions imposed by the lock-up agreements referenced above and by applicable law.

We will enter into a registration rights agreement with the members of TPH LLC, including the Starwood Fund, the members of our management team and a third-party investor, with respect to the shares of our common stock that they will receive as part of our formation transactions. We refer to these shares collectively as the “registrable shares.” Pursuant to the registration rights agreement, we will grant the members of TPH LLC and their direct and indirect transferees shelf registration rights requiring us to file a shelf registration statement and to maintain the effectiveness of such registration statement so as to allow sales thereunder from time to time, demand registration rights to have the registrable shares registered for resale, and, in certain circumstances, the right to “piggy-back” the registrable shares in registration statements we might file in connection with any future public offering.

In connection with this offering, we intend to file a registration statement on Form S-8 to register the total number of shares of our common stock that may be issued under our 2013 Long-Term Incentive Plan, including the restricted stock units to be granted to our executive officers and director nominees, as well as the options to purchase shares of our common stock to be granted to our executive officers, in each case upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan.

Future offerings of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future offerings of equity securities that may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock.

In the future, we may attempt to increase our capital resources by making offerings of debt securities or additional offerings of equity securities. Upon bankruptcy or liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Our preferred stock, if issued, could have a preference on liquidating distributions or a preference on dividend payments or both that could limit our ability to make a dividend distribution to the holders of our common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control. As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and purchasers of our common stock in this offering bear the risk of our future offerings reducing the market price of our common stock and diluting their ownership interest in our company.

Non-U.S. holders may be subject to United States federal income tax on gain realized on the sale or disposition of shares of our common stock.

Because of our anticipated holdings in United States real property interests following the completion of our formation transactions, we believe we will be and will remain a “United States real property holding corporation” for United States federal income tax purposes. As a result, a non-U.S. holder (as defined in “Certain Material Federal Income Tax Considerations”) generally will be subject to United States federal income tax on any gain realized on a sale or disposition of shares of our common stock, and a purchaser of the stock generally will be required to withhold and remit to the Internal Revenue Service (the “IRS”) 10% of the purchase price, unless our common stock is regularly traded on an established securities market (such as the New York Stock Exchange) and such non-U.S. holder did not actually or constructively hold more than 5% of our common stock at any time during the shorter of (a) the five-year period preceding the date of the sale or disposition and (b) the non-U.S. holder’s holding period in such stock. A non-U.S. holder also will be required to file a United States federal income tax return for any taxable year in which it realizes a gain from the disposition of our common stock that is subject to United States federal income tax.

We anticipate that our common stock will be regularly traded on an established securities market following this offering. However, no assurance can be given in this regard and no assurance can be given that our common stock will remain regularly traded in the future. Non-U.S. holders should consult their tax advisors concerning the consequences of disposing of shares of our common stock.

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Various statements contained in this prospectus, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this prospectus speak only as of the date of this prospectus, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements:

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economic changes either nationally or in the markets in which we operate, including declines in employment, volatility of mortgage interest rates and inflation;

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continued or increased downturn in the homebuilding industry;

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continued volatility and uncertainty in the credit markets and broader financial markets;

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our future operating results and financial condition;

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our business operations;

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changes in our business and investment strategy;

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availability of land to acquire and our ability to acquire such land on favorable terms or at all;

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availability, terms and deployment of capital;

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continued or increased disruption in the availability of mortgage financing or the number of foreclosures in the market;

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shortages of or increased prices for labor, land or raw materials used in housing construction;

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delays in land development or home construction resulting from adverse weather conditions or other events outside our control;

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the cost and availability of insurance and surety bonds;

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changes in, or the failure or inability to comply with, governmental laws and regulations;

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the timing of receipt of regulatory approvals and the opening of projects;

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the degree and nature of our competition;

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our leverage and debt service obligations;

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our relationship, and actual and potential conflicts of interest, with Starwood Capital Group;

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availability of qualified personnel and our ability to retain our key personnel; and

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additional factors discussed under the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Our Business.”

USE OF PROCEEDS

We intend to use the net proceeds from this offering (including any additional proceeds that we may receive if the underwriters exercise their option to purchase additional shares) primarily for the acquisition of land, including the land described under “Our Business—Pending Acquisitions,” and for development, home construction and other related purposes.

Pending these uses, we intend to invest the net proceeds from this offering in a variety of capital preservation investments, including short-term, interest-bearing investment grade securities, money market accounts, certificates of deposit and direct or guaranteed obligations of the U.S. government.

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase of shares in the number of shares offered by us, together with a concomitant $1.00 increase in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase the net proceeds to us from this offering by approximately $ million, after deducting the underwriting discount and estimated offering expenses payable by us. Conversely, a decrease of shares in the number of shares offered by us, together with a concomitant $1.00 decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would decrease the net proceeds to us from this offering by approximately $ million, after deducting the underwriting discount and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2012, on an actual basis and as adjusted to give effect to (i) the issuance of shares of our common stock to the Starwood Fund, the members of our management team and a third-party investor in place of members’ equity resulting from our formation transactions and (ii) this offering, assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us. This table should be read in conjunction with the sections captioned “Use of Proceeds,” “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes thereto included elsewhere in this prospectus.


	As of September 30, 2012
	Actual		As Adjusted ⁽¹⁾
	(unaudited, in thousands except per share amounts)
Debt:
Notes payable	$	46,436	$	46,436


Common units subject to redemption ⁽²⁾		37,000		—


Members’ equity and Stockholders’ equity:
Members’ equity		105,590		—
Common stock, $0.01 par value per share, no shares authorized and no shares issued and outstanding, actual; 500,000,000 shares authorized and shares issued and outstanding, as adjusted		—
Preferred Stock, $0.01 par value per share, no shares authorized and no shares issued and outstanding, actual; 50,000,000 shares authorized and no shares issued and outstanding as adjusted		—		—

Additional paid-in capital		—

Total members’ equity		105,590		—

Total stockholders’ equity		—

Total capitalization	$	189,026	$

⁽¹⁾

The number of outstanding shares does not include: (i) any shares of our common stock that may be issued pursuant to the exercise by the underwriters of their option to purchase up to an additional shares of our common stock; (ii) an aggregate of restricted stock units to be granted to our executive officers and director nominees upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan; (iii) options to purchase an aggregate of shares of our common stock to be granted to our executive officers upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan; and (iv) shares of our common stock reserved and available for future issuance under our 2013 Long-Term Incentive Plan.

⁽²⁾

DILUTION

Purchasers of shares of our common stock in this offering will incur an immediate and substantial dilution in net tangible book value per share of their shares of our common stock from the assumed initial public offering price, based on the midpoint of the price range set forth on the cover page of this prospectus.

The difference between the per share offering price paid by purchasers of our common stock in this offering and the pro forma net tangible book value per share of our common stock after this offering constitutes the dilution to purchasers in this offering. Net tangible book value per share is determined by dividing our net tangible book value, which is our total tangible assets less total liabilities, by the number of outstanding shares of our common stock.

As of September 30, 2012, our net tangible book value was approximately $ , or $ per share of our common stock. After giving effect to our formation transactions, the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, the receipt by us of the net proceeds from this offering and the deduction of the underwriting discount and estimated offering expenses payable by us, our pro forma net tangible book value as of September 30, 2012 would have been approximately $ , or $ per share of our common stock (assuming no exercise by the underwriters of their option to purchase additional shares). This amount represents an immediate increase in net tangible book value of approximately $ per share of our common stock to our existing stockholders and an immediate dilution in net tangible book value of approximately $ per share of our common stock, or approximately %, to purchasers in this offering.

The following table illustrates the dilution to purchasers in this offering on a per share basis:


Assumed initial public offering price per share		$

Net tangible book value per share as of September 30, 2012	$

Pro forma increase in net tangible book value per share attributable to purchasers in this offering


Pro forma net tangible book value per share immediately after this offering


Dilution in pro forma net tangible book value per share to purchasers in this offering			$

The pro forma net tangible book value per share immediately after this offering:

Numerator:

Net tangible book value as of September 30, 2012	$

Net proceeds from this offering ⁽¹⁾


Total pro forma net tangible book value immediately after this offering	$


Denominator:

Shares of our common stock outstanding prior to this offering

Shares of our common stock being sold in this offering

Total shares of our common stock

⁽¹⁾

Assumes no exercise by the underwriters of their option to purchase additional shares.

forma net tangible book value per share immediately after this offering by $ per share and the dilution in pro forma net tangible book value per share to purchasers in this offering by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.

We may also increase or decrease the number of shares we are offering. An increase of shares in the number of shares of our common stock offered by us, together with a concomitant $1.00 increase in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase the pro forma net tangible book value per share immediately after this offering and the dilution in pro forma net tangible book value per share to purchasers in this offering by $ and $ , respectively, after deducting the underwriting discount and estimated offering expenses payable by us. Conversely, a decrease of shares in the number of shares of our common stock offered by us, together with a concomitant $1.00 decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would decrease the pro forma net tangible book value per share immediately after this offering and the dilution in pro forma net tangible book value per share to purchasers in this offering by $ and $ , respectively, after deducting the underwriting discount and estimated offering expenses payable by us.

The following table sets forth, as of September 30, 2012, on the pro forma basis as described above, the differences between the number of shares of our common stock purchased from us, the total consideration paid to us and the average price per share paid to us by existing stockholders and by purchasers in this offering, before deducting the underwriting discount and estimated offering expenses payable by us, at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus.


	Shares Purchased				Total Consideration
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholders			%		$		%		$
Purchasers in this offering

Total			100.0	%	$		100.0	%	$

If the underwriters’ option to purchase additional shares is exercised in full, the following will occur:

•

the percentage of shares of our common stock held by our existing stockholders will decrease to approximately % of the total number of shares of our common stock outstanding;

•

the number of shares of our common stock held by purchasers in this offering will increase to shares, or approximately % of the total number of shares of our common stock outstanding; and

•

the pro forma net tangible book value per share will be approximately $ per share and the immediate dilution experienced by purchasers in this offering will be approximately $ per share.

DIVIDEND POLICY

SELECTED FINANCIAL DATA

The following sets forth our selected financial and operating data on a historical basis. You should read the following summary of selected financial data in conjunction with our consolidated historical financial statements and the related notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this prospectus.

Our historical consolidated balance sheet information as of December 31, 2011 and 2010 and September 23, 2010, and consolidated statements of operations information for the year ended December 31, 2011, the period from September 24, 2010 (inception date of TRI Pointe Homes, LLC) through December 31, 2010 and the period from January 1, 2010 through September 23, 2010 (our predecessor) have been derived from the historical consolidated financial statements audited by Ernst & Young LLP, independent auditors, whose report with respect thereto is included elsewhere in this prospectus. From April 2009 to September 23, 2010, our principals were engaged primarily in the business of constructing homes for independent third-party property owners through a number of different entities.


										Period From September 24, 2010 (Inception) Through December 31, 2010			Our Predecessor
	Nine Months Ended September 30,						Year Ended December 31, 2011						Period From January 1, 2010 Through September 23, 2010
	2012			2011			Year Ended December 31, 2011						Period From January 1, 2010 Through September 23, 2010
	(unaudited)
Statement of Operations Data:
Home sales	$	22,277,000		$	9,279,000		$	13,525,000		$	4,143,000		$	—
Cost of home sales		(19,663,000	)		(8,408,000	)		(12,075,000	)		(3,773,000	)		—

Homebuilding gross profit		2,614,000			871,000			1,450,000			370,000			—
Fee building gross margin		38,000			198,000			150,000			814,000			2,665,000
Sales and marketing		(2,351,000	)		(1,062,000	)		(1,553,000	)		(408,000	)		(136,000	)
General and administrative		(4,155,000	)		(3,112,000	)		(4,620,000	)		(1,875,000	)		(1,401,000	)
Organizational costs		—			—			—			(1,061,000	)		—
Other income (expense), net		(86,000	)		(41,000	)		(20,000	)		(15,000	)		(43,000	)

Net income (loss)	$	(3,940,000	)	$	(3,146,000	)	$	(4,593,000	)	$	(2,175,000	)	$	1,085,000

Unaudited pro forma loss per share
Basic	$						$

Diluted	$						$


Operating Data-Owned Projects
Net new home orders		129			34			42			9			4
New homes delivered		55			26			36			11			—
Average sales price of homes delivered	$	405,000		$	357,000		$	376,000		$	377,000		$	—
Cancellation rate		17	%		8	%		13	%		19	%		20	%
Average selling communities		5			2			2			2			1
Selling communities at end of period		7			2			3			2			1
Backlog at end of period, number of homes		82			10			8			2			4
Backlog at end of period, aggregate sales value	$	46,126,000		$	4,004,000		$	3,364,000		$	696,000		$	1,392,000


							Period From September 24, 2010 (Inception) Through December 31, 2010		Our Predecessor
	Nine Months Ended September 30,				Year Ended December 31, 2011				Period From January 1, 2010 Through September 23, 2010
	2012		2011		Year Ended December 31, 2011				Period From January 1, 2010 Through September 23, 2010
	(unaudited)
Operating Data-Fee Building Projects
Net new home orders		17		31		34		24		114
New homes delivered		16		65		68		56		46
Average sales price of homes delivered	$	1,020,000	$	775,000	$	786,000	$	794,000	$	787,000

Balance Sheet Data (at period end)
Cash and cash equivalents	$	45,242,000	$	7,171,000	$	10,164,000	$	11,744,000	$	6,029,000
Real estate inventories	$	148,468,000	$	75,750,000	$	82,023,000	$	14,108,000	$	8,117,000
Total assets	$	195,514,000	$	86,016,000	$	93,776,000	$	30,096,000	$	15,672,000
Notes payable	$	46,436,000	$	—	$	6,873,000	$	3,462,000	$	4,494,000
Total liabilities	$	52,924,000	$	2,195,000	$	11,285,000	$	5,238,000	$	4,983,000
Common units subject to redemption ⁽¹⁾	$	37,000,000	$	—	$	—	$	—	$	—
Members’ equity	$	105,590,000	$	83,821,000	$	82,491,000	$	24,858,000	$	10,689,000

⁽¹⁾

MANAGEMENT’S DISCUSSION AND ANALYSIS OF F INANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following in conjunction with the sections of this prospectus entitled “Risk Factors,” “Cautionary Note Concerning Forward-Looking Statements,” “Selected Financial Data” and “Our Business” and our historical financial statements and related notes thereto included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this prospectus.

We are engaged in the design, construction and sale of innovative single-family homes in planned communities in major metropolitan areas located throughout Southern and Northern California. We also provide fee building services whereby we build, market and sell homes for independent third-party property owners with whom we have revenue sharing agreements on projects typically marketed under the TRI Pointe Homes brand name. We have two reportable segments: homebuilding and fee building. Our corporate segment primarily provides management services to our operating segments.

Overview and Outlook

During the nine months ended September 30, 2012, the overall housing market continued to show signs of improvement largely driven by increasing consumer confidence levels related to the homebuilding industry, continued excellent housing affordability based on historical metrics, decreasing home inventory levels in many markets, and more positive consumer sentiment for the overall economy. Individual markets continue to experience varying results as local economic and employment situations strongly influence the local market demand and home buying abilities. However, most of our markets have shown positive indicators of a sustainable recovery. We improved on most key operating metrics during the nine months ended September 30, 2012 as compared to the same period in 2011, including increased net new home orders, home deliveries, average sales prices, home sales revenue, backlog units, backlog value and homebuilding gross margins.

Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries and have been prepared in accordance with GAAP as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Our consolidated financial statements and notes thereto for interim periods presented are unaudited. In our opinion, these interim financial statements contain all adjustments (consisting of normal recurring adjustments) that are necessary for a fair statement of our operating results, financial position and cash flows. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent interim period or for the full fiscal year ending December 31, 2012.

Results of Operations

Our primary goal in 2011 was to source, perform due diligence, contract and acquire land or lots in targeted market areas to generate deliveries with profitable returns beginning in late 2012 and beyond. We are currently actively acquiring and developing lots in California to maintain and grow our lot supply and active selling communities that are strategically located in selected “core” markets with favorable population and employment growth as a result of proximity to job centers or primary transportation corridors. In addition to expanding our business in existing markets in California, we continue to prudently evaluate opportunities to expand in other Southwestern markets. Accordingly, in October 2012, we announced our entry into the Colorado market. During the nine months ended September 30, 2012, we acquired 199 lots in three communities in California and signed a land option contract, a purchase contract or a non-binding letter of intent to acquire an additional 547 lots in California and Colorado. As of September 30, 2012, we owned 552 lots in which we had commenced

development, held options or were under contract to acquire an additional 689 lots and had entered into non-binding letters of intent to acquire an additional 91 lots in our target markets. In October 2012, we entered into an option contract to acquire an additional 61 lots in one new community in Southern California. With respect to the non-binding letters of intent, there can be no assurance that we will enter into binding agreements or that we will complete these projects as planned.

We also focus on increasing our number of active selling locations which we expect will contribute to our net new home order growth, homes in backlog and ultimately new home deliveries. We opened seven new selling locations during the nine-month period ended September 30, 2012, five in Southern California and two in Northern California. We experienced a 279% increase in net new home orders from 34 to 129, a 720% increase in backlog units from 10 to 82 and a 1,052% increase in backlog value from $4.0 million to $46.1 million for the nine months ended September 30, 2012, as compared to the same period in 2011. Home sales revenue was $22.3 million for the nine months ended September 30, 2012, representing an increase of $13.0 million, or 140%, when compared to the same period in the prior year, due to a 112% increase in the number of homes delivered from 26 to 55 and an increase in the average sales price of homes delivered from $357,000 to $405,000, representing an increase of $48,000, or 13%, during such period.

We refer to our financial statement line items in the explanation of our period over period changes in results of operations. Below are general definitions of what those line items include and represent.

Revenues

Revenues are derived primarily from home deliveries and fee building services provided to independent third-party property owners. Home sales revenue is recorded at close of escrow of the homes while revenue for fee building services is recorded when services have been provided to independent third-party property owners.

Expenses

Expenses relate to cost of home sales and fee building cost of sales provided to independent third-party property owners. Cost of home sales includes the cost of land, land development, home construction, capitalized interest, indirect cost of construction, estimated warranty costs, real estate taxes and direct overhead costs incurred during development and home construction that benefit the entire project, and is recorded after close of escrow of the homes. Expense for fee building cost of sales is recorded when services have been provided to independent third-party property owners. Sales and marketing expense is comprised of direct selling expenses, including internal and external commissions, related sales and marketing expenses, such as advertising and model operations, and sales office costs and is recorded in the period incurred. General and administration expenses represent corporate and divisional overhead expenses such as salaries, benefits, office expenses, outside professional services, insurance and travel expenses and are recorded in the period incurred.

Organizational Costs

Organizational costs include legal, accounting and other expenditures incurred in connection with the formation of TPH LLC, which were expensed in their entirety during the period ended December 31, 2010.

Other Income (Expense), Net

Other income (expense), net, consists of interest income, national contract rebates, dead deal costs (pre-acquisition costs on projects where we determine continuation of the project is not probable) and certain consulting fees.

The historical financial data presented below are not necessarily indicative of the results to be expected for any future period.

Consolidated Financial Data:


	Nine-months Ended September 30,						Year Ended December 31,			Period From September 24, 2010 (Inception) Through December 31,			Our Predecessor
	Nine-months Ended September 30,						Year Ended December 31,						Period From January 1, 2010 Through September 23,
	2012			2011			2011			2010			2010
	(unaudited)
Revenues:
Home sales	$	22,277,000		$	9,279,000		$	13,525,000		$	4,143,000		$	—
Fee building		244,000			5,635,000			5,804,000			14,844,000			19,853,000

		22,521,000			14,914,000			19,329,000			18,987,000			19,853,000


Expenses:
Cost of home sales		19,663,000			8,408,000			12,075,000			3,773,000			—
Fee building		206,000			5,437,000			5,654,000			14,030,000			17,188,000
Sales and marketing		2,351,000			1,062,000			1,553,000			408,000			136,000
General and administrative		4,155,000			3,112,000			4,620,000			1,875,000			1,401,000

		26,375,000			18,019,000			23,902,000			20,086,000			18,725,000

Income (loss) from operations		(3,854,000	)		(3,105,000	)		(4,573,000	)		(1,099,000	)		1,128,000
Organizational costs		—			—			—			(1,061,000	)		—
Other income (expense), net		(86,000	)		(41,000	)		(20,000	)		(15,000	)		(43,000	)

Net income (loss)	$	(3,940,000	)	$	(3,146,000	)	$	(4,593,000	)	$	(2,175,000	)	$	1,085,000

Matters Affecting the Comparability of Our Financial Results

On September 24, 2010, we received an equity commitment of $150 million from the Starwood Fund, a private equity fund managed by an affiliate of Starwood Capital Group, a private equity firm founded and controlled by Barry Sternlicht, the chairman of our board. Prior to the Starwood Fund’s investment, most of our operations consisted of “fee building projects” in which we built, marketed and sold homes for independent third-party property owners with whom we have revenue sharing agreements on projects typically marketed under the TRI Pointe Homes brand name.

For periods prior to September 24, 2010, the date on which the Starwood Fund agreed to make its investment in us, we conducted our business through a number of different entities, which we refer to collectively as “our predecessor.” For periods from and after September 24, 2010 and prior to the completion of our formation transactions, we conducted our business through TPH LLC. As a result of the foregoing, the financial and operational data for 2010 that is presented and discussed in this prospectus is generally bifurcated between the period during 2010 that our business was conducted through our predecessor (January 1, 2010 through September 23, 2010) and the period during 2010 that our business was conducted through TPH LLC (September 24, 2010 through December 31, 2010). The historical results of operations of our predecessor may not be comparable to the results of operations of TPH LLC because each of our predecessor and TPH LLC used a different basis of accounting and our homebuilding operations have been our strategic focus since September 24, 2010 compared to our predecessor’s focus on fee building services prior to such date.

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

Net New Home Orders and Backlog


	Nine Months Ended September 30,						Increase (Decrease)
	2012			2011			Amount			%
Net new home orders		129			34			95			279	%
Cancellation rate		17	%		8	%		9	%		112	%
Average selling communities		5			2			3			150	%
Selling communities at end of period		7			2			5			250	%
Backlog (dollar value)	$	46,126,000		$	4,004,000		$	42,122,000			1,052	%
Backlog (units)		82			10			72			720	%
Average sales price of backlog	$	563,000		$	400,000		$	163,000			40	%

Net new home orders for the nine months ended September 30, 2012 increased 279% to 129, compared to 34 during the same period in 2011. Our overall “absorption rate” (the rate at which home orders are contracted, net of cancellations) for the nine months ended September 30, 2012 was 25.8 per average selling community (2.87 monthly), compared to 17.0 per average selling community (1.89 monthly) during the same period in 2011. Our monthly absorption rates increased despite an increase in our cancellation rate. Our cancellation rate of buyers for our owned projects who contracted to buy a home but did not close escrow (as a percentage of overall orders) was approximately 17% for the nine months ended September 30, 2012 as compared to an unusually low 8% during the same period in 2011. We believe our current cancellation rate of 17% is more representative of an industry average cancellation rate as compared to 8% for the nine months ended September 30, 2011. We experienced substantial order growth primarily due to an increase in our average selling community count. Our average number of selling communities increased by three communities from two for the nine months ended September 30, 2011 to five for the nine months ended September 30, 2012. The increase was due to our opening seven new selling communities for the nine months ended September 30, 2012, offset by final net new home orders at two selling communities. The increase in net new home orders positively impacted our number of homes in backlog, which are homes we expect to close in future periods. We expect that our net new home orders and backlog increases will have a positive impact on revenues and cash flow in future periods.

Backlog reflects the number of homes, net of actual cancellations experienced during the period, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home. Homes in backlog are generally closed within three to six months, although we may experience cancellations of sales contracts prior to closing. The increase in backlog units of 72 homes was driven by the 279% increase in net new home orders during the nine months ended September 30, 2012 as compared to the same period of the previous year. The dollar value of backlog increased $42.2 million, or 1,052%, as of September 30, 2012 from $4.0 million as of September 30, 2011. The increase in dollar amount of backlog reflects an increase in the number of homes in backlog of 72, or 720%, to 82 homes as of September 30, 2012 from 10 homes as of September 30, 2011 and an increase in the average sales price of homes in backlog. We experienced an increase in the average sales price of homes in backlog of $163,000, or 40%, to $563,000 as of September 30, 2012 compared to $400,000 as of September 30, 2011 due to the introduction of new product at seven new communities with a shift to larger square footage homes with corresponding higher average sales prices in the 2012 period, including one move-up product. The increase in the dollar amount of backlog of homes sold but not closed as described above generally results in an increase in operating revenues in subsequent periods.

Home Sales Revenue and New Homes Delivered


	Nine Months Ended September 30,				Increase (Decrease)
	2012		2011		Amount		%
New homes delivered		55		26		29		112	%
Home sales revenue	$	22,277,000	$	9,279,000	$	12,998,000		140	%
Average sales price of homes delivered	$	405,000	$	357,000	$	48,000		13	%

New home deliveries increased 29, or 112%, to 55 during the nine months ended September 30, 2012 from 26 during the nine months ended September 30, 2011. The increase in new home deliveries was primarily attributable to the increase in net new home orders and units in backlog due to the increase in the average number of selling communities. In addition, we were able to convert 59% of our units in backlog as of June 30, 2012 into home deliveries for the three months ended September 30, 2012.

Home sales revenue increased $13.0 million, or 140%, to $22.3 million for the nine months ended September 30, 2012 from $9.3 million for the nine months ended September 30, 2011. The increase was primarily attributable to: (1) an increase in revenue of $11.7 million due to a 112% increase in homes closed to 55 for the nine months ended September 30, 2012 from 26 for the nine months ended September 30, 2011, and (2) an increase in revenues of $1.4 million related to an increase in average sales price of $48,000 per unit to $405,000 for the nine months ended September 30, 2012 from $357,000 for the nine months ended September 30, 2011. The increase in the average sales price of homes delivered was attributable to a change in product mix from the deliveries at four new communities for the nine months ended September 30, 2012, which included an increase in the number of homes delivered with a sales price in excess of $400,000.

Homebuilding


	Nine Months Ended September 30,
	2012			%			2011			%
Home sales	$	22,277,000			100.0	%	$	9,279,000			100.0	%
Cost of home sales		19,663,000			88.3	%		8,408,000			90.6	%

Homebuilding gross margin		2,614,000			11.7	%		871,000			9.4	%
Add: interest in cost of home sales		211,000			1.0	%		181,000			1.9	%

Adjusted homebuilding gross margin ⁽¹⁾	$	2,825,000			12.7	%	$	1,052,000			11.3	%

Homebuilding gross margin percentage		11.7	%					9.4	%

Adjusted homebuilding gross margin percentage ⁽¹⁾		12.7	%					11.3	%

⁽¹⁾

Non-GAAP financial measure (as discussed below).

Homebuilding gross margin represents home sales revenue less cost of home sales. Cost of home sales increased $11.3 million, or 134%, to $19.7 million for the nine months ended September 30, 2012 from $8.4 million for the nine months ended September 30, 2011. The increase was primarily due to a 112% increase in the number of homes delivered and the product mix of homes delivered from new communities in the 2012 period. Our homebuilding gross margin percentage increased to 11.7% for the nine months ended September 30, 2012 as compared to 9.4% for the same period in 2011, primarily due to the delivery unit mix from new projects, which achieve higher gross margins, along with additional cost savings on existing projects offset by 33% of our deliveries from existing older product with lower gross margins in the 2012 period as compared to the 2011 period.

Excluding interest in cost of home sales, adjusted homebuilding gross margin percentage was 12.7% for the nine months ended September 30, 2012, compared to 11.3% for the nine months ended September 30, 2011. Adjusted homebuilding gross margin is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.

Fee Building


	Nine Months Ended September 30,
	2012		%			2011		%
Fee building revenue	$	244,000		100.0	%	$	5,635,000		100.0	%
Fee building cost		206,000		84.4	%		5,437,000		96.5	%

Fee building gross margin	$	38,000		15.6	%	$	198,000		3.5	%

As of September 30, 2012, we had entered into one construction management agreement to build 83 homes in Moorpark, California and entered into a non-binding letter of intent to build 57 homes in Carpinteria, California. There can be no assurance that we will enter into a binding agreement or that we will complete this project as planned. In addition, we completed one fee building project in Irvine, California, whereby all homes were completed and delivered to the third-party property owner, leaving three active model homes remaining unsold. Fee building revenue, which was all recorded in Southern California, decreased $5.4 million, or 96%, to $244,000 for the nine months ended September 30, 2012 from $5.6 million for the nine months ended September 30, 2011. Fee building cost decreased $5.2 million, or 96%, to $206,000 for the nine months ended September 30, 2012 from $5.4 million for the nine months ended September 30, 2011. Fee building revenue and cost decreased primarily due to the close out of two of the three fee building projects in 2011, leaving only one remaining fee building project for the nine months ended September 30, 2012, which completed construction activity in early 2012. The two new fee building projects mentioned above, one of which began in September 2012, began generating fee building revenue and cost in October 2012. Fee building gross margin represents the net fee income earned related to our fee building projects.

Selling, General and Administrative Expense


	Nine Months Ended September 30,				As a Percentage of Home Sales Revenue
	2012		2011		2012			2011
Sales and marketing	$	2,351,000	$	1,062,000		10.5	%		11.4	%
General and administrative (“G&A”)		4,155,000		3,112,000		18.7	%		33.6	%

Total sales and marketing and G&A	$	6,506,000	$	4,174,000		29.2	%		45.0	%

Sales and marketing expense increased $1.3 million, or 121%, to $2.4 million for the nine months ended September 30, 2012 from $1.1 million for the nine months ended September 30, 2011. The increase in sales and marketing expense was primarily attributable to a 150% increase in the average number of selling communities and a 112% increase in the number of homes delivered for the nine months ended September 30, 2012 compared to the same period in 2011. Sales and marketing expense was 10.5% and 11.4% of overall home sales revenue for the nine months ended September 30, 2012 and 2011, respectively. As a percentage of home sales revenue, we expect sales and marketing expense to decrease significantly as we begin to deliver homes in all of our active projects.

General and administrative expenses increased $1.1 million, or 34%, to $4.2 million for the nine months ended September 30, 2012 from $3.1 million for the nine months ended September 30, 2011. The increase was primarily attributed to (1) an increase of $677,000 in our compensation-related expenses resulting largely from a 29% increase in our office headcount to 31 employees as of September 30, 2012 compared to 24 as of September 30, 2011, (2) an increase of $195,000 in office rent and office related expenses to $389,000 for the nine months ended September 30, 2012, as compared to $194,000 for the nine months ended September 30, 2011, due to our growth, and our resulting move to our Northern California office in August 2011 and our Southern California office in November 2011, and (3) moderate increases in outside professional services, depreciation, travel and other miscellaneous expenses related to increased operations from our growth in 2012. Our general and administrative expense as a percentage of home sales revenue was 18.7% and 33.6% for the nine months ended September 30, 2012 and 2011, respectively. We expect that our general and administrative expense as a percentage of home sales revenue will continue to decrease for the balance of 2012 and into the near future as our increase in new home deliveries from growth in our community count generate increased home sales revenue.

Other Income (Expense), Net

Other income (expense), net, increased $45,000, or 110%, to $86,000 for the nine months ended September 30, 2012 from $41,000 for the nine months ended September 30, 2011. The increase in other income (expense), net, was due to a decrease in other income of $98,000 related to a reduction in national contract rebates collected from closed projects, offset by a decrease in other expense of $59,000 related to the reduction in dead deal costs for the nine months ended September 30, 2012 as compared to the same period in 2011.

Other Items

Interest, which was incurred principally to finance land acquisitions, land development and home construction, totaled $1,297,000 and $108,000 for the nine months ended September 30, 2012 and 2011, respectively, all of which was capitalized to real estate inventory. The increase in interest incurred during the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 was primarily attributable to our increase in outstanding debt, which was the result of the increase in the number of active projects and the growth in our real estate inventory.

Net Loss

As a result of the foregoing factors, net loss during the nine months ended September 30, 2012 was $3.9 million compared to a net loss during the nine months ended September 30, 2011 of $3.1 million.

Lots Owned and Controlled

The table below summarizes our lots owned and controlled as of the dates presented:


	September 30,				Increase (Decrease)
	2012		2011		Amount		%
*Lots Owned*
Southern California		382		311		71		23	%
Northern California		170		108		62		57	%

Total		552		419		133		32	%

*Lots Controlled ⁽¹⁾*
Southern California		387		326		61		18	%
Northern California		305		—		305		—
Colorado		149		—		149		—

Total		841		326		515		157	%

*Total Lots Owned and Controlled ⁽¹⁾*		1,393		745		648		87	%

⁽¹⁾

two new communities and one existing community in Southern California for an aggregate purchase price of approximately $56.0 million. With respect to the lots under non-binding letters of intent, there can be no assurance that we will enter into binding agreements or as to the terms thereof. In November 2012, we closed the purchase of an aggregate of 164 of the controlled lots in our inventory.

In Southern California, our owned and controlled land totaled 769 lots as of September 30, 2012. We plan to open sales locations at five new communities in 2013 in the following cities (counties): La Habra (Orange County), San Diego (San Diego County), Rancho Mission Viejo (Orange County), Azusa (Los Angeles County) and Irvine (Orange County). Lots under option contracts include two attractive infill development sites (which are new homes constructed on vacant or under-utilized lots among existing properties in established communities) in Huntington Beach (Orange County), which are projected to begin sales in 2014. In addition to our owned projects, we are managing three fee building projects for a total of 143 homes (including one project to build 57 homes pursuant to a non-binding letter of intent).

In Northern California, our owned and controlled land totaled 475 lots as of September 30, 2012. These lots are all in the highly desirable Bay Area, contiguous to Silicon Valley. We plan to open sales locations at two new communities located in Mountain View (Santa Clara County) and San Mateo (San Mateo County) in 2013. Lots under option contracts include three new projects in a well-located new community in Alameda (Alameda County), which are projected to open in 2014.

In Colorado, our controlled land totaled 149 lots as of September 30, 2012. We plan to open a sales location in this community located south of Denver in Castle Rock (Douglas County) in 2013.

Year Ended December 31, 2011 Compared to the Period from September 24, 2010 through December 31, 2010

Net New Home Orders and Backlog


	Year Ended December 31, 2011			Period From September 24, 2010 (Inception) Through December 31, 2010			Increase (Decrease)
	Year Ended December 31, 2011						Amount			%
Net new home orders		42			9			33			367	%
Cancellation rate		13	%		19	%		(6)	%		(32)	%
Average selling communities		2			2			—			—	%
Selling communities at end of period		3			2			1			50	%
Backlog (dollar value)	$	3,364,000		$	696,000		$	2,668,000			383	%
Backlog (units)		8			2			6			300	%
Average sales price of backlog	$	421,000		$	348,000		$	73,000			21	%

Net new home orders for the year ended December 31, 2011 increased 33, or 367%, to 42 compared to nine for the period from September 24, 2010 through December 31, 2010. Our overall absorption rate for the year ended December 31, 2011 was 21.0 per average selling community (1.75 monthly), compared to 4.5 per average selling community (1.50 monthly) for the period from September 24, 2010 through December 31, 2010. Our absorption rate per average selling community increased and we experienced substantial order growth because of the comparison of twelve months of order activity to just over three months in the 2010 period. Our cancellation rate was approximately 13% for the year ended December 31, 2011 as compared to 19% for the period from September 24, 2010 through December 31, 2010.

Backlog units increased by six homes, or 300%, to eight as of December 31, 2011 as compared to two as of December 31, 2010 primarily driven by the 367% increase in net new home orders for the year ended December 31, 2011. The dollar value of backlog increased $2.7 million, or 383%, to $3.4 million as of December 31, 2011 from $0.7 million as of December 31, 2010. The increase in dollar amount of backlog

reflects an increase in the number of homes in backlog and an increase in the average sales price of homes in backlog. Our average sales price of homes in backlog increased $73,000, or 21%, to $421,000 for the period ended December 31, 2011 compared to $348,000 for the period from September 24, 2010 through December 31, 2010 due to the introduction of new product at new communities with a shift to larger square footage homes with corresponding higher average sales prices in the 2011 period.

Home Sales Revenue and New Homes Delivered


	Year Ended December 31, 2011		Period From September 24, 2010 (Inception) Through December 31, 2010		Increase (Decrease)
	Year Ended December 31, 2011				Amount			%
New homes delivered		36		11		25			227	%
Home sales revenue	$	13,525,000	$	4,143,000	$	9,382,000			226	%
Average sales price of homes delivered	$	376,000	$	377,000	$	(1,000	)		—	%

New home deliveries increased 25, or 227%, to 36 during the year ended December 31, 2011 from 11 during the period from September 24, 2010 through December 31, 2010. The increase in new home deliveries was primarily attributable to the increase in units in backlog and net new home orders because of the comparison of twelve months of activity to just over three months in the 2010 period.

Home sales revenue increased $9.4 million, or 226%, to $13.5 million for the year ended December 31, 2011 from $4.1 million for the period from September 24, 2010 through December 31, 2010, all of which is attributed to the increase in number of homes delivered given the slight change in the average sales price of homes delivered between the periods.

Homebuilding


	Year Ended December 31, 2011			%			Period From September 24, 2010 (Inception) Through December 31, 2010			%
Home sales	$	13,525,000			100.0	%	$	4,143,000			100.0	%
Cost of home sales		12,075,000			89.3	%		3,773,000			91.1	%

Homebuilding gross margin		1,450,000			10.7	%		370,000			8.9	%
Add: interest in cost of home sales		269,000			2.0	%		88,000			2.1	%

Adjusted homebuilding gross margin ⁽¹⁾		1,719,000			12.7	%		458,000			11.0	%

Homebuilding gross margin percentage		10.7	%					8.9	%

Adjusted homebuilding gross margin percentage ⁽¹⁾		12.7	%					11.0	%

⁽¹⁾

Non-GAAP financial measure (as discussed below).

Cost of home sales increased $8.3 million, or 220%, to $12.1 million for the year ended December 31, 2011 from $3.8 million for the period from September 24, 2010 through December 31, 2010, primarily due to the 227% increase in the number of homes delivered. Our homebuilding gross margin percentage increased to 10.7% for the year ended December 31, 2011 as compared to 8.9% for the period from September 24, 2010 through

December 31, 2010. The increase in margins is primarily due to additional cost savings achieved at our two communities in the 2011 period as compared to the delivery unit mix of homes for the 2010 period, which included 27% of our deliveries from existing older product with lower gross margins versus the newer product currently being delivered. Excluding interest in cost of home sales, adjusted homebuilding gross margin percentage was 12.7% for the year ended December 31, 2011, compared to 11.0% for the period from September 24, 2010 through December 31, 2010. Adjusted homebuilding gross margin is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.

Fee Building


	Year Ended December 31, 2011		%			Period From September 24, 2010 (Inception) Through December 31, 2010		%
Fee building revenue	$	5,804,000		100.0	%	$	14,844,000		100.0	%
Fee building cost		5,654,000		97.4	%		14,030,000		94.5	%

Fee building gross margin	$	150,000		2.6	%	$	814,000		5.5	%

Fee building revenue, which was all recorded in Southern California, decreased $9.0 million, or 61%, to $5.8 million for the year ended December 31, 2011 from $14.8 million for the period from September 24, 2010 through December 31, 2010. Fee building cost decreased $8.4 million, or 60%, to $5.6 million for the year ended December 31, 2011 from $14.0 million for the period from September 24, 2010 through December 31, 2010. Fee building revenue and cost decreased primarily due to the close out of two fee building projects in 2011 and the change in the focus of our business from fee building to primarily building and selling homes for our own account.

Selling, General and Administrative Expense


					As a Percentage of Home Sales Revenue
	Year Ended December 31, 2011		Period From September 24, 2010 (Inception) Through December 31, 2010		Year Ended December 31, 2011			Period From September 24, 2010 (Inception) Through December 31, 2010
Sales and marketing	$	1,553,000	$	408,000		11.5	%		9.8	%
General and administrative (“G&A”)		4,620,000		1,875,000		34.2	%		45.3	%

Total sales and marketing and G&A	$	6,173,000	$	2,283,000		45.7	%		55.1	%

Sales and marketing expense increased $1.1 million, or 281%, to $1.6 million for the year ended December 31, 2011 from $0.4 million for the period from September 24, 2010 through December 31, 2010. The increase in sales and marketing expense was primarily attributable to a 227% increase in the number of homes delivered for the year ended December 31, 2011 and the twelve months of model operations for the full year as compared to just over three months for the period from September 24, 2010 through December 31, 2010. Sales and marketing expense was 11.5% and 9.8% of overall home sales revenue for the year ended December 31, 2011 and the period from September 24, 2010 through December 31, 2010, respectively.

General and administrative expenses increased $2.7 million, or 146%, to $4.6 million for the year ended December 31, 2011 from $1.9 million for the period from September 24, 2010 through December 31, 2010 primarily attributable to twelve months of general and administrative expenses for the full year as compared to just over three months for the period from September 24, 2010 through December 31, 2010. Our general and administrative expense as a percentage of home sales revenue was 34.2% and 45.3% for the year ended December 31, 2011 and the period from September 24, 2010 through December 31, 2010, respectively, as a result of the lower level of home sales revenue in the 2010 period given the startup nature of our company.

Other Income (Expense), Net

Other income (expense), net, increased $5,000, or 33%, to $20,000 for the year ended December 31, 2011 from $15,000 for the period from September 24, 2010 through December 31, 2010. The increase was primarily due to an increase in other income of $119,000 related to national contract rebates collected from closed projects, offset by an increase in other expense of $128,000 related to an increase in dead deal costs for the year ended December 31, 2011 as compared to the period from September 24, 2010 through December 31, 2010.

Organizational Costs

Net Loss

As a result of the foregoing factors, net loss for the year ended December 31, 2011 was $4.6 million compared to a net loss for the period from September 24, 2010 through December 31, 2010 of $2.2 million.

Lots Owned and Controlled

The table below summarizes our lots owned and controlled as of the dates presented:


	December 31,				Increase (Decrease)
	2011		2010		Amount		%
*Lots Owned*
Southern California		301		48		253		527	%
Northern California		107		—		107		N/A

Total		408		48		360		750	%

*Lots Controlled ⁽¹⁾*
Southern California		326		169		157		93	%
Northern California		59		—		59		—	%

Total		385		169		216		128	%

*Total Lots Owned and Controlled ⁽¹⁾*		793		217		576		266	%

⁽¹⁾

Includes lots under an option contract or under non-binding letters of intent.

Year Ended December 31, 2011 Compared to the Period from January 1, 2010 through September 23, 2010 (Our Predecessor)

Net New Home Orders and Backlog


				Our Predecessor
	Year Ended December 31,			Period From January 1, 2010 Through September 23,
	Year Ended December 31,			Period From January 1, 2010 Through September 23,			Increase (Decrease)
	2011			2010			Amount			%
Net new home orders		42			4			38			950	%
Cancellation rate		13	%		20	%		(7)	%		(35)	%
Average selling communities		2			1			1			100	%
Selling communities at end of period		3			1			2			200	%
Backlog (dollar value)	$	3,364,000		$	1,392,000		$	1,972,000			142	%
Backlog (units)		8			4			4			100	%
Average sales price of backlog	$	421,000		$	348,000		$	73,000			21	%

Net new home orders for the year ended December 31, 2011 increased 38, or 950%, to 42 compared to four for the period from January 1, 2010 through September 23, 2010. Our overall absorption rate for the year ended December 31, 2011 was 21.0 per average selling community (1.75 monthly). The comparative analysis for the absorption rate for the period from January 1, 2010 through September 23, 2010 is not comparable given only one active selling location which opened in May 2010. Our absorption rate per average selling community increased and we experienced substantial order growth for the year ended December 31, 2011 as compared to the period from January 1, 2010 through September 23, 2010 due to twelve months of order activity from two selling communities versus four months of order activity from one selling location in the 2010 period. Our cancellation rate was approximately 13% for the year ended December 31, 2011 as compared to 20% for the period from January 1, 2010 through September 23, 2010. The cancellation rate was higher for the period from January 1, 2010 through September 23, 2010 due to the limited amount of orders as compared to a full year of activity ended December 31, 2011.

Backlog units increased by four homes, or 100%, to eight as of December 31, 2011 as compared to four homes as of September 23, 2010 primarily driven by the 950% increase in net new home orders offset by 36 home deliveries for the year ended December 31, 2011. The dollar value of backlog increased $2.0 million, or 142%, to $3.4 million as of December 31, 2011 from $1.4 million as of September 23, 2010. The increase in dollar amount of backlog reflects the increase in the number of homes in backlog and an increase in the average sales price of homes in backlog. Our average sales price of homes in backlog increased $73,000, or 21%, to $421,000 for the period ended December 31, 2011 compared to $348,000 for the period from January 1, 2010 through September 23, 2010 due to the introduction of new product at new communities with a shift to larger square footage homes with corresponding higher average sales prices in the 2011 period.

Home Sales Revenue and New Homes Delivered


			Our Predecessor
	Year Ended December 31,		Period From January 1, 2010 Through September 23,
	Year Ended December 31,		Period From January 1, 2010 Through September 23,		Increase (Decrease)
	2011		2010		Amount		%
New homes delivered		36		—		36	N/A
Home sales revenue	$	13,525,000	$	—	$	13,525,000	N/A
Average sales price of homes delivered	$	376,000	$	—	$	376,000	N/A

Increase in new homes delivered, home sales revenue and average sale price is because we did not have any home sales during the predecessor period from January 1, 2010 through September 23, 2010. In addition, we have not included a homebuilding gross margin table for the same reason.

Fee Building


						Our Predecessor
						Period From
						January 1, 2010
	Year Ended					Through
	December 31,					September 23,
	2011		%			2010		%
Fee building revenue	$	5,804,000		100.0	%	$	19,853,000		100.0	%
Fee building cost		5,654,000		97.4	%		17,188,000		86.6	%

Fee building gross margin	$	150,000		2.6	%	$	2,665,000		13.4	%

Fee building revenue, which was all recorded in Southern California, decreased $14.0 million, or 71%, to $5.8 million for the year ended December 31, 2011 from $19.9 million for the period from January 1, 2010 through September 23, 2010. Fee building cost decreased $11.6 million, or 67%, to $5.6 million for the year ended December 31, 2011 from $17.2 million for the period from January 1, 2010 through September 23, 2010. Fee building revenue and cost decreased primarily due to the close out of two fee building projects in 2011 and the change in the focus of our business from fee building to primarily building and selling homes for our own account.

Selling, General and Administrative Expense


			Our Predecessor
	Year Ended December 31, 2011		Period From January 1, 2010 Through September 23, 2010


					As a Percentage of
					Home Sales Revenue
					2011			2010
Sales and marketing	$	1,553,000	$	136,000		11.5	%		N/A
General and administrative (“G&A”)		4,620,000		1,401,000		34.2	%		N/A

Total sales and marketing and G&A	$	6,173,000	$	1,537,000		45.7	%		N/A

Sales and marketing expense increased $1.5 million, or 1,042%, to $1.6 million for the year ended December 31, 2011 from $0.1 million for the period from January 1, 2010 through September 23, 2010. The increase in sales and marketing expense was primarily attributable to 36 homes delivered for the year ended December 31, 2011 and the twelve months of model operations for two communities for the full year 2011 as compared to no home deliveries and four months of model operations for one community for the period from January 1, 2010 through September 23, 2010. Sales and marketing expense was 11.5% of overall home sales revenue for the year ended December 31, 2011 with no comparative data for the period from January 1, 2010 through September 23, 2010 due to no home sales revenue.

General and administrative expenses increased $3.2 million, or 230%, to $4.6 million for the year ended December 31, 2011 from $1.4 million for the period from January 1, 2010 through September 23, 2010 primarily attributable to our growth in employees and operations for the full year 2011 as compared to the period from January 1, 2010 through September 23, 2010. Our general and administrative expense as a percentage of home sales revenue was 34.2% with no comparative data for the period from January 1, 2010 through September 23, 2010 due to no home sales revenue.

Other Income (Expense), Net

Other income (expense), net, decreased $23,000, or 53%, to $20,000 for the year ended December 31, 2011 from $43,000 for the period from January 1, 2010 through September 23, 2010. The decrease was primarily due to an increase in other income of $123,000 related to national contract rebates collected from closed projects and $11,000 of interest income, offset by an increase in other expense of $118,000 related to the increase in dead deal costs for the year ended December 31, 2011 as compared to the period from January 1, 2010 through September 23, 2010.

Net Income (Loss)

As a result of the foregoing factors, net loss for the year ended December 31, 2011 was $4.6 million compared to net income for the period from January 1, 2010 through September 23, 2010 of $1.1 million.

Lots Owned and Controlled

The table below summarizes our lots owned and controlled as of the dates presented:


	December 31, 2011		As of September 23, 2010		Increase (Decrease)
	December 31, 2011		As of September 23, 2010		Amount		%
*Lots Owned*
Southern California		301		59		242		410	%
Northern California		107		—		107		N/A

Total		408		59		349		592	%

*Lots Controlled ⁽¹⁾*
Southern California		326		126		200		160	%
Northern California		59		—		59		—	%

Total		385		126		259		206	%

*Total Lots Owned and Controlled ⁽¹⁾*		793		185		608		329	%

⁽¹⁾

Includes lots under an option contract or under non-binding letters of intent.

Liquidity and Capital Resources

Overview

Our principal uses of capital for the nine months ended September 30, 2012 were operating expenses, land purchases, land development, home construction and the payment of routine liabilities. We used funds generated by operations and available borrowings to meet our short-term working capital requirements. We remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and keep us poised for growth.

Cash flows for each of our communities depend on their stage in the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, and construction of model homes, roads, utilities, general landscaping and other amenities. Because these costs are a component of our inventory and not recognized in our statement of operations until a home closes, we incur significant cash outlays prior to our recognition of earnings. In the later stages of community development, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. From a liquidity standpoint, we are currently actively acquiring and developing lots in our markets to maintain and grow our lot supply and active selling communities that are strategically located in “core markets,” which are in major job centers or on transportation corridors to those job centers. We are also using our cash on hand to fund expansion into Colorado. As demand for new homes improves and we continue to expand our business, we expect that cash outlays for land purchases and land development to grow our lot inventory will exceed our cash generated by operations. During the nine months ended September 30, 2012, we closed 55 homes, purchased 199 lots for $35.2 million, spent $14.5 million on land development, and started construction on 183 homes. The opportunity to purchase substantially finished lots in desired locations is becoming increasingly more limited and competitive. As a result, we are spending more dollars on land development, as we are purchasing more undeveloped land and partially finished lots than in recent years.

We exercise strict controls and believe we have a prudent strategy for company-wide cash management, including those related to cash outlays for land and inventory acquisition and development. We ended the third quarter with $45.2 million of cash and cash equivalents, a $35.1 million increase from December 31, 2011, primarily as a result of additional capital contributions of $66.0 million, a net increase in notes payable of $39.6 million and home sales revenue of $22.3 million for the nine months ended September 30, 2012, offset by land acquisitions and land development expenditures of $54.5 million, an increase in our home inventory under construction of $31.6 million and other expenditures of $6.7 million. We intend to generate cash from the sale of our inventory net of loan release payments on our notes payable, but we intend to redeploy the net cash generated from the sale of inventory to acquire and develop strategic and well-positioned lots that represent opportunities to generate desired margins, as well as for other operating purposes.

In addition to expanding our business in existing markets in California, we continue to look for opportunities to expand outside our existing markets. Accordingly, in October 2012 we announced our entry into the Denver, Colorado market. We expect to purchase our first lots in Colorado in December 2012, begin sales operations in the second quarter of 2013 and have our first deliveries in the third quarter of 2013. Entry into the Denver area offers us growth opportunities based on a number of positive factors, including a growing employment base, rising median incomes, and affordable cost of living. We are also looking at opportunities in other Southwestern markets to expand our footprint into new markets with positive growth potential and the ability to leverage our existing resources.

We intend to employ both debt and equity as part of our ongoing financing strategy, coupled with redeployment of cash flows from continuing operations, to provide us with the financial flexibility to access capital on the best terms available. In that regard, we expect to employ prudent levels of leverage to finance the acquisition and development of our lots and construction of our homes. Our existing indebtedness is recourse to us and we anticipate that future indebtedness will likewise be recourse. As of September 30, 2012, we had approximately $86.0 million of aggregate loan commitments, of which $46.4 million was outstanding. Our aggregate loan commitments consist of a $20 million secured revolving credit facility, which provides financing for several real estate projects, two project-specific revolving loans and several other loan agreements related to the acquisition and development of lots and the construction of model homes and homes for sale. Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service. As a means of sustaining our long-term financial health and limiting our exposure to unforeseen dislocations in the debt and financing markets, we currently expect to remain conservatively capitalized. However, our charter does not contain a limitation on the amount of debt we may incur and our board of directors may change our target debt levels at any time without the approval of our stockholders.

We intend to finance future acquisitions and developments with the most advantageous source of capital available to us at the time of the transaction, which may include a combination of common and preferred equity, secured and unsecured corporate level debt, property-level debt and mortgage financing and other public, private or bank debt.

Secured Revolving Credit Facility

As of September 30, 2012, we were party to a secured revolving credit facility which has a maximum loan commitment of $20 million. Our secured revolving credit facility has an initial maturity date of April 19, 2014 and a final maturity date of April 19, 2015. We may borrow under our secured revolving credit facility in the ordinary course of business to fund our operations, including our land development and homebuilding activities. Interest on our secured revolving credit facility is paid monthly at a rate based on LIBOR or prime rate pricing, subject to a minimum interest rate floor of 5.5%. As of September 30, 2012, the outstanding principal balance was $7.1 million, the interest rate was 5.5% per annum and we had approximately $11.0 million of availability under our secured revolving credit facility.

Secured Acquisition and Development Loans and Construction Loans

As of September 30, 2012, we were party to several secured acquisition and development loan agreements to purchase and develop land parcels. In addition, we were party to several secured construction loan agreements for the construction of our model and production homes. As of September 30, 2012, the total aggregate commitment of our acquisition and development loans and our construction loans was approximately $66.0 million, of which $39.3 million was outstanding. The acquisition and development loans will be repaid as lots are released from the loans based upon a specific release price, as defined in each respective loan agreement. Our construction loans will be repaid with proceeds from home sales based upon a specific release price, as defined in each respective loan agreement. These loans range in maturity between May 2013 and February 2015, including the six month extensions which are at our election (subject to certain conditions). Interest on the loans is paid monthly at a rate based on LIBOR or prime rate pricing, with interest rate floors ranging between 4.0% and 6.0%.

Covenant Compliance

Under our secured revolving credit facility, our acquisition and development loans and our construction loans, we are required to comply with certain financial covenants, including but not limited to those set forth in the table below:


Financial Covenant	Actual at September 30, 2012		Covenant Requirement at September 30, 2012
Liquidity ⁽¹⁾	$	56,252,000	$	5,000,000
(Greater of $5.0 million or 10% of total liabilities)
Tangible Net Worth	$	104,444,000	$	61,500,000
(Not less than $47.0 million plus 50% of annual net income and 50% of additional future capital contributions after December 31, 2011)
Maximum Total Liabilities to Net Worth Ratio		0.51		£ 1.5
(Not in excess of 1.5:1.0)

⁽¹⁾

Liquidity is defined as cash on hand plus availability under our secured revolving credit facility.

As of September 30, 2012 and 2011, we were in compliance with all of these financial covenants.

We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. The ratio of debt-to-capital and the ratio of net debt-to-capital are calculated as follows (dollars in thousands):


	At September 30, 2012			At December 31, 2011
Notes payable	$	46,436		$	6,873
Common units subject to redemption ⁽¹⁾		37,000			—
Members’ equity		105,590			82,491

Total capital	$	189,026		$	89,364

Ratio of debt-to-capital ⁽²⁾		24.6	%		7.7	%
Notes Payable	$	46,436		$	6,873
Less: cash and cash equivalents		(45,242	)		(10,164	)

Net debt		1,194			—
Common units subject to redemption ⁽¹⁾		37,000			—
Members’ equity		105,590			82,491

Total capital	$	143,784		$	82,491

Ratio of net debt-to-capital ⁽³⁾		0.8	%		N/A

⁽¹⁾

equity commitment to TPH LLC, in exchange for additional common units. As of September 30, 2012, we were required to return this $37 million capital contribution (or a lesser amount specified by the Starwood Fund) to the Starwood Fund if this offering were not to close by February 28, 2013, or if this offering were to terminate prior to that time. In November 2012, we obtained written approval from the Starwood Fund, pursuant to an amendment of the operating agreement of TPH LLC, to remove the redemption feature of the $37 million of common units.

⁽²⁾

The ratio of debt-to-capital is computed as the quotient obtained by dividing notes payable by the sum of total notes payable plus members’ equity.

⁽³⁾

The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is notes payable less cash and cash equivalents) by the sum of net debt plus members’ equity. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital.

Cash Flows—Nine Months Ended September 30, 2012 to Nine Months Ended September 30, 2011

For the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011, the comparison of cash flows is as follows:

•

Net cash used in operating activities increased to $69.4 million in the 2012 period from a use of $62.7 million in the 2011 period. The change was primarily a result of (i) an increase in real estate inventories of $66.4 million in the 2012 period compared to an increase of $61.6 million in the 2011 period, primarily driven by the increase in land, land development and homes under construction, offset by the increase in home closings in the 2012 period as compared to the 2011 period and (ii) a consolidated net loss of $3.9 million in the 2012 period compared to a consolidated net loss of $3.1 million in the 2011 period.

•

Net cash used in investing activities was $102,000 in the 2012 period as compared to $156,000 in the 2011 period. The change was a result of less fixed assets purchased in the 2012 period.

•

Net cash provided by financing activities increased to $104.5 million in the 2012 period from $58.3 million in the 2011 period. The change was primarily a result of (i) an increase in net borrowings on notes payable of $39.5 million in the 2012 period as compared to a net decrease in notes payable of $3.5 million in the 2011 period, (ii) an increase in capital contributions from members of $29.0 million offset by a financial advisory fee payment of $1.0 million in the 2012 period compared to $64.0 million in capital contributions offset by a financial advisory fee payment of $2.2 million in the 2011 period and (iii) an increase of $37.0 million in capital contributions in exchange for the issuance of common units subject to redemption in the 2012 period with no comparable in the 2011 period. (In November 2012, we obtained written approval from the Starwood Fund, pursuant to an amendment of the operating agreement of TPH LLC, to remove the redemption feature of the $37.0 million of common units.)

As of September 30, 2012, our cash balance was $45.2 million. We believe we have sufficient cash and sources of financing for at least twelve months.

Cash Flows—Year Ended December 31, 2011 Compared to the Period from September 24, 2010 through December 31, 2010

For the year ended December 31, 2011 as compared to the period from September 24, 2010 through December 31, 2010, the comparison of cash flows is as follows:

•

Net cash used in operating activities increased to $66.4 million in the 2011 period from a use of $4.1 million in the 2010 period. The change was primarily a result of (i) an increase in real estate inventories of $67.9 million in the 2011 period compared to an increase of $2.5 million in the 2010 period,

primarily driven by the increase in land, land development and homes under construction in the 2011 period as compared to the 2010 period, (ii) an increase in accounts payable of $2.6 million offset by a decrease in accounts receivable of $2.0 million in the 2011 period as compared to a decrease in accounts payable of $0.2 million offset by an increase in accounts receivable of $1.5 million in the 2010 period, and (iii) a consolidated net loss of $4.6 million in the 2011 period compared to a consolidated net loss of $2.2 million in the 2010 period.

•

Net cash used in investing activities was $308,000 in the 2011 period as compared to $26,000 in the 2010 period. The change was a result of more fixed assets purchased in the 2011 period.

•

Net cash provided by financing activities increased to $65.2 million in the 2011 period from $15.9 million in the 2010 period. The change was primarily a result of (i) an increase in net borrowings on notes payable of $3.4 million in the 2011 period as compared to a net decrease in notes payable of $1.5 million in the 2010 period, and (ii) an increase in capital contributions from members of $64.0 million offset by a financial advisory fee payment of $2.2 million in the 2011 period compared to $20.0 million in capital contributions offset by a financial advisory fee payment of $3.0 million in the 2010 period.

As of December 31, 2011, our cash balance was $10.2 million.

Cash Flows—Year Ended December 31, 2011 Compared to the Period from January 1, 2010 through September 23, 2010 (Our Predecessor)

For the year ended December 31, 2011 as compared to the period from January 1, 2010 through September 23, 2010, the comparison of cash flows is as follows:

•

Net cash used in operating activities increased to $66.4 million in the 2011 period from a use of $7.2 million in the 2010 period. The change was primarily a result of (i) an increase in real estate inventories of $67.9 million in the 2011 period compared to an increase of $7.4 million in the 2010 period, primarily driven by the increase in land, land development and homes under construction in the 2011 period as compared to the 2010 period and (ii) a consolidated net loss of $4.6 million in the 2011 period compared to consolidated net income of $1.1 million in the 2010 period, all of which was partially offset by (iii) an increase in accounts payable of $2.6 million and a decrease in accounts receivable of $2.0 million in the 2011 period as compared to a decrease in accounts payable of $0.6 million offset by an increase in accounts receivable of $1.2 million in the 2010 period.

•

Net cash used in investing activities was $308,000 in the 2011 period as compared to $50,000 in the 2010 period. The change was a result of more fixed assets purchased in the 2011 period.

•

Net cash provided by financing activities increased to $65.2 million in the 2011 period from $4.5 million in the 2010 period. The change was primarily a result of (i) an increase in net borrowings on notes payable of $3.4 million in the 2011 period as compared to an increase of $4.5 million in the 2010 period and (ii) an increase in capital contributions from members of $64.0 million offset by a financial advisory fee payment of $2.2 million in the 2011 with no comparable amount in the 2010 period.

As of December 31, 2011, our cash balance was $10.2 million.

Off-Balance Sheet Arrangements and Contractual Obligations

In the ordinary course of business, we enter into land option contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers as a method of acquiring land in staged takedowns, to help us manage the financial

and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices. We generally have the right at our discretion to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash deposit with no further financial responsibility to the land seller. As of September 30, 2012, we had $16.5 million of non-refundable cash deposits pertaining to land option contracts and purchase contracts for 689 lots with an aggregate remaining purchase price of approximately $109.3 million (net of deposits). We closed the purchase of an aggregate of 164 of the controlled lots in our inventory in November 2012 for an aggregate purchase price of $40.7 million (including the application of $6.5 million of previously paid deposits).

Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

As of September 30, 2012, the outstanding principal balance of our secured revolving credit facility was $7.1 million, the interest rate was 5.5% per annum and we had approximately $11.0 million of availability under our secured revolving credit facility. As of September 30, 2012, we also were party to several secured acquisition and development loan agreements to purchase and develop land parcels. In addition, we were party to several secured construction loan agreements for the construction of our model and production homes. As of September 30, 2012, the total aggregate commitments of our acquisition and development loans and our construction loans were approximately $66.0 million, of which $39.3 million was outstanding. We expect that the obligations secured by our secured revolving credit facility and the loan agreements generally will be satisfied in the ordinary course of business and in accordance with applicable contractual terms.

Contractual Obligations Table

The following table summarizes our future estimated cash payments under existing contractual obligations as of December 31, 2011, including estimated cash payments due by period. Our purchase obligations primarily represent commitments for land purchases under land purchase and land option contracts with non-refundable deposits and commitments for subcontractor labor and material to be utilized in the normal course of business.


	Payments Due by Period
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term debt principal payments ⁽¹⁾	$	6,873,000	$	6,873,000	$	—	$	—	$	—
Long-term debt interest payments		201,000		201,000		—		—		—
Operating leases ⁽²⁾		1,643,000		233,000		774,000		636,000		—
Purchase obligations ⁽³⁾		86,061,000		57,061,000		29,000,000		—		—

Total	$	94,778,000	$	64,368,000	$	29,774,000	$	635,000	$	—

⁽¹⁾

Long-term debt represents our secured revolving credit facility and an acquisition and development loan. Contractual maturities of the debt is in the 1-3 Years category; however, the assets securing the loans are expected to be sold in less than a year and consequently repayment will be required at that time. For a more detailed description of our long-term debt, please see note 6 of the notes to our consolidated financial statements included elsewhere in this prospectus.

⁽²⁾

For a more detailed description of our operating leases, please see note 8 of the notes to our consolidated financial statements included elsewhere in this prospectus.

⁽³⁾

Includes $74.2 million (net of deposits) of the remaining purchase price for all land option contracts and purchase contracts and $11.9 million of subcontractor labor and material commitments as of December 31,

2011. For a more detailed description of our land purchase and option contracts, please see the discussion set forth above in this “—Off-Balance Sheet Arrangements and Contractual Obligations” section and notes 1 and 2 of the notes to our consolidated financial statements included elsewhere in this prospectus.

Inflation

Our homebuilding and fee building segments can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs. In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers. While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we are often unable to offset cost increases with higher selling prices.

Seasonality

Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity in spring and summer, although this activity is also highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it typically takes four to six months to construct a new home, we deliver more homes in the second half of the year as spring and summer home orders convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occur during the second half of the year. We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry.

Critical Accounting Policies

Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of costs and expenses during the reporting period. On an ongoing basis, our management evaluates its estimates and judgments, including those which impact our most critical accounting policies. Our management bases its estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions. Our management believes that the following accounting policies are among the most important to the portrayal of our financial condition and results of operations and require among the most difficult, subjective or complex judgments:

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These provisions include:

•

a requirement to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in an initial public offering registration statement;

•

an exemption to provide less than five years of selected financial data in an initial public offering registration statement;

•

an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act in the assessment of the emerging growth company’s internal control over financial reporting;

•

an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies; and

•

an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which

the auditor would be required to provide additional information about the audit and the financial statements of the issuer.

We have determined to opt out of the exemption from compliance with new or revised financial accounting standards. As a result, we will comply with new or revised financial accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of this exemption is irrevocable.

We have elected to adopt the reduced disclosure requirements described above. As a result of these elections, the information that we provide in this prospectus may be different than the information you may receive from other public companies in which you hold equity interests. In addition, it is possible that some investors will find our common stock less attractive as a result of our elections, which may cause a less active trading market for our common stock and more volatility in our stock price.

Cash and Cash Equivalents

We define cash and cash equivalents as cash on hand, demand deposits with financial institutions, and short term liquid investments with an initial maturity date of less than three months. Our cash balances exceed federally insurable limits. We monitor the cash balances in our operating accounts and adjust the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to cash in our operating accounts.

Real Estate Inventories and Cost of Sales

We capitalize pre-acquisition, land, development and other allocated costs, including interest, during development and home construction. Applicable costs incurred after development or construction is substantially complete are charged to selling, general and administrative, and other expenses as appropriate. Pre-acquisition costs, including non-refundable land deposits, are expensed to other income (expense) when we determine continuation of the respective project is not probable.

Land, development and other common costs are typically allocated to inventory using a methodology that approximates the relative-sales-value method. Home construction costs per production phase are recorded using the specific identification method. Cost of sales for homes closed includes the allocation of construction costs of each home and all applicable land acquisition, land development and related common costs (both incurred and estimated to be incurred) based upon the relative-sales-value of the home within each community. Changes to estimated total development costs subsequent to initial home closings in a community are generally allocated on a relative-sales-value method to remaining homes in the community. Inventory is stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to fair value. We review our real estate assets at each community for indicators of impairment. Real estate assets include projects actively selling and projects under development or held for future development. Indicators of impairment include, but are not limited to, significant decreases in local housing market values and selling prices of comparable homes, significant decreases in gross margins and sales absorption rates, costs in excess of budget, and actual or projected cash flow losses.

or less than the asset’s carrying value. If the undiscounted cash flows are more than the asset’s carrying value, no impairment adjustment is required. However, if the undiscounted cash flows are less than the asset’s carrying value, the asset is deemed impaired and is written down to fair value. These impairment evaluations require us to make estimates and assumptions regarding future conditions, including timing and amounts of development costs and sales prices of real estate assets, to determine if expected future undiscounted cash flows will be sufficient to recover the asset’s carrying value.

When estimating undiscounted cash flows of a community, we make various assumptions, including: (i) expected sales prices and sales incentives to be offered, including the number of homes available, pricing and incentives being offered by us or other builders in other communities, and future sales price adjustments based on market and economic trends; (ii) expected sales pace and cancellation rates based on local housing market conditions, competition and historical trends; (iii) costs expended to date and expected to be incurred including, but not limited to, land and land development costs, home construction costs, interest costs, indirect construction and overhead costs, and selling and marketing costs; (iv) alternative product offerings that may be offered that could have an impact on sales pace, sales price and/or building costs; and (v) alternative uses for the property.

Many assumptions are interdependent and a change in one may require a corresponding change to other assumptions. For example, increasing or decreasing sales absorption rates has a direct impact on the estimated per unit sales price of a home, the level of time sensitive costs (such as indirect construction, overhead and carrying costs), and selling and marketing costs (such as model maintenance costs and advertising costs). Depending on the underlying objective of the community, assumptions could have a significant impact on the projected cash flow analysis. For example, if our objective is to preserve operating margins, our cash flow analysis will be different than if the objective is to increase sales. These objectives may vary significantly from community to community and over time. If assets are considered impaired, impairment is determined by the amount the asset’s carrying value exceeds its fair value. Fair value is determined based on estimated future cash flows discounted for inherent risks associated with real estate assets. These discounted cash flows are impacted by expected risk based on estimated land development, construction and delivery timelines; market risk of price erosion; uncertainty of development or construction cost increases; and other risks specific to the asset or market conditions where the asset is located when assessment is made. These factors are specific to each community and may vary among communities. We perform a quarterly review for indicators of impairment. We did not note any indicators of impairment for any projects, and no impairment adjustments relating to real estate inventories were recorded, for the nine months ended September 30, 2012 and the years ended December 31, 2011 and 2010.

Revenue Recognition

Home Sales and Profit Recognition. In accordance with ASC 360, Property, Plant, and Equipment , revenues from home sales and other real estate sales are recorded and a profit is recognized when the respective units are closed. Home sales and other real estate sales are closed when all conditions of escrow are met, including delivery of the home or other real estate asset, title passage, appropriate consideration is received and collection of associated receivables, if any, is reasonably assured. Sales incentives are a reduction of revenues when the respective unit is closed. When it is determined that the earnings process is not complete, the sale and the related profit are deferred for recognition in future periods. The profit we record is based on the calculation of cost of sales, which is dependent on our allocation of costs, as described in more detail above in the section entitled “—Real Estate Inventories and Cost of Sales.”

Fee Building. We enter into construction management agreements to provide fee building services whereby we will build, market and sell homes on behalf of independent third-party property owners. The independent third-party property owner funds all project costs incurred by us to build and sell the homes. We primarily enter into cost plus fee contracts where we charge independent third-party property owners for all direct and indirect costs plus a negotiated management fee. For these types of contracts, we recognize revenue based on the actual total costs we have expended and the applicable management fee. The management fee is typically a fixed fee based on a percentage of the cost or home sales revenue of the project depending on the

terms of the agreement with the independent third-party property owner. In accordance with ASC 605, Revenue Recognition , revenues from construction management services are recognized over a cost-to-cost approach in applying the percentage-of-completion method. Under this approach, revenue is earned in proportion to total costs incurred, divided by total costs expected to be incurred. The total estimated cost plus the management fee represents the total contract value. We recognize revenue based on the actual labor and other direct costs incurred, plus the portion of the management fee we have earned to date. In the course of providing our services, we routinely subcontract for services and incur other direct costs on behalf of our clients. These costs are passed through to clients and, in accordance with industry practice and GAAP, are included in our revenue and cost of revenue. Under certain agreements, we are eligible to receive additional incentive compensation, as certain financial thresholds defined in the agreement are achieved. We recognize revenue for any incentive compensation when such financial thresholds are probable of being met and such compensation is deemed to be collectible, generally at the date the amount is communicated to us by the independent third-party property owner.

We also enter into fee building contracts where we do not bear risks for any services outside of our own. For these types of contracts, we recognize revenue as services are performed. We do not recognize any revenue or costs related to subcontractors’ cost since we do not bear any risk related to them.

Warranty Reserves

Estimated future direct warranty costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. Amounts accrued are based upon historical experience rates. Indirect warranty overhead salaries and related costs are charged to the reserve in the period incurred. We assess the adequacy of our warranty accrual on a quarterly basis and adjust the amounts recorded if necessary. Our warranty accrual is included in accrued liabilities in the accompanying consolidated balance sheets.

Acquired Intangible Assets

Upon consummation of a business combination as defined in ASC 805, Business Combinations , we perform an assessment to determine the value of the acquired company’s tangible and identifiable intangible assets and liabilities. In our assessment, we determine whether identifiable intangible assets exist, which typically include backlog and customer relationships. The identified intangible assets are amortized over their respective calculated term.

Variable Interest Entities

We account for variable interest entities in accordance with ASC Topic 810, Consolidation (“ASC 810”). Under ASC 810, a variable interest entity (“VIE”) is created when: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties, including the equity holders; (b) the entity’s equity holders as a group either (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity’s equity holders have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of the equity holder with disproportionately few voting rights. If an entity is deemed to be a VIE pursuant to ASC 810, the enterprise that has both (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE. In accordance with ASC 810, we perform ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. As of September 30, 2012, December 31, 2011 and 2010, we did not have any investment that was deemed to be a VIE.

some instances, we may also expend funds for due diligence, development and construction activities with respect to optioned land prior to takedown. Such costs are classified as inventories owned, which we would have to write off should we not exercise the option. Therefore, whenever we enter into a land option or purchase contract with an entity and make a non-refundable deposit, a VIE may have been created. As of September 30, 2012, December 31, 2011 and December 31, 2010, we were not required to consolidate any VIEs nor did we write off any costs that had been capitalized under lot option contracts. In accordance with ASC 810, we perform ongoing reassessments of whether we are the primary beneficiary of a VIE.

Stock-Based Compensation

We account for share-based awards in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. ASC 718 requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees.

Sales and Marketing Expense

Sales and marketing costs incurred to sell real estate projects are capitalized if they are reasonably expected to be recovered from the sale of the project or from incidental operations and are incurred for tangible assets that are used directly through the selling period to aid in the sale of the project or services that have been performed to obtain regulatory approval of sales. All other selling expenses and other marketing costs are expensed in the period incurred.

Organizational Costs

Income Taxes

TPH LLC is a limited liability company and our predecessor includes a limited partnership and a limited liability company, all of which are treated as partnerships for income tax purposes and are subject to certain minimal taxes and fees; however, income taxes on taxable income or losses realized by TPH LLC are the obligation of the members. We have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements, nor have we been assessed interest or penalties by any major tax jurisdictions. Our evaluation was performed for the tax years ended December 31, 2011 and 2010.

TPH LLC has a subsidiary that is treated as a C Corporation for income tax purposes. Federal and state income taxes are provided for this C Corporation in accordance with the provisions of ASC 740, Income Taxes . The provision for, or the benefit from, income taxes is calculated using the asset and liability method, under which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are evaluated to determine whether a valuation allowance should be established based on our determination of whether it is more likely than not that some or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends primarily on the generation of future taxable income during the periods in which those temporary differences become deductible. Judgment is required in determining future tax consequences of events that have been recognized in the consolidated financial statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated financial position or results of operations.

Our predecessor followed certain accounting guidance with respect to how uncertain tax positions should be accounted for and disclosed in the consolidated financial statements. The guidance requires the assessment of tax

positions taken or expected to be taken in the tax returns and to determine whether the tax positions are “more-likely-than-not” of being sustained upon examination by the applicable taxing authority. Tax positions deemed to meet the more-likely-than-not criteria would be recorded as a tax benefit or expense in the current year. We are required to assess open tax years, as defined by the statute of limitations, for all major jurisdictions, including federal and certain states. Open tax years are those that are open for examination by taxing authorities. We have no examinations in progress and believe that there are no uncertain tax positions that do not meet the more-likely-than-not level of authority.

Related Party Transactions

See “Certain Relationships and Related Party Transactions” for a description of our transactions with related parties.

Recently Issued Accounting Standards

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 amends ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. Our adoption of these provisions of ASU 2011-04 on January 1, 2012 did not have an impact on our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends the guidance in ASC 350-20, Intangibles – Goodwill and Other – Goodwill . Under ASU 2011-08, entities have the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, then entities are required to perform the two-step goodwill impairment test. ASU 2011-08 will be effective for our fiscal year beginning December 1, 2012, with early adoption permitted. The adoption of ASU 2011-08 is not expected to have a material effect on our consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate debt. We did not utilize swaps, forward or option contracts on interest rates or commodities, or other types of derivative financial instruments as of or during the nine months ended September 30, 2012. We have not entered into and currently do not hold derivatives for trading or speculative purposes. Many of the statements contained in this section are forward looking and should be read in conjunction with our disclosures under the heading “Cautionary Note Concerning Forward-Looking Statements.”

The table below details the principal amount and the average interest rates for the outstanding debt for each category based upon the expected maturity or disposition dates. The fair value of our variable rate debt, which consists of our secured revolving credit facility and our acquisition and development loans, is based on quoted market prices for the same or similar instruments as of September 30, 2012.


	Expected Maturity Date
	September 30,																					Estimated Fair Value
	2012			2013			2014			2015			2016			Thereafter			Total			Estimated Fair Value
Liabilities :
Variable rate debt ⁽¹⁾	$	28,620,600		$	17,815,200			$—			$—			$—			$—		$	46,435,800		$	46,435,800
Average interest rate		5.5	%		5.5	%		—	%		—	%		—	%		—	%		5.5	%		5.5	%

⁽¹⁾

Contractual maturities of the variable rate debt are in 2013 and 2014; however, the assets securing the loans are expected to be sold in less than a year and consequently repayment will be required at that time. For a more detailed description of our long-term debt, please see note 6 of the notes to our consolidated financial statements included elsewhere in this prospectus.

Based on the current interest rate management policies we have in place with respect to our outstanding debt, we do not believe that the future market rate risks related to the above securities will have a material adverse impact on our financial position, results of operations or liquidity.

MARKET OPPORTUNITY

Unless otherwise indicated, market data is derived from a market study prepared for us in connection with this offering by John Burns Real Estate Consulting, LLC (“JBREC”). Founded in 2001, JBREC is an independent research provider and consulting firm focused on the housing industry. The following information contains forward-looking statements which are subject to uncertainty and you should review “Cautionary Note Concerning Forward-Looking Statements.”

National Housing Market

Historically, strong housing markets have been associated with affordability, a healthy domestic economy, positive demographic trends such as population growth and household formation, low interest rates, increases in renters that qualify as homebuyers and locally based dynamics such as housing demand relative to housing supply. Many markets across the U.S. are beginning to exhibit several of these positive characteristics. Relative to long-term historical averages, the U.S. economy is creating more jobs for every homebuilding permit issued, the inventory of resale and new unsold homes is relatively low and affordability is near its highest level in over 30 years, as measured by the ratio of homeownership costs to household income.

The U.S. housing market is in the middle of phase two of a three-phase supply-constrained housing recovery, as described below:

•

Phase 1 —job growth begins.

•

Phase 2—price appreciation occurs among low-priced homes in foreclosure, increasing resale prices to the point that purchasing a new home provides more value than purchasing an existing home.

•

Phase 3 —strong demand and limited supply, coupled with normal vacancy rates, lead to considerable price appreciation in land-constrained markets and a resurgence in construction activity in markets with sufficient land supplies.

While conditions are improving, significant future growth is required to return to pre-recession housing market conditions.

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Construction starts, as measured by the U.S. Census Bureau through August 2012, are at 750,000 units per year. This represents 27% of a recovery to a level of 1.5 million annual starts, which is comparable to housing starts in the year 2000, a period that is reflective of a more stable market, up 57% from a low of 478,000 annual starts in April 2009.

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Existing home sales, as measured by the National Association of Realtors, are at 4,820,000 transactions per year through August 2012, approximately in-line with what JBREC estimates to be a stable level based on existing home sales activity during the late 1990s, when the housing market was in a more balanced environment and many economic variables were near historical averages. Existing home sales had fallen to an annualized rate of 3,300,000 transactions in July 2010.

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New home sales are at 373,000 annualized transactions through August 2012, as measured by the U.S. Census Bureau, representing 19% of a recovery to a level of 800,000 annual transactions, which JBREC estimates to be a stable level based on new home sales activity during the late 1990s, when the housing market was in a more balanced environment and many economic variables were near historical averages. New home sales had fallen to 273,000 annualized transactions in February 2011.

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Home affordability for the nation reached its most favorable levels during the housing downturn as prices and mortgage rates declined. A combination of rising prices and mortgage rates is likely to increase the cost of housing relative to incomes for U.S. homebuyers over the coming decade, bringing affordability measures closer to the historical median level measured from 1981 to 2012.

Demand . Job growth is the most important factor for a healthy housing market. While year-over-year job growth is once again positive after significant losses from 2008 through 2010, recent growth has moderated amidst fiscal and political uncertainty. Additionally, the rate of job growth in economic recoveries has slowed over the last 30 years, primarily as a result of the aging U.S. labor force, productivity improvements and globalization. JBREC forecasts that job growth, while positive, will soften through 2013, and grow at a 1.3% compound annual rate through 2016. By the end of 2016, the economy is expected to have recovered all of the 7.7 million jobs lost between 2008 and 2010.

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The current average employment growth to homebuilding permit ratio for the country is 2.4. A balanced ratio in a stable market is 1.2 to 1.3. This ratio has been above a stable market ratio for several quarters, due to a marginal rise in employment growth coupled with historically low homebuilding permit levels. Eventually, the relative excess job growth to homebuilding permit growth should lead to improving consumer confidence and new home sales, which should result in increased construction activity.


The U.S. homeownership rate (the percentage of U.S. adult households that own their residence) is currently below the rate that the long-term history of the homeownership rate and demographic shifts would suggest, according to JBREC. The homeownership rate, which was 65.5% as of the second quarter of 2012 according to the U.S. Census Bureau, is down from a JBREC-estimated peak of 70.1% in 2004. JBREC forecasts homeownership will decrease to a low of 62.9% in 2015. The projected decline is expected to result from a combination of three factors:

a larger percentage of new households formed as renters,

current homeowners displaced by mortgage distress, and

a decline in the long-term propensity to own for younger generations.

However, JBREC believes that this trend of a declining homeownership rate will begin to reverse in 2016, making a gradual recovery to 66.0% by 2025.

The projected decline in homeownership rate is not expected to have a significant negative impact on the new home market in 2012 and 2013, as most of the decline will be attributable to homeowners who are currently not paying their mortgages. The major implication of this decline in homeownership rate is expected to be an unprecedented increase in renters, in which case the rental market will likely be the primary beneficiary early in the recovery. The rental market is currently adding 900,000 renters of single-family homes and 740,000 apartment renters each year. Most homeowners that are 90 or more days delinquent on their mortgage will become renters, which will be one of the factors that causes a decline in the homeownership rate to below 63%. The homeownership rate should eventually recover, as former homeowners previously displaced by mortgage distress buy a home again. This is already occurring, and JBREC believes that 70% of foreclosed homeowners will re-enter homeownership over time.

Household formations are expected to average 1.38 million per year through 2016, based on population growth that averages 0.8% per year and headship rates (which is the percentage of people in an age group that head a household) that return to levels that are more consistent with historical trends by 2025. The reduction in headship rates for nearly all age groups from 2000 to 2010 was caused primarily by the economic distress in the latter half of the last decade. This reduction has created an estimated 1.9 million units of pent-up household growth that is expected to reverse itself by 2025 as headship rates rebound. Immigration is expected to add to the household and population growth as well, occurring at approximately 0.3% per year, and mostly concentrated in the 20 to 40 year old demographic.

A lack of inventory is currently limiting sales activity in the existing home market, but sales are expected to grow through 2015, in part, due to continued investor activity. After decreasing to 4.1 million transactions in 2008 from a peak of nearly 7.1 million transactions three years prior, existing home sales transactions are currently just over 4.8 million, hampered by a large decrease in the supply of homes on the market. JBREC forecasts that sales will rise to 5.25 million transactions in 2015, which would be equivalent to the sales activity in 2001, and will decline in 2016. The share of sales that were for investment purposes rose to 27% in 2011, which was the highest rate since 2005. An elevated share of distressed sales is expected to keep activity above normal levels in the near term.

The projected slow but steady job growth should help to absorb the rising new home supply, which is coming off historical lows. New home sales transactions reached a trough in 2011 at 306,000 homes sold, and are forecasted to rise steadily to 740,000 sales in 2016 – a level last reached in pre-boom 1996 and post-boom 2007. The new home market currently has only 38,000 units of completed supply, which is the lowest level in more than 30 years, and JBREC expects this to lead to increased construction levels as the demand for housing rebounds.

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Supply . JBREC is forecasting measurable improvement in new residential construction activity that will begin in 2012. Activity should steadily increase over the following few years, but JBREC believes that annual homebuilding permit levels through 2016 will remain below the average annual levels experienced nationally from 1998 to 2006, similar to what happened in Houston in the mid-1980s and in Southern California in the early 1990s. In theory, the United States does not need any additional housing construction until all of the excess vacancy is consumed. In reality, however,

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housing construction will occur to the extent that it is a wise business decision for homebuilders and consumers decide to purchase new homes that are more energy efficient and meet their location and lifestyle requirements. With prices rising, and certain submarkets stabilized, homebuilder demand for lots is increasing substantially.

The number of existing unsold homes available for sale (not including “shadow inventory,” which is the number of homes with a mortgage that are in some form of distress but that are not currently for sale) continues its general downward trend after peaking in 2007. As of August 31, 2012, there were 6.1 months of inventory supply on the market, which is well below the peak level and below the average of 7.3 months of supply over the past 30 years.

The excess of vacant homes in the United States has been reduced significantly from its peak of more than 3.2 million units in 2009 to an estimated 1.5 million excess vacant homes today. The vacant housing inventory had accumulated first as investors and second-homebuyers purchased homes for profit and personal use, and then as the severe recession significantly reduced household formations. The housing vacancy in the United States is expected to stabilize in 2015, reducing the excess nationally in that year as household growth outpaces construction, although this will vary by local market.

While the number of homes entering the foreclosure process is declining, the overall volume is still quite high relative to historical levels. Approximately 12% of all mortgages are currently delinquent – nearly twice the pre-2008 level. The shadow inventory is still substantial. This supply is likely to be sold or liquidated over the next several years. Real estate owned (“REO”) by lenders who foreclosed and short sales (sales in lieu of a foreclosure) are forecasted to peak in 2012, and to remain elevated through 2015. JBREC believes that banks will dispose of these distressed loans through either short sales or foreclosures and will do so at a moderate rate so as to limit the downward pressure on home prices resulting from the liquidation of foreclosed homes. One risk is that banks change their philosophy, and decide to dispose of these distressed loans at a more rapid pace.

The media has made much of the distress in the market, focusing on the homes that are in some form of delinquency or foreclosure. However, it is important to note that only 10% of the total housing units in the United States have some sort of distress; the remaining 90% do not.


*Affordability* . Affordability in the existing home market at the national level is at historically favorable levels looking back over the last 30 years. The ratio of annual housing costs (which is mortgage payment plus a portion of the down payment) for the median-priced resale home to the median household income is near an all-time low, dating back to 1981. Due to slowly rising mortgage rates coupled with expected home price appreciation, affordability conditions nationally are expected to weaken gradually in the coming years, but still remain historically favorable. While affordability conditions vary by market, most markets have experienced their most favorable historical affordability during this cycle.

Resale home prices are trending up slowly, and the declining percentage of distressed sales and low inventory levels should further cause prices to rise. JBREC projects flat prices overall in 2012, but appreciation of 5% to 6% per year in 2013 to 2015, slowing to 3% by 2016. Many factors can influence this outlook. Recent statements by the Federal Reserve cause JBREC to believe that the Federal Reserve would like to see home price appreciation exceed these levels.

Increasing home price appreciation in the near-term will be supported by low mortgage rates, which remain

historically favorable and are expected to remain low in the near term due to low inflation and global economic uncertainty. JBREC forecasts that average 30-year fixed mortgage rates will rise slowly to 4.5% by 2016, as increasing inflation is expected to drive rates higher after this period of very low inflation. This forecast is subject to the policies of the U.S. government, including the Federal Reserve.

There is a strong case for solid price appreciation:

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Demand —demand is growing much faster than the new home supply being added to the market, which will eventually reduce the excess existing supply that is currently in the market. With a lower level of excess supply, prices will rise.

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Affordability —the most favorable affordability in decades will help in the recovery.

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Safe haven investment —hard assets, such as real estate, are broadly considered an inflation hedge, and many investors will focus on inflation once the current deflation concerns subside.

The Bear Case . While the fundamentals are in place for a recovery in the housing market, there are a number of factors that would slow the recovery, including the following .

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The market could see a low level of activity from entry-level buyers due to a lack of savings, challenges with back-end debt-to-income ratios and credit, and uncertainty about the housing market and the economy.

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A low level of home purchases by mature families could also occur due to the high loan-to-value ratios of many existing homeowners.

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Lower net worth may result in delayed retirement for some consumers, resulting in decreases in home purchases by retirees.

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There are 1.5 million excess vacant homes that need to be filled.

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Land development may still be unprofitable in many markets. Home price appreciation is necessary for many land parcels to become profitable for developers and builders.

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The economy could still experience slow and volatile growth in the years to come. Recessions caused by excess leverage, such as the recent recession, take many years to recover from and these periods are typically very volatile.

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A large number of mortgaged homes will go through the foreclosure process and will be sold under duress.

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There exists a potential for a rise in mortgage rates, driven by the bond market.

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The implementation of qualified mortgage and qualified residential mortgage rules proposed in the Dodd-Frank Wall Street Reform and Consumer Protection Act could make mortgages more difficult to obtain.

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Development and building costs are rising, which could negatively impact homebuilder margins.

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Given current high unemployment rates and the resulting excess of available labor, new job creation in the current environment may be at lower income levels than in the pre-recession period, which could serve to undermine the ratios of current average employment growth to homebuilding permits as a factor supporting growth in the housing market.

In addition, the government deficit is substantial, and the United States will be subject to further credit rating downgrades until political leadership develops and executes a plan to address the deficit. A lack of fiscal accountability could cause U.S. economic problems for years to come.

Conclusion. In summary, housing is a risky asset class, but JBREC believes the outlook for the housing market is very favorable as a result of several factors, including the following:

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Demand is strong. The number of adults finding employment is exceeding new home supply by a ratio of 2.4 to 1.

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Supply is low. Resale inventory is below the historical average months of supply, new home inventory is at an all-time low, and new construction is 50% below historical averages.

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Affordability is historically favorable. With mortgage rates at 3.5%+, and home prices in many markets returning to levels last seen in 2003, homeownership is an attractive financial option.

JBREC forecasts that the excesses of the recent downturn will clear and that home prices and construction will increase for the foreseeable future.

California Housing Market

Los Angeles-Ventura, CA Housing Market Overview

The combined Los Angeles-Ventura, California market consists of Los Angeles and Ventura Counties, which were combined due to the influence of the Los Angeles economy on Ventura County. With 10.8 million people and nearly 3.6 million households, Los Angeles-Ventura represents the largest concentration of population in California. This market has a wide diversity of submarkets and demographics, which make it critical for builders and developers to understand the local consumer. A large percentage of new homebuilding activity will likely occur in either infill locations close to job growth or in more distant areas where land is available for traditional single-family detached home development.

The housing fundamentals in Los Angeles-Ventura are improving, which is a positive sign for home price appreciation in this market. More recent improvement has been stronger in Los Angeles County than in Ventura County. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one- to three-year leading indicator for home price appreciation. While both markets have seen substantial improvement in the affordability fundamentals, Los Angeles has experienced a stronger rebound in the demand and supply fundamentals than Ventura.

Los Angeles-Ventura has combined payroll employment of nearly 4.1 million workers, and job growth is returning to the market after experiencing a decline in employment of 8.4% between 2008 and 2010. Compared with other Southern California markets, the percentage decline in employment in Los Angeles-Ventura was not as large as Riverside-San Bernardino or Orange County, but larger than San Diego County.

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Owing to its size, the Los Angeles-Ventura market has a diverse employment distribution that closely resembles that of the nation as a whole, with some slight variations. The Trade, Transportation and Utilities sector is the largest, accounting for 19.6% of the total jobs. The Professional and Business Services, Government, and Education and Health Services sectors each comprise approximately 14% of the job base. The higher-income sectors – Financial Activities, Information, and Professional and Business Services – account for a combined 25.2% of jobs in the area, which is higher than the national average. The Los Angeles-Ventura region is home to such Fortune 500 companies as Walt Disney, DirecTV, Occidental Petroleum, Amgen and Edison International.

Following losses that occurred from 2005 to 2007, population and household growth has returned to the Los Angeles-Ventura area. The combined region had lost a total of 82,300 people and 23,700 households in that time frame, as people moved to other parts of the country for employment and better housing affordability. The area rebounded and added a total of 230,500 people and 100,000 households from 2008 through 2011.

For 2011, the median household income in Los Angeles-Ventura was $55,442, which is close to the national average. After peaking above $57,000 in 2008, the median household income declined in 2009 and 2010. Incomes are rising once again, although the 1.9% growth rate in 2011 was below the 30-year average growth rate of 3.3%.

Los Angeles-Ventura’s existing home sales are improving from very low levels for this market. In the twelve months ended July 31, 2012, sales had reached 83,558 transactions, representing an increase of more than 25% from the 2008 market trough of 66,614 transactions. Resale prices had witnessed strong appreciation from 1998 through 2006, with the median price rising at an average annual rate of 14% during that time. However, the median price fell by a total of 43% in 2008 and 2009 due to a shift in sales activity to distressed sales in the lower price points and a loss of value. Home prices now appear to be stabilizing, and the current median price is on par with the median price from late 2003.

New home sales activity in Los Angeles-Ventura is just beginning to rise from trough levels in 2011, and is expected to show a gradual return to more stable levels. New home sales for the two-county area have totaled 4,258 in the twelve months ended July 31, 2012. The median new home price continues to decline from the peak level in 2007. However, the median new home price in this market should not be relied upon as the only indicator of market trends, as it can be significantly influenced by both the mix of home types being sold at any given time across such a diverse market and the relatively small number of new home sales. Resale home prices are a better indication of market trends.

While homebuilding permit activity in Los Angeles-Ventura is growing rapidly from a percentage standpoint, the growth is from a trough level that was the lowest in at least three decades, and the absolute level of new home construction is still historically low. The trough of the market for construction activity occurred in 2009 at just under 5,500 total homebuilding permits, which was just 7% of the peak permit level in 1986 and just 19% of the more recent peak of 29,146 homebuilding permits in 2004. During the twelve months ended July 31, 2012, Los Angeles-Ventura

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has issued 12,231 homebuilding permits, which is a notable improvement from the trough. Given the relatively high level of infill building activity, the area has a high proportion of multi-family construction, mostly in Los Angeles County. Over the 30-year period from 1982 through 2011, 43% of the homebuilding permits issued in the combined areas were for single-family homes, whereas in 2011, only 24% of the permits issued were for single-family homes.

Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher than the number of homebuilding permits issued in that same time. The current employment growth to homebuilding permit ratio is 4.7; a normal range measured over the last 30 years for the employment growth to homebuilding permit ratio in the Los Angeles-Ventura market would be 1.0 to 1.2.

Resale listings in Los Angeles-Ventura are declining, causing the resale market to become more competitive and favoring home sellers, which is leading to increases in prices. Through August 31, 2012, Los Angeles-Ventura had 26,476 homes listed on the market, which represented a decline of 34% from the prior year. By comparison, in late 2007, listings were approaching 62,400 homes on the market. The current level of listings equates to 4.0 months of supply, based on existing home sales activity over the most recent twelve months. This represents a significant drop from more than 11 months of supply in mid-2008.

Pre-foreclosure notices have also trended downward, which is a positive sign for home prices in the Los Angeles-Ventura market. Pre-foreclosure notices are an indicator of future home sales that will be distressed sales. In the twelve months ended June 30, 2012, slightly more than 62,000 pre-foreclosure notices had been issued, representing a 10% decline from the prior year and a 48% decline from the peak in 2009.

Although the level of pre-foreclosure homes is declining, there is still a high level of distressed homes that are not yet on the market that may act to limit upward movement of home prices. As of June 30, 2012,

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the shadow inventory amounted to an estimated 89,200 homes, or ten months of supply. This is more than three times the level of listings that are currently on the market. JBREC believes that most shadow inventory homes in Los Angeles-Ventura will gradually become distressed sales over the next few years, as it expects banks to continue to process foreclosures at a slow pace due to regulatory pressures and to maintain values of the balance of their inventories. JBREC expects that the subsequent pace of distressed sales will be slow enough that home prices will not continue to fall.

When comparing the monthly costs of owning the median-priced home with the median household income, affordability in Los Angeles-Ventura is much better than the area’s historical median dating back to 1981. This estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 46% in Los Angeles County and 41% in Ventura County. When compared against each market’s own history, housing affordability relative to incomes in Ventura County is slightly better than in Los Angeles County.

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In summary, the housing fundamentals in Los Angeles-Ventura are improving – more rapidly in Los Angeles County. Job growth exceeds the area’s very low new construction levels, and listings are declining, which makes for a more competitive resale environment. As housing fundamentals return to more favorable levels, the Los Angeles-Ventura market is positioned for price appreciation and increased construction activity.


Orange County, CA Housing Market Overview Orange County, California, also referred to as the Santa Ana-Anaheim-Irvine metropolitan division, is one of two counties that comprise the greater Los Angeles-Long Beach-Santa Ana metropolitan statistical area (“MSA”). Once considered a bedroom community for neighboring Los Angeles County, Orange County is now the third-most populous county in the State of California, with more than three million people and more than one million households.
The housing fundamentals in Orange County are improving, which is a positive sign for price appreciation in this market. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one-to three-year leading indicator for home price appreciation. The overall housing market fundamentals have improved since 2008, as the fundamentals for housing demand have strengthened due to improved job growth and home sales activity. The supply fundamentals have
strengthened as well due to low homebuilding permit levels and declining listings, and the affordability fundamentals have improved due to lower pricing and low interest rates, but not to the same level as many other markets across the country.

The Orange County job base supports demand for local new home construction, but a significant number of employees of businesses within the county are residents of more affordable, neighboring counties. The county has a payroll employment level of nearly 1.4 million workers, and is experiencing a return of job growth in the market after having experienced a drop in employment of 10.9% between 2007 and 2010.

Much of California’s future job growth is expected to take place in Orange County. The county has a large share of high-paying jobs and is home to numerous Fortune 500 companies, including Ingram Micro, Western Digital, Spectrum Group International, Broadcom, Pacific Life and Allergan. The Professional and Business Services sector is the county’s largest, accounting for 18.3% of jobs, and is generally considered to be a high-income employment sector. This sector is closely followed in size by the Trade, Transportation and Utilities sector, which comprises 18.1% of the county’s jobs. Compared to the nation, Orange County has a higher concentration of jobs in the Financial Activities and Professional and Business

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Services sectors (both of which are considered to be higher-income employment sectors) and in the Construction, Leisure and Hospitality, and Manufacturing sectors.

While the county experienced a drop in population and household growth during the market’s peak and subsequent decline, growth has returned, with the county averaging population growth of more than 30,000 residents and household growth of approximately 10,000 households annually in recent years.


For 2011, the median household income was $71,999, which is higher than the national average. After peaking above $76,000 in 2008, the median household income in Orange County declined in 2009 and 2010. Incomes are rising once again in Orange County, although the 1.6% growth rate in 2011 was below the 30-year average growth rate of 3.4%. Existing home sales in Orange County are gradually improving from the trough of the market in 2007, in which only 23,468 existing homes were sold. Existing home sales during the twelve months ended July 31, 2012 totaled 30,029, representing an increase of 28% from the 2007 total. After several years of sales activity in the 25,000 to 30,000 range, the existing home sales market appears to be improving. Resale prices had witnessed strong appreciation in the late 1990s and early 2000s, but decreased significantly in the late 2000s. The median sales price declined 31% from 2007 to 2009, due in part to a shift in sales activity away from the higher price points and a loss in value. Home prices appear to be stabilizing. Orange County’s new home sales activity is declining slightly due to lower supply levels when compared to 2010 and 2011. New home sales have totaled 1,740 in the twelve months ended July 31, 2012. While the median new home price has declined significantly from the peak level in 2005, new home prices should not be relied upon as the only indicator of market trends, as they can be heavily influenced by the mix of home types being sold at any given time. Resale home prices are a better indication of market trends. Homebuilding permit activity in Orange County is slowly beginning to increase from its lowest levels in decades. The trough of the market for construction activity occurred in 2009 at just over 2,100 total homebuilding permits, constituting less than 9% of the peak permit level in the county in the late 1980s. During the twelve months ended July 31, 2012, Orange County has issued 4,383 homebuilding permits, which is lower than the demand generated by the recent improvement in employment growth. Over the 30-year period from 1982 through 2011, 53% of the homebuilding permits issued were for single-family homes. In 2011, 42% of the homebuilding permits issued were for single-family homes. The potential exists for a significant increase in


homebuilding permit activity in Orange County over the next decade due to a number of large, restructured investments such as: Heritage Fields at the former El Toro Marine Corps Air Station; the former Tustin Marine Corps Air Station; Baker Ranch; Rancho Mission Viejo; and the Irvine Ranch.



Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher than the number of homebuilding permits issued in that same time. The current employment growth to homebuilding permit ratio is 6.3, as compared to the 1.6 average ratio for the market from 1981 through 2011. Resale listings in Orange County continue to decline as existing home sales rise, causing the resale market to become more competitive and leading to increases in prices. Through August 31, 2012, Orange County had 7,730 homes listed on the market, which represented a decline of 32% from the prior year. At their peak in mid-2007, listings reached as many as 17,500 homes on the market. The current level of listings equates to 3.1 months of supply, based on existing home sales activity over the most recent twelve months. This represents a significant drop from nearly nine months of supply in 2008, and the months of supply has remained between three and five months since the beginning of 2009. In addition to the decline in listings, pre-foreclosure notices are trending downward, which is a positive sign for home prices in the Orange County market. Pre-foreclosure notices are an indicator of future home sales that will be distressed sales. In the twelve months ended June 30, 2012, fewer than 17,500 foreclosure notices had been issued, representing a 3% decline from the prior year and a 45% decline from the peak in 2009. While the level of future distress is generally declining, there remains a level of distressed homes that are not yet on the market, which also puts pressure on home prices. As of June 30, 2012, the shadow inventory

amounted to an estimated 25,400 homes, or 8.1 months of supply. This is more than three times the level of listings that are currently on the market. JBREC believes most shadow inventory homes will gradually become distressed sales over the next few years, and that the pace of distressed sales will be slow enough that home prices will not be significantly negatively affected.


When comparing the monthly costs of owning the median-priced home with the median household income, through July 31, 2012, affordability in Orange County is slightly better than the area’s historical median dating back to 1981. This estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 51%, and has ranged between 37% and 86% on an annual basis since 1981.

In summary, Orange County’s housing fundamentals are solid. Job growth significantly exceeds new construction levels, and listings are on the decline. The improvement of housing fundamentals from the downturn will allow Orange County to return to solid price appreciation and continued rental rate appreciation, and rising construction.


San Diego, CA Housing Market Overview The San Diego-Carlsbad-San Marcos, California MSA consists of San Diego County. San Diego is the second-most populous county in the State of California, with nearly 3.2 million people and more than 1.1 million households, which is slightly larger than neighboring Orange County. The coastal county is known for its defense/military bases, high-tech industry, and tourism, as well as manufacturing and research. The majority of demand for housing is generated by growth in the region’s diverse economy, but San Diego has also attracted certain affluent second-homebuyers and retirees for quality of life reasons.

The housing fundamentals in San Diego are improving, which is a positive sign for price appreciation in this market. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one- to three-year leading indicator for home price appreciation. The overall housing market fundamentals have improved since 2008, as housing demand has strengthened due to improved job growth and home sales activity. The supply fundamentals have strengthened as well due to

low homebuilding permit levels and declining listings, and the affordability fundamentals have improved due to lower pricing and low interest rates. The risk of a substantial oversupply of residential lots and homes in this MSA are reduced relative to most other markets in the country due to a very difficult entitlement process in which it can take several years to convert a raw property into entitled and finished residential lots.

San Diego has a payroll employment level of more than 1.2 million workers, and job growth is returning to the market after witnessing a decrease in employment of 6.6% between 2008 and 2010. On a percentage basis, the San Diego metro area witnessed the smallest decrease in employment of the Southern California metro areas.

Defense/military has a large presence in San Diego’s employment, including the largest naval fleet in the world. The county is also home to a large number of research and manufacturing businesses, particularly in the wireless and biotechnology sectors, and is home to several Fortune 500 companies, including Qualcomm and Sempra Energy. The Professional and Business Services sector is the county’s largest, accounting for 17.6% of jobs, and is generally considered to be a high-income employment sector. The Government sector is nearly equal in size, accounting for 17.5% of employment, and the Trade, Transportation and Utilities sector comprises 16.1% of employment. Compared to the nation, San Diego has a higher concentration of jobs in the Professional and Business Services, Leisure and Hospitality, and Government sectors.

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Population and household growth in San Diego have rebounded after slowing in the early- to mid-2000s. From 2007 to 2011, population growth averaged 39,000 people (1.3%) per year and household growth averaged 12,300 (1.2%) per year.

For 2011, the median household income in San Diego was $60,767, which is higher than the national average. After peaking above $63,500 in 2008, the median household income in San Diego declined in 2009 and 2010. Incomes are rising once again, although the 2.0% growth rate in 2011 was below the 30-year average growth rate of 3.8%.

San Diego’s existing home sales are improving. In the twelve months ended July 31, 2012, sales had reached 35,456 transactions, representing an increase of nearly 33% from the 2007 market trough of 26,715. The federal and state tax credits, as well as increased levels of distressed sales, helped to boost sales in 2008 and 2009. Sales slowed in 2010 and 2011 as the tax credits began to expire and the number of homes on the market began to decline, but sales are rising once again. Resale prices had witnessed strong appreciation from the late 1990s through 2005, but remained essentially flat in 2006 and decreased from 2007 through 2009. The median price in San Diego declined 38% from the peak in 2005 to the trough in 2009, due in part to a shift in sales activity away from the higher price points and a loss in value. Home prices now appear to be stabilizing.

San Diego’s new home sales activity is beginning to slowly increase from trough levels in 2011, but the increase is expected to accelerate as both demand and supply return to the market. New home sales have totaled 2,757 in the twelve months ended July 31, 2012. While the median new home price is down from the peak level in 2004, new home prices should not be relied upon as the only indicator of market trends, as they can be heavily influenced by the mix of home types being sold at any given time. Resale home prices are a better indication of market trends.

Homebuilding permit activity in San Diego is rising from its lowest levels in decades, but is currently at less than one-third of the highest level during the early 2000s. The trough of the market for construction activity occurred in 2009 at just under 3,000 total homebuilding permits, which was less than 7% of the peak permit level in the county in 1986. During the twelve months ended July 31, 2012, San Diego has issued 5,392 homebuilding permits, which is much lower than the demand generated by the recent improvement in employment growth. Over the 30-year period from 1982 through 2011, 52% of the

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homebuilding permits issued were for single-family homes. In 2011, 42% of the homebuilding permits issued were for single-family homes. This shift is due to a lack of land zoned for traditional single-family detached homes and a resulting increase in the share of infill, attached housing.

Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher than the number of homebuilding permits issued in that same time. The current employment growth to homebuilding permit ratio is 6.5, as compared to the 1.3 average employment growth to homebuilding permit ratio for the market from 1981 through 2011.

Resale listings in San Diego are declining, causing the resale market to become more competitive and leading to increases in prices. Through August 31, 2012, San Diego had 10,202 homes listed on the market, which represented a decline of 32% from the prior year. In late 2006 and again in late 2007, listings surpassed 22,000 homes on the market. The current level of listings equates to 3.5 months of supply, based on existing home sales activity over the most recent twelve months. This represents a significant decrease from the more than nine months of supply in 2008. In addition, the months of supply has continued to decline from 5.5 months in August 2011.

In addition to the decline in listings, pre-foreclosure notices have been trending downward, which is a positive sign for home prices in the San Diego market. Pre-foreclosure notices are an indicator of future home sales that will be distressed sales. In the twelve months ended June 30, 2012, fewer than 19,500 pre-foreclosure notices had been issued, representing a 9% decline from the prior year and a 50% decline from the peak in 2009.

While the level of future distressed home sales is generally declining, there remains a moderate level of distressed homes that are not yet on the market that will

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act to limit rapid appreciation of home prices. As of June 30, 2012, the shadow inventory amounted to an estimated 27,700 homes, or 8.3 months of supply. This is nearly three times the level of listings that are currently on the market. JBREC believes that most shadow inventory homes in San Diego will gradually become distressed sales over the next few years, and the pace of distressed sales will be slow enough that home prices will not be significantly negatively affected.


When comparing the monthly costs of owning the median-priced home with the median household income, through July 31, 2012, affordability in San Diego is much better than the area’s historical median dating back to 1981. This estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 43%, and has ranged between 38% and 84% on an annual basis during that time.

In summary, San Diego’s housing fundamentals are solid. Job growth exceeds the area’s new construction levels, and listings are on the decline. As the fundamentals that drive the San Diego housing market reflect a more stable environment, the market is on track to return to solid price and rental rate appreciation and rising construction.

Riverside-San Bernardino, CA Housing Market Overview

The Riverside-San Bernardino MSA, often referred to as California’s Inland Empire, is composed of Riverside and San Bernardino counties, located inland of Southern California’s coastal region. With more than 4.3 million people and 1.3 million households, the metro area represents a significant portion of the Southern California demographics. While maintaining its own economy, the Riverside-San Bernardino metro area can be considered a “bedroom” community because it provides a significant number of employees to businesses in the neighboring coastal counties of Los Angeles, Orange and San Diego. The housing recovery in the Inland Empire is likely to lag that of Southern California’s coastal markets, but solid fundamentals are in place to support the recovery in this market. However, because of the relative availability of land for traditional single-family detached lots, the Inland Empire will continue to be an important market for new single-family detached homebuilding activity in the greater Southern California region for years to come.



The Inland Empire’s housing fundamentals are continuing to improve, which bodes well for future price appreciation in this market over the next one to three years. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one- to three-year leading indicator for home price appreciation. The overall housing market fundamentals have improved since 2008 as a result of improvement in the supply fundamentals, which is due to low permit levels and declining listings. The

affordability fundamentals have improved to their most favorable levels in history due to substantial reductions in prices stemming from the recession and low interest rates. The housing demand fundamentals have also strengthened as a result of improvement in job growth and home sales activity.

Riverside-San Bernardino has a payroll employment level of more than 1.1 million workers, and job growth is positive once again after the metro area experienced a decrease in employment of 11.4%, representing more than 145,000 jobs, between 2008 and 2010. Among the Southern California markets, Riverside-San Bernardino experienced the largest overall job loss during the recession.

The two largest employment sectors in the metro area are the Trade, Transportation and Utilities sector (24.5% of total jobs), and the Government sector (18.6% of total jobs). Riverside-San Bernardino has a higher concentration of jobs in these sectors – as well as in the Construction and Leisure and Hospitality sectors – than the nation as a whole. The metro area has a lower overall concentration of jobs in the employment sectors that are considered to be higher-paying.

Growth has slowed in Riverside-San Bernardino following the boom in housing, but still remains positive. The average annual population growth from 2008 through 2011 was more than 59,000 people (1.4%), which was down from average growth levels of

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2.9% from 1998 through 2007. Similarly, for the same periods the household growth has slowed to an average of just over 15,500 households (1.2%) per year following a decade of 2.6% annual growth.

For 2011, the median household income in Riverside-San Bernardino was $54,008, which is just below the national average. The median income peaked above $57,400 in 2008, and declined in 2009 and 2010. While incomes are rising once again, the 1.6% growth rate in 2011 was below the 30-year average growth rate of 3.5%.

Existing home sales activity that had been declining in recent years following a temporary increase in 2008 and 2009 stimulated by tax credits is now flattening and positioned for a rebound. In the twelve months ended July 31, 2012, sales had reached 65,028 transactions, representing a nearly 63% increase from the 2007 market trough of 39,946. Following the increase in sales activities in 2008 and 2009 referenced above, the existing home sales volume in Riverside-San Bernardino slowed in 2010 and 2011 as the tax credits began to expire and the number of homes on the market began to decline. Resale prices appreciated considerably from 1998 through 2005, but decreased sharply between 2007 and 2009 as the market weakened. The median existing home price declined nearly 58% from 2006 to 2009 as sales activity moved to the lower price points.

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As sales activity shifts away from distressed sales, the Riverside-San Bernardino market is poised for strong growth in the median existing home price.

The new home sales activity in Riverside-San Bernardino is slowly rising from trough levels in 2011, but is expected to further increase as both demand and supply return to the market. New home sales have totaled 4,491 in the twelve months ended July 31, 2012, and are substantially lower than the 2005 peak of more than 39,600 transactions. The median new home price is rising after two years of little to no growth. However, new home prices in this environment of compressed new home sales volume can be heavily influenced by the mix of home types being sold at any given time. As a result, resale home prices are a better indication of housing market trends in the Inland Empire.

Riverside-San Bernardino’s homebuilding permit activity has risen slightly from a trough in 2011, but is currently at less than one-tenth of the highest level of the mid-2000s. The trough of the market for construction activity occurred in 2011 at 4,736 total homebuilding permits, which was just 9% of the nearly 51,500 homebuilding permits issued in 2004. During the twelve months ended July 31, 2012, Riverside-San Bernardino has issued 5,161 homebuilding permits,

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which is much lower than the demand generated by the recent improvement in employment growth. Over the 30-year period from 1982 through 2011, 80% of the homebuilding permits issued were for single-family homes. In recent years, the pace of single-family construction has fallen off at a more rapid rate than multi-family, and in 2011, 71% of the homebuilding permits issued were for single-family homes.

Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher than the number of permits issued during that same period. The current employment growth to homebuilding permit ratio is 4.9, as compared to the 0.9 average ratio for the market from 1981 through 2011. This ratio in this market historically has been below 1.0 due to the fact that a portion of the residents who live in Riverside-San Bernardino work in the neighboring counties.

Resale listings in Riverside-San Bernardino are declining, causing the resale market to become more competitive and leading to increases in prices. Through August 31, 2012, Riverside-San Bernardino had 19,156 homes listed on the market, which represented a decline of 35% from the prior year. At their peak in 2007, listings surpassed 64,000 homes on the market. The current level of listings equates to 3.5 months of supply, based on existing home sales activity over the most recent twelve months, representing a significant drop from the more than 18 months of supply in early 2008. The months of supply has trailed off from 5.5 months in August 2011.

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In addition to the decline in listings, pre-foreclosure notices generally have been trending downward, rising minimally in the most recent quarter. Pre-foreclosure notices are an indicator of future home sales that will be distressed sales. In the twelve months ended June 30, 2012, just over 47,000 pre-foreclosure notices had been issued, representing a 12% decline from the prior year and a 52% decline from the peak in 2009.

While the level of future distress is generally declining, there remains a relatively high level of distressed homes that are not yet on the market, which also puts pressure on home prices. As of June 30, 2012, the shadow inventory amounted to an estimated 64,700 homes, or 10.7 months of supply. This is nearly three times the level of listings that are currently on the market. JBREC believes most of these shadow inventory homes will gradually become distressed sales over the next few years, and that the pace of distressed sales will be slow enough that home prices will not be significantly negatively affected.


When comparing the cost of ownership dating back to 1981 with the median household income, through July 31, 2012, affordability conditions in the Riverside-San Bernardino market were very close to the historical best for the area. This estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 25%, and has ranged between 24% and 65% on an annual basis during that time.

In summary, Riverside-San Bernardino is one of the largest new housing markets in California and has numerous submarkets, all with unique characteristics (similar to the greater Los Angeles MSA). While this housing market has been impacted significantly by the distress of the recent downturn and is likely to lag the neighboring Southern California housing markets in the recovery, the longer term prospects for homebuilders in the Inland Empire are positive due to excellent affordability, recent low levels of new supply, availability of land, and returning job growth.

San Francisco, CA Housing Market Overview

The San Francisco metropolitan division consists of San Francisco, San Mateo and Marin counties. The three-county area is home to 1.8 million people and more than 720,000 households. The metro division is the leading financial center of Northern California, which is reflected in the area’s large concentration of jobs in the higher-paying employment sectors. The market is land-constrained due to strong local environmental concerns and a lengthy and difficult entitlement process. However, higher density, infill opportunities exist in this area.

San Francisco’s housing fundamentals are improving, which bodes well for home price appreciation in the metro division. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one- to three-year leading indicator for home price appreciation. The market has strong supply fundamentals due to low homebuilding permit levels and declining listings of resale homes. The demand fundamentals are also improving as job growth and home sales volumes are rising. The affordability fundamentals in San Francisco are close to their historical median levels.

The San Francisco metro division currently has an employment level of nearly 980,000 jobs, and current employment growth is strong, gaining 40,900 jobs (4.4%) in the twelve months ended July 31, 2012. San Francisco is making progress in recovering the 64,800 (or 6.5%) jobs lost in 2009 and 2010. The recent downturn in the economy resulted in fewer losses than the downturn caused by the “dot com” bust in the early 2000s, when San Francisco lost a total of 142,000 jobs (13.1%) between 2001 and 2004.

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San Francisco has a high concentration of jobs in the employment sectors that are considered to be higher-income: the Financial Activities, Information and Professional and Business Services sectors account for a combined 34.6% of jobs in the metro division, as compared to 21.3% for the nation. The Professional and Business Services sector is the largest in San Francisco, comprising 22.3% of total jobs. As a result of the large concentration of jobs in these higher-paying sectors, San Francisco has a lower concentration of jobs in most other sectors, with the exception of the Leisure and Hospitality and Other Services sectors. A number of

Fortune 500 companies are headquartered in the San Francisco metro division, including McKesson, Wells Fargo, Oracle and PG&E Corp.

Unlike the downturn of the early 2000s, San Francisco did not see a loss in population or households during the period of job losses in 2009 and 2010. Growth has slowed slightly, but remains positive. From 2007 through 2011, San Francisco added an average of more than 18,000 people (1.0% growth) per year, and an average of 6,600 households (1.0%) per year in that time.


For 2011, the median household income in San Francisco was $77,864, which is much higher than the national average, due to the large share of high-paying jobs. The median household income peaked above $78,500 in 2008, and then declined slightly in 2009 and 2010. Incomes are rising once again, although the 1.9% growth rate in 2011 was approximately one-half of the average annual growth rate of 4.3% over the last 30 years.

Existing home sales in the San Francisco metro division have continued to improve each year since the market trough in 2008, when home sales fell below even the lowest levels of the early 1990s. In the twelve months ended July 31, 2012, existing home sales for the area had reached 15,955 transactions, which is up more than 27% from the 2008 sales of 12,514 transactions. Along with an increase in sales volume, home prices are beginning to rise once again in San Francisco, following a drop in 2008 and 2009. The median existing home sales price declined a total of 22% in those two years, which is a lesser decline than in other Bay Area markets.

New home sales activity in the San Francisco metro division continues to decline, falling to its lowest level since 2001. New home sales for the San Francisco metro division totaled 738 transactions in the twelve months ended July 31, 2012. The median new home price is increasing once again after declining from 2008 through 2010. However, the median new home price can be heavily influenced by the mix of home types being sold at any given time in this broad region. As a result, resale home prices are a better indication of market trends, given the fact that the current resale volume outpaces new home sales volume by 21 to 1.

Construction activity rebounded in San Francisco in 2011, with a significant increase in multi-family homebuilding permits from the very low levels in 2009 and 2010. In particular, multi-family construction fell from more than 3,000 permits in 2008 to fewer than 600 permits in 2009 and 869 permits in 2010. In 2011, multi-family units rose to 2,376 units, and continue to increase. Single-family homebuilding permits remain very low, but are slowly beginning to rise. Over the twelve months ended July 31, 2012, there were 396 single-family homebuilding permits issued. Single-family homebuilding permits represent just 12.5% of the total construction activity over the last twelve months, as compared to an approximate 35% share over the 30 years from 1982 through 2011. The share of single-family homebuilding permits has generally declined since 2003.

Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher

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than the number of homebuilding permits issued in that same time. The current employment growth to homebuilding permit ratio is 12.8; a normal range for this ratio in San Francisco would be closer to 1.0.

Resale listings in San Francisco are very low and are declining year-over-year, which is creating a greater level of competition in the resale market and may lead to increasing prices. Through August 31, 2012, there were 4,130 homes listed on the market, which represented a decline of 23% from one year prior. By comparison, listings had approached 7,300 homes on the market in early 2010. The current level of listings translates to 3.1 months of supply, based on existing home sales activity over the most recent twelve months. This is well below the 6.3 months of supply in early 2010. The months of supply of resale homes in San Francisco is currently higher than in neighboring Oakland and San Jose.

Pre-foreclosure notices continue to trend downward, which is good news for home prices in the San Francisco market. In the twelve months ended June 30, 2012, fewer than 5,900 foreclosure notices had

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been issued, representing a 15% decline from one year prior and a 36% decline from the peak in 2009.

While the number of homes falling into the status of pre-foreclosure is declining, there is a moderate level of potential distressed homes that are not yet on the market and may limit upward movement for home prices. As of June 30, 2012, the shadow inventory amounted to an estimated 8,500 homes, or 5.6 months of supply. This is approximately two times the very low level of listings that are currently on the market. JBREC believes that most shadow inventory homes will gradually become distressed sales over the next few years, and the pace of distressed sales will be slow enough that home prices will not be significantly negatively affected.

Affordability conditions in the San Francisco metro division are better than their median historical level when comparing the monthly costs of owning the median-priced home with the median household income dating back to 1981. Affordability conditions had not corrected as much in the San Francisco market as they had in many other markets due to less of a home price decline in San Francisco. This estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 68% in San Francisco; the historical median is 74%.

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In summary, the housing fundamentals in the San Francisco metro division are solid and improving. Strong job growth outpaces construction activity, and listings are declining. San Francisco is expected to return to solid home price appreciation and rising construction.

Oakland, CA Housing Market Overview

The Oakland metropolitan division consists of Alameda and Contra Costa counties, and represents a sizeable portion of the greater Bay Area, accounting for 2.6 million people and more than 940,000 households. This area, also known as the East Bay, represents a more affordable alternative for single-family detached homes than the coastal markets in the greater Bay Area.

The housing fundamentals in Oakland are excellent and are among the most improved in the Bay Area markets. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one- to three-year leading indicator for home price appreciation. The improvement in the overall fundamentals in recent years has resulted from improvement in all three fundamentals categories: demand, supply and affordability. The demand fundamentals are improving as job growth and home

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sales activity is rising. The supply fundamentals are strong due to very low levels of listings and permits that are low in relation to history. The affordability fundamentals are very strong in Oakland, due to today’s very low mortgage rates and the price declines that have occurred.


There are more than 955,000 payroll jobs in the Oakland metro division, which is down from peak levels in the early 2000s. Year-over-year employment growth is once again positive, however, and the market has added 19,800 jobs (2.1%) in the twelve months ended July 31, 2012. Oakland showed employment losses of 100,300 jobs between 2008 and 2011, for a loss of 9.6% from the 2007 peak. Oakland did not experience nearly as many job losses as the other major Bay Area markets in the “dot com” bust in the early 2000s, losing 31,100 jobs (2.9%) between 2002 and 2004.


The Oakland market has a diverse employment distribution that closely resembles that of the United States, with some slight variations. The largest employment sector in the metro division is Trade, Transportation and Utilities, which accounts for more than 18% of the total payroll jobs. The next-largest sector is the high-paying Professional and Business Services sector, which accounts for more than 16% of jobs in Oakland, and represents a higher concentration of jobs than the rest of the United States in this sector. The Oakland market has a slightly lower concentration of jobs than the rest of the United States in most other

sectors, with the exception of Construction and Information. Among the Fortune 500 companies headquartered in the Oakland metro division are Chevron, Safeway and Synnex.

Population and household growth has been solid in the Oakland area in recent years, adding an average of more than 30,000 people (1.1% growth) and 10,000 households (1.2% growth) per year from 2007 through 2011. The region witnessed slight losses in population and households from 2003 through 2005 in the wake of the job losses around that time.

The median household income in Oakland in 2011 was $71,745, which is higher than the national average, but the lowest of the major Bay Area markets. Oakland’s median household income peaked at nearly $74,300 in 2008, and then declined slightly in 2009 and 2010. Incomes are rising once again, although the 2.0% growth rate in 2011 was approximately one-half of the average annual growth rate of 3.9% over the last 30 years.

Oakland’s existing home sales volume is rising once again, and is up more than 8% from one year prior. Existing home sales hit a trough of 24,396 transactions in 2007, and rose in 2008 and 2009, owing in part to increased levels of distressed sales activity, which further lowered prices. After dipping slightly lower in 2010 and 2011, sales activity is rising once again, with 32,672 transactions in the twelve months ended July 31, 2012. Among the three major Bay Area markets, Oakland has shown the strongest recovery in sales volume in percentage terms. Along with an increase in sales volume, home prices are also beginning to rise, following a notable drop in 2008 and 2009. The median existing home sales price declined a total of 53% in Oakland in those two years, due to a shift away from the highest price points and a loss in value. The Oakland market had a high percentage of distressed sales, which contributed to the decline in the median price.

Oakland’s new home sales activity is also beginning to rise once again from trough levels in 2011. The 2,103 new home transactions in 2011 were even lower than new home sales in this market in 1993, which was the previous trough. New home sales in Oakland totaled 2,473 in the twelve months ended July 31, 2012. The Oakland metro division accounted

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for approximately 55% of the Bay Area new home sales during that time, and has historically accounted for 57% of the new home sales among the three major local markets (Oakland, San Francisco and San Jose) over the last 20 years. The median new home price continues to decline from the peak level in 2005. The median new home price can be heavily influenced by the mix of home types being sold at any given time in this broad region. Resale home prices are a better indication of market trends, particularly given that new home sales activity is currently very small in comparison to existing home sales.

Homebuilding permits are beginning to rise in the Oakland metro division, although construction activity remains very low in comparison to the peak levels of the mid-1980s and even the more recent peak during the mid-2000s. Total homebuilding permit issuance in the twelve months ended July 31, 2012 was 3,860 units, which is 50% higher than the market trough of 2,568 units in 2009. By comparison, the Oakland market averaged more than 10,000 total units per year from 1997 through 2006. The Oakland market had a relatively high percentage of single-family homebuilding permits, accounting for 64% of the total residential construction during the last 30 years. More recently, single-family construction has slowed faster than multi-family construction, and single-family permits accounted for 51% of the total in 2011.

Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher than the number of homebuilding permits issued in that same time. The current employment growth to homebuilding permit ratio is 5.1, as compared to the 30-year average for this market of 0.9.

Oakland’s supply of resale listings is very low in comparison to sales activity, which could lead to further increases in resale prices in this market as it becomes increasingly competitive. Resale listings in Oakland have declined 54% year-over-year to just 3,540 homes on the market as of August 31, 2012. By comparison, listings had topped 16,000 homes five years earlier. The current level of listings equates to a very low 1.3 months of supply, which is well below the level of 8.4 months of supply in mid-2008.

Pre-foreclosure notices in Oakland continue to decline, which is a positive sign for home prices in this market. In the twelve months ended June 30, 2012, approximately 19,600 pre-foreclosure notices had been issued, representing a 16% decline from one year prior and a 44% decline from the peak in 2009.

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While the number of homes falling into the status of pre-foreclosure is declining, there is a relatively high level of potential distressed homes that are not yet on the market and could limit upward movement for home prices. As of June 30, 2012, the shadow inventory amounted to an estimated 32,800 homes, or 9.2 months of supply, which is significantly higher than the level of listings that are currently on the market. Oakland exhibited a higher level of distress than the other major Bay Area markets, which contributes to the higher level of shadow inventory. JBREC believes that most shadow inventory homes will gradually become distressed sales over the next few years, and the pace of distressed sales will be slow enough that home prices will not be significantly negatively affected.


Affordability conditions in Oakland are near their historical best when comparing the monthly costs of owning the median-priced home with the median household income dating back to 1981. Oakland’s affordability conditions are among the best in the Bay Area, due largely to the greater decline in home prices in this market. JBREC’s estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 38% in Oakland, compared to the area’s historical median of 50%.

In summary, the housing fundamentals in Oakland are strong and improving. Oakland’s supply fundamentals are very favorable, with historically low homebuilding permit activity and existing home listings that are also very low. The foregoing factors are creating a more competitive resale environment, characterized by a shift in the balance of power from buyers to sellers. Job growth is returning, and home sales activity is rising at a time when affordability conditions are among the most favorable this market has seen in more than 30 years.

San Jose, CA Housing Market Overview

The San Jose MSA consists of Santa Clara and San Benito counties. With nearly 1.9 million people and 636,000 households, San Jose is one of the larger markets in the state of California. Widely regarded as a leading technology center, the metro area is home to many of the world’s foremost technology companies. The job growth from this South Bay market has a ripple effect on regional housing demand. The mix of housing in San Jose is shifting from a fairly balanced split between attached homes and single-family detached homes to a more attached-dominated market as the availability of land for detached housing is diminished.

San Jose’s housing fundamentals have shown considerable improvement in recent years, which is a positive sign for home price appreciation in this market. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one- to three-year leading indicator for home price appreciation. The improvement in the overall fundamentals is due to the combination of significantly improved demand fundamentals as a result of improving job growth and rising sales activity, and improved supply fundamentals as a result of low homebuilding

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permit and listings levels. While the affordability fundamentals in San Jose are improved from 2005, affordability conditions are near their historical median due to the fact that prices did not decline in this market as significantly as in many other markets.

There are more than 900,000 jobs in the San Jose metro area, and employment growth is once again positive after job losses in 2009 and 2010. The metro area lost 59,700 jobs (6.5%) from the 2008 peak before returning with positive growth of 23,000 jobs (2.7%

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growth) in 2011. The recent downturn in the economy resulted in fewer losses than the downturn caused by the “dot com” bust in the early 2000s, when San Jose lost 182,300 jobs between 2001 and 2004, or 17.5% of the market total.


Because of its dominance in the technology industry, San Jose has a very high concentration of employment in related job sectors when compared to the nation as a whole. The largest sector is the higher-paying Professional and Business Services sector, which accounts for nearly 20% of the payroll jobs in the metro area. The next largest sector is Manufacturing, which accounts for 18% of the jobs in San Jose – twice the national average. The Information sector, at nearly 6% of all jobs, is three times the concentration of the nation, and is also considered to be a higher-paying sector.

Technology companies dominate the Fortune 500 companies in San Jose, which include Hewlett-Packard, Apple, Google, SanDisk and Intel, among many others.

Unlike the years that followed the job losses from the technology sector decline in the early 2000s, San Jose has not witnessed a drop in population or households in the recent downturn. Growth has remained strong, with an average of 23,900 people (1.3% growth) added each year from 2007 through 2011, and an average of 8,400 households (1.4% growth) added annually.

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For 2011, the median household income in the San Jose metro area was $85,550, which is the highest among the major Bay Area markets, driven by the presence of the technology industry. The San Jose median household income peaked above $87,300 in 2008, declining in 2009 and 2010. Incomes are rising once again, although the 2.4% growth rate in 2011 was lower than the average annual growth rate of 4.0% over the last 30 years.

Existing home sales in San Jose are rising after remaining relatively flat in 2010 and 2011. In the twelve months ended July 31, 2012, existing home sales for the area had reached 19,334 transactions, constituting an increase of nearly 28% from the 15,130 transactions in 2008. This also constitutes a return to the existing home sales levels prevalent in the mid-1990s. Home prices also continue to rise in San Jose. The total decline in the median existing home price of nearly 37% between 2008 and 2009 was a result of sales activity shifting to lower price points, as well as a loss of value. The median price increased 12% year-over-year in 2010.

San Jose’s new home sales activity is slowly rising from 2011, but remains historically low for this market. New home sales transactions totaled 1,256 for the twelve months ended July 31, 2012. The San Jose market has historically accounted for 28% of the new home sales activity among the three major Bay Area markets (San Jose, San Francisco and Oakland) over the last 20 years and, in 2011, San Jose made up 27% of the total. The median new home price is flattening after declining from the peak level in 2007. The median new home price can be heavily influenced by the mix of home types being sold at any given time in this broad

region. As a result, resale home prices are a better indication of market trends, especially given that the new home sales volume in this market is considerably lower than the existing home sales volume.

A surge in multi-family construction has homebuilding permits on the rise once again in San Jose, and single-family construction is also growing from trough levels in 2009. Construction activity in 2009 had fallen to just 1,094 total homebuilding permits, which was the lowest level of construction activity in at least 30 years. Single-family homebuilding

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permits had fallen to 642 units, while multi-family homebuilding permits had decreased to 452 units.

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Over the twelve months ended July 31, 2012, single-family homebuilding permit issuances had risen to 1,323, while multi-family homebuilding permits had risen to 4,190. The area has a high proportion of multi-family construction: 53% of the permits issued in the 30-year period from 1982 to 2011 were for multi-family residences.

Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher than the number of homebuilding permits issued in that same time. The current employment growth to homebuilding permit ratio is 5.5. Historically, the ratio has been closer to 1.2 jobs added for every homebuilding permit issued.

Resale listings in San Jose are very low and declining rapidly, which could lead to more competitiveness and increasing prices in the resale market. Through August 31, 2012, San Jose had 3,721 homes listed on the market, which represented a decline of 41% from one year prior. By comparison, listings exceeded 10,000 homes on the market in August 2008. The current level of listings translates to a very low 2.3 months of supply, based on existing home sales activity over the most recent twelve months. This is well below the level of more than 8.5 months of supply when listings had peaked.

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Pre-foreclosure notices are once again declining in the San Jose market after flattening in 2011. This is a positive sign for home prices, as pre-foreclosure notices are an indicator of future distress. In the twelve months ended June 30, 2012, approximately 8,200 notices had been issued, representing a 14% decline from one year prior and a 51% decline from the peak in 2009.

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prices. As of June 30, 2012, the shadow inventory amounted to an estimated 12,100 homes, or 6.1 months of supply. This is approximately three times the very low level of listings that are currently on the market. JBREC believes that most shadow inventory homes will gradually become distressed sales over the next few years, and the pace of distressed sales will be slow enough that home prices will not be significantly negatively affected.

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San Jose’s affordability conditions are close to their historical median when comparing the monthly costs of owning the median-priced home with the median household income. This estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 53% in San Jose, which is also the median value for this ratio over the period 1981 to 2012.

In summary, the housing fundamentals in San Jose are improving. The combination of recent solid job

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growth and a high-income employment base are positive for housing demand in this market, particularly as job growth outpaces the supply of new homes being added to the market. Low levels of existing home listings are creating a more competitive resale market, which should influence future home price appreciation.

Denver, CO Housing Market Overview

The Denver-Aurora-Broomfield MSA covers ten counties in north-central Colorado. With more than 2.6 million people and more than one million households, it is the most populous metropolitan area in the state.

The housing fundamentals in the Denver market are continuing to improve and could be a leading indicator for future price appreciation. The John Burns Real Estate Consulting Housing Cycle Risk Index measures the health of the housing market based on the performance of 24 market fundamentals in relation to their own history, and has historically been a one- to three-year leading indicator for home price appreciation. The overall housing market fundamentals have improved since 2009 as housing demand has strengthened due to improved job growth and home sales activity. Supply fundamentals have improved as

well due to low homebuilding permit levels in recent years and declining resale home listings. Further, affordability fundamentals have improved from 2008 due to home price declines and lower mortgage interest rates. The JBREC affordability calculations show that affordability levels in Denver are currently near their long-term historical median.

Job growth is strong in the Denver market, with a net increase of 36,600 jobs (3.0%) in the twelve months ended July 31, 2012. Denver’s employment declined by

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just 59,600 jobs (4.8%) between 2009 and 2010, and Denver is now beginning to recover those jobs. The metro area has a payroll employment level of 1.2 million workers.

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The Denver metro area has a diverse employment base, with a strong concentration of jobs in the employment sectors that are considered to be higher-income. The combination of these high-income sectors of Professional and Business Services, Financial Activities and Information account for 28.5% of the metro area’s jobs, compared to 21.3% for the nation. The largest sector is the Trade, Transportation and Utilities sector, which accounts for 19.1% of the jobs in the metro area. The Government sector is also large, comprising 13.7% of the metro area’s jobs. Fortune 500 companies headquartered in the Denver metro area

include Arrow Electronics, DISH Network, Liberty Interactive, Newmont Mining and Liberty Global.

The Denver metro area has experienced strong population and household growth in recent years, improved from the early 2000s when growth slowed following the bust in the technology sector, which resulted in deep job losses in this market in 2002 and 2003. From 2006 through 2011, Denver averaged population growth in excess of 44,000 people annually (1.8% growth) and household growth of 18,700 households annually (1.9% growth).


For 2011, the median household income in the Denver metro area was $59,802, which is higher than the national average. The median income in Denver approached $61,000 in 2008 and declined slightly in 2009 and 2010. Household incomes are rising once again in Denver, and the 2.6% growth rate in 2011 was just below the 30-year average growth rate of 2.9%.

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Existing home sales in Denver are rising from the trough of the market in 2010, when sales activity dipped to 36,656 transactions, marking the fifth consecutive year of declining sales. Existing home sales during the twelve months ended July 31, 2012 totaled 41,649, representing an increase of nearly 14% from the 2010 total. The median resale price in Denver did not experience the same level of decline during the recent downturn in the housing market that many other major markets did. However, Denver also did not experience the same level of positive price appreciation in the

mid-2000s that many other markets experienced. Prices in Denver had risen earlier, with double-digit appreciation annually from 1999 through 2001. The median existing home price declined a total of 13% from the 2006 peak to the 2009 trough. A diminishing supply of homes on the market and improving demand is causing prices to rise once again.


The new home sales activity in Denver is slowly increasing from trough levels in 2011, but remains well below the market peak. Denver averaged more than 16,500 new home transactions annually from 1999 through 2006, but experienced a drop to just over 4,000 homes in 2011. New home sales have begun to rise, however, and totaled 4,255 transactions in the twelve months ended July 31, 2012. The median new home price has also risen from the trough in this cycle in 2009. However, new home prices can be heavily influenced by the mix of home types being sold at any given time, particularly when new home sales volume is far below historical levels. Resale home prices in Denver are a

better indication of the broader housing market trends given that the existing (resale) home market is ten times the current size of the new housing market.


Denver’s homebuilding permit activity is rebounding quickly from historically low levels. During the twelve months ended July 31, 2012, Denver has issued 10,217 homebuilding permits, or nearly 2.5 times the level at the market trough of 4,112 units in 2009. The low level for homebuilding permits in 2009 was even lower than the previous low in 1990, and just 15% of the peak level of homebuilding permits in this cycle in 2001. Over the 30-year period from 1982 through 2011, 68% of the homebuilding permits issued were for single-family homes. In 2011, 54% of the homebuilding permits issued were for single-family homes, which remained flat from 2010 while multi-family permits doubled.

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Current demand is greater than the new supply being added to the market, with recent job growth in the twelve months ended July 31, 2012 significantly higher than the number of homebuilding permits issued in that same time. The current employment growth to homebuilding permit ratio is 3.6, as compared to the 1.0 average ratio for the Denver market from 1991 through 2011.

Resale listings in Denver have flattened, but at a level that is lower than the prior year. As listings decrease and the volume of existing home sales rises, the resale market becomes more competitive and is shifting power to sellers versus buyers, leading to increases in prices. Through August 31, 2012, Denver had 14,900 homes listed on the market, which represented a decline of 21% from the prior year. At their peak in mid-2006, listings had neared 32,000 homes on the market. The current level of listings equates to 4.3 months of supply, based on existing home sales activity over the most recent twelve months. Months of supply in the Denver market has ranged between four and eight months of supply dating back to at least 2003.

Pre-foreclosure notices are also flattening in Denver at a level that is significantly reduced from the peak of the market. Pre-foreclosure notices are an indicator of future home sales that will be distressed sales. Denver was one of the earlier markets to show the beginning signs of distress in the market, and pre-foreclosure notices peaked in 2007. In the twelve months ended June 30, 2012, slightly more than 16,100 pre-foreclosure notices had been issued, representing a 17% decline from the prior year and a 59% decline from the peak in 2007.

While the level of future distress is generally declining, there remains an inventory of distressed homes that are not yet on the market, which could

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reduce home prices. As of June 30, 2012, the shadow inventory amounted to an estimated 27,100 homes, or 7.0 months of supply. This is nearly two times the level of listings that are currently on the market. However, JBREC believes most shadow inventory homes will gradually be converted to distressed sales over the next few years and that the pace of these distressed sales should be slow enough that home prices will not be significantly negatively affected. To date, banks have been judicious and this is expected to continue. Banks are also experiencing strong demand from the investor community for REO homes which has helped to support pricing.

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When comparing the monthly costs of owning the median-priced home with the median household income, affordability conditions in Denver are slightly better than their historical median dating back to 1981. This estimate of the ownership costs takes into consideration the change in mortgage rates over time, which can significantly impact the monthly payment. The ratio of ownership cost to income is currently 30%, and has ranged between 25% and 50% on an annual basis dating back to 1981. Because prices did not decline as much in Denver during this cycle as in many other markets across the country, affordability conditions did not correct as noticeably either.

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In summary, the housing fundamentals in Denver are strong. The demographic growth is solid, and employment growth exceeds new construction levels. Denver is poised to return to solid price and rental rate appreciation, and is already experiencing an increase in construction activity, which is expected to continue.

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OUR BUSINESS

Our Company

We are engaged in the design, construction and sale of innovative single-family homes in planned communities in major metropolitan areas located throughout Southern and Northern California. Our company was founded in April 2009, towards the end of an unprecedented downturn in the national homebuilding industry, by our current management team with over a century of collective industry experience. Our business initially focused primarily on fee building projects in Southern California, in which we built, marketed and sold homes for independent third-party property owners, typically marketed under the TRI Pointe Homes brand name. Commencing with the investment in us by the Starwood Fund in September 2010, our business evolved into primarily building, marketing and selling homes for our own account. We also expanded into Northern California and, recently, Colorado. Since our formation, we have grown from our three founders (Messrs. Bauer, Mitchell and Grubbs) to over 50 employees.

As a “next generation” regional homebuilder, we are focused on taking advantage of opportunities in selected markets in California and are prudently evaluating opportunities in other Southwestern states with improving local market conditions. Unburdened by underperforming assets or legacy issues, our growth strategy generally seeks to capitalize on high demand in selected “core” markets with favorable population and employment growth as a result of proximity to job centers or primary transportation corridors. Our current operations consist of 13 communities, eight of which are actively selling, containing 695 lots under various stages of development (including three communities, one of which is actively selling, containing 143 lots for our fee building projects, as described below) in Southern and Northern California.

Prior to this offering, we have operated our business through TRI Pointe Homes, LLC, which, immediately prior to the completion of this offering, will be converted into a Delaware corporation and renamed TRI Pointe Homes, Inc. The members of TRI Pointe Homes, LLC, which members include the Starwood Fund, the members of our management team and a third-party investor, will receive an aggregate of shares of our common stock in connection with our conversion into a corporation.

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operations. As of September 30, 2012, the Starwood Fund had contributed the entire $150 million of its commitment to us, and it has no further obligation to contribute capital to us. The Starwood Fund’s investment has enabled us to acquire or control, through options or non-binding letters of intent, 1,436 lots in 20 current and future communities.

In Southern California, our owned and controlled land totaled 769 lots as of September 30, 2012. In October 2012, we entered into an option contract to acquire an additional 61 lots in Southern California. We plan to open sales locations at five new communities in 2013 in the following cities (counties): La Habra (Orange County), San Diego (San Diego County), Rancho Mission Viejo (Orange County), Azusa (Los Angeles County) and Irvine (Orange County). Lots under option contracts include two attractive infill development sites (which are new homes constructed on vacant or under-utilized lots among existing properties in established communities) in Huntington Beach (Orange County), which are projected to begin sales in 2014. In addition to our owned projects, we are managing three fee building projects for a total of 143 homes (including one project to build 57 homes pursuant to a non-binding letter of intent).

In Colorado, our controlled land totaled 149 lots as of September 30, 2012. We plan to begin sales in this community located south of Denver in Castle Rock (Douglas County) in 2013.

Net new home orders for our owned projects for the nine months ended September 30, 2012 and for the year ended December 31, 2011 were 129 and 42, respectively. For the nine months ended September 30, 2012, we delivered 55 homes from our owned projects for total home sales revenue of $22.3 million. For the year ended December 31, 2011, we delivered 36 homes from our owned projects for total home sales revenue of $13.5 million. The cancellation rate of buyers for our owned projects who contracted to buy a home but did not close escrow (as a percentage of overall orders) was approximately 17% during the nine months ended September 30, 2012 and 13% during the year ended December 31, 2011. The dollar amount of our backlog of homes sold but not closed for our owned projects as of September 30, 2012 and December 31, 2011 was approximately $46.1 million and $3.4 million, respectively.

Through our relationship with Starwood Capital Group, our management team has drawn upon the deep real estate knowledge base of Starwood Capital Group’s personnel and its established track record of investing in real estate operating companies. Starwood Capital Group has invested in most major classes of real estate, including residential land and communities, multi-family condominiums and apartments, office, industrial, retail, hotel, senior housing, mixed-use, health clubs, resorts and golf courses. As of June 30, 2012, Starwood Capital Group had approximately $20 billion of real estate-related assets under management and had invested approximately $13 billion of equity in real estate across the capital structure since its inception. We believe that our relationship

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with Starwood Capital Group gives us a strong competitive advantage, in particular by providing us with access to the personnel, relationships and the investing and operational expertise of Starwood Capital Group. Affiliates of Starwood Capital Group may make available to us for purchase, at market prices, certain of their owned residential land holdings. We intend to use a portion of the net proceeds from this offering to acquire 149 entitled lots located in Castle Rock, Colorado from an entity managed by an affiliate of Starwood Capital Group for a purchase price of approximately $8.6 million.

Our Competitive Strengths

We believe the following strengths will provide us with a significant competitive advantage in implementing our business strategy:

Experienced and Proven Leadership

Upon the completion of this offering, the members of our management team will collectively beneficially own shares of our common stock (excluding grants of restricted stock units and options to purchase shares of our common stock), which will represent % of our common stock outstanding immediately after this offering, or % if the underwriters exercise their option to purchase additional shares in full (in each case, based upon the midpoint of the price range set forth on the cover page of this prospectus and assuming this offering closes on , 2013). See “Principal Stockholders.” In addition, the members of our management team will be granted an aggregate of restricted stock units and options to purchase an aggregate of shares of our common stock upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan.

Focus on High Growth Core Markets in California and Other Southwestern States

Our business is well-positioned to capitalize on the broader national housing market recovery. We are focused on the design, construction and sale of innovative single-family detached and attached homes in planned communities in major metropolitan areas in Southern and Northern California and, more recently, in Colorado (where we have land under a purchase contract with an entity managed by an affiliate of Starwood Capital Group but no current real estate ownership). Additionally, we plan to evaluate expansion opportunities on an opportunistic basis in other markets in the Southwestern United States. According to JBREC, the Southwestern region represents some of the largest single family housing markets in the country, as defined by sales, starts and building permits. In Southern California, we principally operate in the counties of Los Angeles, Orange, San Diego, Ventura and Riverside-San Bernardino, and in Northern California, we principally operate in the counties of Santa Clara, San Mateo and Alameda. In Colorado, we anticipate that we will principally operate in

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the counties of Douglas, Denver, Arapahoe and Jefferson. These markets are generally characterized by high job growth and increasing populations, creating strong demand for new housing, and we believe they represent attractive homebuilding markets with opportunities for long-term growth. Moreover, our management team has deep local market knowledge of the California and Colorado homebuilding and development industries. We believe this experience and strong relationships with local market participants enable us to efficiently source, entitle and close on land.

Attractive Land Positions to Support Future Growth

Strong Operational Discipline and Controls

Our management team possesses significant operating expertise, including running a much larger public homebuilder. The perspective gained from that experience has helped shape the strict discipline and hands-on approach with which our company is managed. From monthly “dashboard” updates on each project to quarterly operating committee review and financial accountability at the project management level, our strict operating discipline is a key part of our strategy to maximize returns while minimizing risk.

Our Relationship with Starwood Capital Group

Through our relationship with Starwood Capital Group, our management team has drawn upon the deep real estate knowledge base of Starwood Capital Group’s personnel and its established track record of investing in real estate operating companies. Starwood Capital Group’s executive team consists of a group of seasoned investment professionals that has largely worked together for more than 15 years through all stages of the real estate investment cycle. The team has executed large corporate transactions, demonstrating a sophisticated capital markets and operational expertise that sets them apart from most traditional real estate investors. On behalf of

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funds sponsored by Starwood Capital Group, members of its executive team have created or taken public three successful companies, including Starwood Hotels & Resorts Worldwide, Inc., Starwood Property Trust, Inc. and iS tar Financial, Inc. They also participated in the formation of Equity Residential Properties Trust, one of the premier U.S. multi-family REITs. Starwood Capital Group has invested in most major classes of real estate and built successful operating businesses in various real estate-related sectors, including residential land, senior housing, hotels, resorts, office, industrial, multi-family condominiums and apartments, mezzanine debt, golf, retail, mixed use and health clubs. Starwood Capital Group invests at different levels of capital structures, including equity, preferred equity, mezzanine debt and senior debt, depending on the asset risk profile and return expectation. We believe the breadth of experience and the relationships that Starwood Capital Group has fostered since its inception, particularly in the residential land business, will provide us with competitive advantages in acquiring land and developing homes. Over the past five years, affiliates of Starwood Capital Group have purchased over 19,400 residential lots in targeted markets. As of September 30, 2012, affiliates of Starwood Capital Group controlled more than 21,100 residential lots across the United States, including approximately 9,600 lots in California, Arizona and Colorado. Affiliates of Starwood Capital Group may make available to us for purchase, at market prices, certain of their owned residential land holdings.

No Legacy Issues

Given our recent formation in 2009 and that our current land inventory was accumulated following the Starwood Fund’s investment in us in September 2010, we do not have distressed legacy assets or liabilities to manage, unlike many competitors that were affected by the unprecedented downturn in the real estate markets that resulted from the recession of 2008 – 2009. As a result, all of our real estate assets as well as those we have under option contracts, purchase contracts or non-binding letters of intent are located in markets that we targeted after the downturn commenced, whereas many of our competitors continue to own legacy properties in economically stagnant locations or land options either on undesirable properties or with unfavorable terms. The absence of legacy issues has also allowed us to hire experienced and talented real estate development personnel who became available during the downturn. We believe that our strong balance sheet and absence of legacy issues enables us to focus on future growth, as opposed to having resources diverted to manage troubled assets.

Our Business Strategy

Acquire Attractive Land Positions While Reducing Risk

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also believe that our strategy of holding an inventory of land that will provide us with a two to three year supply of developed lots and focusing on the development of entitled parcels that we can complete within approximately 24 to 36 months from the start of sales allows us to limit exposure to land development and market cycle risk while pursuing attractive returns on our capital. We also seek to minimize our exposure to land risk through disciplined management of entitlements, as well as the use of land options and other flexible land acquisition arrangements.

Increase Market Position in Growth Markets

Provide Superior Design and Homeowner Experience and Service

Offer a Diverse Range of Products

Focus on Efficient Cost Structure and Target Attractive Returns

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Utilize Prudent Leverage

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Project Sales by Market


	Nine Months Ended September 30, 2012				Year Ended December 31,
	Nine Months Ended September 30, 2012				2011				2010 ⁽¹⁾
	Home Sales		Units Delivered		Home Sales		Units Delivered		Home Sales		Units Delivered
	(dollars in thousands)
Southern California
*Owned Projects*
Riverside County:
Amberview, Riverside	$	4,412		10	$	—		—	$	—		—
Topazridge, Riverside		3,481		8		—		—		—		—
Sagebluff, Riverside		4,946		14		—		—		—		—
Castlerock, Riverside		—		—		7,117		21		2,728		8
San Diego County:
Eagle Ridge, Oceanside		4,970		12		6,408		15		1,415		3
Los Angeles County:
Los Arboles, Simi Valley		4,468		11		—		—		—		—

Total—Owned Projects	$	22,277		55	$	13,525		36	$	4,143		11

*Fee Building Projects*
Orange County:
Andalucia, Irvine ⁽²⁾				—				—				3
Sonoma, Irvine ⁽²⁾				—				19				76
San Marino, Irvine ⁽³⁾				16				20				—
San Diego County:
Patria, Chula Vista ⁽²⁾				—				29				23

Total—Fee Building Projects				16				68				102

Total—Company				71				104				113

⁽¹⁾

⁽²⁾

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Description of Completed Projects and Communities under Development


County, Project, City	Year of First Delivery ⁽¹⁾		Total Number of Homes ⁽²⁾		Cumulative Units Closed as of September 30, 2012		Backlog at September 30, 2012 ⁽³⁾⁽⁴⁾		Lots as of September 30, 2012 ⁽⁵⁾		Sales Price Range (in 000’s) ⁽⁶⁾	Home Size Range (sq. ft.)
*Owned Projects*
Southern California
Orange County:
Brio, La Habra		2013		91		—		—		91	$410–$445	1,744–2,259
San Diego County:
Eagle Ridge, Oceanside		2010		30		30		—		—	$425–$435	2,362–2,495
Candera, San Marcos		2012		50		—		22		50	$297–$357	1,524–2,014
Candera, San Marcos		2012		8		—		5		8	$440–$490	2,361–2,929
Civita, San Diego		2013		45		—		—		45	$570–$630	1,615–2,017
Riverside County:
Castlerock, Riverside		2010		29		29		—		—	$315–$335	2,336–2,661
Amberview, Riverside		2012		11		10		1		1	$390–$440	2,713–4,291
Topazridge, Riverside		2012		68		8		5		60	$390–$440	2,567–3,773
Sagebluff, Riverside		2012		47		14		9		33	$350–$380	2,866–3,206
Los Angeles County:
Los Arboles, Simi Valley		2012		43		11		12		32	$385–$420	1,300–1,521
Tamarind Lane, Azusa		2012		62		—		6		62	$425–$450	2,015–2,098

Southern California Total				484		102		60		382

Northern California
Santa Clara County:
Chantrea, San Jose		2012		38		—		13		38	$1,245–$ 1,465	3,390–4,250
Ironhorse South, Morgan Hill		2012		37		—		9		37	$ 500–$676	1,818–2,672
Ironhorse North, Morgan Hill		2013		32		—		—		32	$ 500–$676	1,818–2,672
San Mateo County:
Amelia, San Mateo		2013		63		—		—		63	$ 690–$1,030	1,256–2,521

Northern California Total				170		—		22		170

Company Total—Owned Projects				654		102		82		552


*Fee Building Projects*
Southern California
Orange County:
Andalucia, Irvine ⁽⁷⁾		2010		3		3		—		—	$849–$1,028	1,961–2,596
Sonoma, Irvine ⁽⁷⁾		2010		95		95		—		—	$755–$900	2,330–2,622
San Marino, Irvine ⁽⁸⁾		2011		39		36		—		3	N/A	2,808–3,121
San Diego County:
Patria, Chula Vista ⁽⁷⁾		2010		52		52		—		—	$503–$553	2,687–3,341
Ventura County:
Meridian Hills, Moorpark ⁽⁷⁾		2013		83		—		—		83	$620–$775	2,650–3,883
Lagunitas, Carpinteria ⁽⁹⁾		2013		57		—		3		57	$450–$815	1,360–2,605

Southern California Total				329		186		3		143

Company Total—Fee Building Projects				329		186		3		143

Grand Totals:
Owned Projects				654		102		82		552
Fee Building Projects				329		186		3		143

				983		288		85		695

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⁽¹⁾

Year of first delivery for future periods is based upon management’s estimates and is subject to change.

⁽²⁾

The number of homes to be built at completion is subject to change, and there can be no assurance that we will build these homes.

⁽³⁾

Backlog consists of homes under sales contracts that had not yet closed, and there can be no assurance that closings of sold homes will occur.

⁽⁴⁾

⁽⁵⁾

Owned lots and fee building lots as of September 30, 2012 include owned lots and fee building lots in backlog as of September 30, 2012.

⁽⁶⁾

⁽⁷⁾

⁽⁸⁾

We entered into a construction management agreement to only build homes in this community for an independent third-party property owner. This project is marketed under the third-party owner’s name.

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Pending Acquisitions


Market	Total Lots Controlled ⁽¹⁾		Communities		Aggregate Purchase Price, Net ⁽²⁾
Southern California		387		5	$	103,875,000
Northern California		305		4		52,850,000
Colorado		149		1		8,579,000

Company total		841		10	$	165,304,000

⁽¹⁾

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⁽²⁾

Includes the estimated aggregate purchase price of all the lots per region less aggregate deposits paid of $16.5 million as of September 30, 2012.

Owned and Controlled Lots


Market	Lots Owned		Lots Controlled ⁽¹⁾		Lots Owned and Controlled ⁽¹⁾
Southern California		382		387		769
Northern California		170		305		475
Colorado		—		149		149

Company total		552		841		1,393

⁽¹⁾

Includes (i) 689 lots that are under land option contracts or purchase contracts, (ii) 91 lots that are under non-binding letters of intent and (iii) 61 lots that are under an option contract executed in October 2012. With respect to the lots under non-binding letters of intent, there can be no assurance that we will enter into binding agreements or as to the terms thereof. In November 2012, we closed the purchase of an aggregate of 164 of the controlled lots in our inventory.

Acquisition Process

As of September 30, 2012, we had 13 communities containing 695 lots under various stages of development (including three communities containing 143 lots for our fee building projects). All of these lots are entitled. We believe that our current inventory of owned and controlled lots and lots under land option or purchase contracts will be adequate to supply our homebuilding operations for approximately two to three years.

Our land acquisition strategy focuses on the development of entitled parcels that we can complete within approximately 24 to 36 months from the start of sales in order to reduce development and market cycle risk while maintaining an inventory of owned lots and lots under land option or purchase contracts sufficient for construction of homes over a two to three-year period. Our acquisition process generally includes the following steps to reduce development and market cycle risk:

•

review of the status of entitlements and other governmental processing, including title reviews;

•

limitation on the size of an acquisition to minimize investment levels in any one project, which is generally less than 350 lots;

•

completion of due diligence on the land parcel prior to committing to the acquisition;

•

preparation of detailed budgets for all cost categories;

•

completion of environmental reviews and third-party market studies;

•

utilization of options, joint ventures and other land acquisition arrangements, if necessary; and

•

employment of centralized control of approval over all acquisitions through a land committee process. Upon the completion of this offering, our executive committee, which will be comprised of Barry

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Sternlicht, the chairman of our board of directors, Douglas Bauer, our Chief Executive Officer, and J. Marc Perrin, a member of our board of directors, will replace the land committee, and will have the authority to review and consider the approval of any land acquisition with a purchase price of up to $35 million.

Before purchasing a land parcel, we also engage outside architects and consultants to help review our proposed acquisition and design our homes and communities.

We acquire land parcels pursuant to purchase agreements that are often structured as option contracts. Such option contracts require us to pay non-refundable deposits, which can vary by transaction, and entitle (but do not obligate) us to acquire the land typically at fixed prices. The term within which we can exercise our option varies by transaction and our acquisition is often contingent upon the completion of entitlement or other work with regard to the land (such as “backbone” improvements, such as the installation of main roads or sewer mains). Depending upon the transaction, we may be required to purchase all of the land involved at one time or we may have a right to acquire identified groups of lots over a specified timetable. In some transactions, a portion of the consideration that we pay for the land may be in the form of a share of the profits of a project after we receive an agreed to level of profits from the project. In limited instances such as where we acquire land from a master developer that is part of a larger project, the seller may have repurchase rights entitling it to repurchase the land from us under circumstances where we do not develop the land by an outside deadline (unless the delay is caused by certain circumstances outside our control), or where we seek to sell the land directly to a third party or indirectly through a change in control of our company. Repurchase rights typically allow the seller to repurchase the land at the price that we paid the seller to acquire the land plus the cost of improvements that we have made to the land and less some specified discount.

Homebuilding, Marketing and Sales Process

Our detached homes range in size from approximately 1,300 to 4,300 square feet, and our attached homes range in size from approximately 1,250 to 2,500 square feet. The prices of our homes also vary substantially. Base sales prices for our detached homes range from approximately $300,000 to $1,500,000 and base sales prices for our attached homes range from approximately $300,000 to $1,000,000. The average sales price of our homes delivered was approximately $405,000 and $376,000, respectively, for the nine months ended September 30, 2012 and the year ended December 31, 2011.

We typically develop communities in phases based upon projected sales, and we construct homes in each phase whether or not they have been pre-sold. We have the ability to control the timing of construction of subsequent phases in the same community based on sales activity in the prior phase, market conditions and other factors. We also will attempt to delay much of the customization of a home until a qualified buyer has been approved, so as to enable the buyer to tailor the home to such buyer’s specifications; however, we will complete the build out of any unsold homes in a particular phase where deemed appropriate for marketing purposes of such home.

The design of our homes is limited by factors such as zoning requirements, building codes and energy efficiency laws. As a result, we contract with a number of architects and other consultants in connection with the design process. Substantially all of our construction work is done by subcontractors with us acting as the general contractor. We also enter into contracts as needed with design professionals and other service providers who are familiar with local market conditions and requirements. We do not have long-term contractual commitments with our subcontractors, suppliers or laborers. We maintain strong and long-standing relationships with many of our subcontractors. We believe that our relationships have been enhanced through both maintaining our schedules and making timely payment to our subcontractors. By dealing fairly, we are able to keep our key subcontractors attentive to our projects.

Sales and Marketing

In connection with the sale and marketing of our homes, we make extensive use of advertising and other promotional activities, including our website (www.tripointehomes.com), mass-media advertisements, brochures,

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direct mail and the placement of signboards in the immediate areas of our developments. The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this prospectus.

We sell our homes through our own sales representatives and through independent real estate brokers. Our in-house sales force typically works from sales offices located in model homes close to or in each community. Sales representatives assist potential buyers by providing them with basic floor plans, price information, development and construction timetables, tours of model homes and the selection of options. Sales personnel are licensed by the applicable real estate bodies in their respective markets, are trained by us and generally have had prior experience selling new homes in the local market. Our personnel, along with subcontracted marketing and design consultants, carefully design exteriors and interiors of each home to coincide with the lifestyles of targeted homebuyers.

As of September 30, 2012, we owned 26 model homes. Generally, we build model homes at each project and have them professionally decorated to display design features. We believe that model homes play a significant role in helping homebuyers understand the efficiencies and value provided by each floor plan type. Interior decorations vary among our models and are selected based upon the lifestyles of our targeted homebuyers. Structural changes in design from the model homes are not generally permitted, but homebuyers may select various other optional construction and design amenities. In addition to model homes, customers can gain an understanding of the various design features and options available to them using third-party design centers. At each design center, customers can meet with a designer and are shown the standard and upgraded selections available to them.

We typically sell homes using sales contracts that include cash deposits by the purchasers. Before entering into sales contracts, we pre-qualify our customers. However, purchasers can generally cancel sales contracts if they are unable to sell their existing homes, if they fail to qualify for financing, or under certain other circumstances. Although cancellations can delay the sale of our homes, they have historically not had a material impact on our operating results. The cancellation rate of buyers who contracted to buy a home but did not close escrow (as a percentage of overall orders) was approximately 17% during the nine months ended September 30, 2012 and 13% during the year ended December 31, 2011. Cancellation rates are subject to a variety of factors beyond our control such as adverse economic conditions and increases in mortgage interest rates. Our inventory of completed and unsold homes was six homes as of September 30, 2012.

Customer Financing

We seek to assist our homebuyers in obtaining financing by arranging with mortgage lenders to offer qualified buyers a variety of financing options. Substantially all homebuyers utilize long-term mortgage financing to purchase a home and mortgage lenders will usually make loans only to qualified borrowers.

Quality Control and Customer Service

We pay particular attention to the product design process and carefully consider quality and choice of materials in order to attempt to eliminate building deficiencies. The quality and workmanship of the subcontractors we employ are monitored and we make regular inspections and evaluations of our subcontractors to seek to ensure that our standards are met.

We maintain quality control and customer service staff whose role includes providing a positive experience for each customer throughout the pre-sale, sale, building, closing and post-closing periods. These employees are also responsible for providing after sales customer service. Our quality and service initiatives include taking customers on a comprehensive tour of their home prior to closing and using customer survey results to improve our standards of quality and customer satisfaction.

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Warranty Program

Our company currently provides a limited one year warranty covering workmanship and materials. In addition, our limited warranty (generally ranging from a minimum of two years up to the period covered by the applicable statute of repose) covers certain defined construction defects. The limited warranty covering construction defects is transferable to subsequent buyers not under direct contract with us and requires that homebuyers agree to the definitions and procedures set forth in the warranty, including the submission of unresolved construction-related disputes to binding arbitration. We reserve up to 1.0% of the sales price of each home we sell to provide the customer service to our homebuyers. We believe that our reserves are adequate to cover the ultimate resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation.

We subcontract our homebuilding work to subcontractors who generally provide us with an indemnity and a certificate of insurance prior to receiving payments for their work and, therefore, claims relating to workmanship and materials are generally the primary responsibility of our subcontractors.

There can be no assurance, however, that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates, that we will not be liable for damages, the cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims or that claims will not arise out of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with our subcontractors.

Seasonality

We have experienced seasonal variations in our quarterly operating results and capital requirements. We typically take orders for more homes in the first half of the fiscal year than in the second half, which creates additional working capital requirements in the second and third quarters to build our inventories to satisfy the deliveries in the second half of the year. We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry.

Raw Materials

Typically, all the raw materials and most of the components used in our business are readily available in the United States. Most are standard items carried by major suppliers. However, a rapid increase in the number of homes started could cause shortages in the availability of such materials or in the price of services, thereby leading to delays in the delivery of homes under construction. We continue to monitor the supply markets to achieve the best prices available.

Fee Building Services

Although, since the investment by the Starwood Fund in 2010, our primary business focus is building and selling homes for our own account, we also selectively provide construction services whereby we build, market and sell homes for independent third-party property owners with whom we have revenue sharing agreements on projects typically marketed under the TRI Pointe Homes brand name (“fee building projects”). Our services with respect to fee building projects may include design, development, construction and sale of the homes, and we may take a project at any stage of development through its completion and sale. We earn revenue on our fee building projects either as a flat fee for the project or as a percentage of the cost or revenue of the project depending upon the terms of the agreement with our customer. For the nine months ended September 30, 2012, we delivered 16 homes at our fee building projects. For the year ended December 31, 2011, we delivered 68 homes at our fee building projects.

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As of September 30, 2012, we had three communities containing 143 lots under various stages of development for our fee building projects (including one project to build 57 homes pursuant to a non-binding letter of intent). Net new home orders for our fee building projects for the nine months ended September 30, 2012 and for the year ended December 31, 2011 were 22 and 12, respectively.

Our Financing Strategy

Our Formation Transactions and Structure

Prior to this offering, we have operated our business through TRI Pointe Homes, LLC. Prior to the completion of this offering, we will engage in the following formation transactions:

•

TRI Pointe Homes, LLC will be converted from a Delaware limited liability company into a Delaware corporation and renamed TRI Pointe Homes, Inc.

•

In connection with the conversion, the common and incentive units of TRI Pointe Homes, LLC will be automatically converted into shares of our common stock and, as a result, the members of TRI Pointe Homes, LLC, which members include the Starwood Fund, the members of our management team and a third-party investor, will receive an aggregate of shares of our common stock. We will allocate such shares of our common stock among the members of TRI Pointe Homes, LLC in the manner described in footnote (1) below.

See “Description of Capital Stock” for additional information regarding the terms of our common stock and the terms of our charter and bylaws as will be in effect following our formation transactions. Concurrently with the completion of our formation transactions, the operating agreement of TRI Pointe Homes, LLC will be terminated. Following the completion of our formation transactions, TRI Pointe Homes, Inc., which is the issuer of the shares of our common stock offered by this prospectus, will own the assets and conduct the business described in this prospectus.

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We carry out our business generally through a number of project-specific, wholly-owned subsidiaries. Our fee building business is conducted primarily through TRI Pointe Contractors, LP, and TRI Pointe Communities, Inc. is our wholly-owned subsidiary through which we conduct real estate brokerage activities relating to our business. The following chart illustrates our expected ownership structure immediately following the completion of this offering (assuming no exercise by the underwriters of their option to purchase additional shares):

LOGO

⁽¹⁾

As part of our formation transactions, the members of TPH LLC will receive an aggregate of shares of our common stock. The members of TPH LLC include the Starwood Fund, the members of our management team and a third-party investor. In addition to their membership interest in TPH LLC, members of our management team also hold incentive units in TPH LLC and we refer to them in their capacity as holders of incentive units as “Incentive Unit Holders.” The allocation of the shares of our common stock among the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders depends on a calculation of an internal rate of return to the members of TPH LLC (other than the Incentive Unit Holders) resulting from this offering, which in turn depends upon the timing of this offering and the value per share of our common stock. Under the operating agreement of TPH LLC, that value per share of our common stock is based initially upon the midpoint of the price range set forth on the cover page of this prospectus. Such value is subject to adjustment following the completion of this offering such that the number of shares that are allocated to the members of TPH LLC (other than the Incentive Unit Holders), on the one hand, may increase or decrease and the number of shares that are allocated to the Incentive Unit Holders, on the other hand, may correspondingly decrease or increase in an amount limited to up to 1.0% of the aggregate number of shares of our common stock outstanding immediately following the completion of this offering. Although the allocation of shares of our common stock among the members of TPH LLC and the Incentive Unit Holders is subject to a minor adjustment based on the foregoing, the number of shares of our common stock received by the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders in the aggregate will not change as a result of such adjustment. For a more detailed discussion regarding the numbers of shares of our common stock that will be received by the members of TPH LLC (other than the Incentive Unit Holders), on the one hand, and the Incentive Unit Holders, on the other hand, see “Principal Stockholders.”

⁽²⁾

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Government Regulation and Environmental Matters

We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction and similar matters which impose restrictive zoning and density requirements, the result of which is to limit the number of homes that can be built within the boundaries of a particular area. Projects that are not entitled may be subjected to periodic delays, changes in use, less intensive development or elimination of development in certain specific areas due to government regulations. We may also be subject to periodic delays or may be precluded entirely from developing in certain communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Local governments also have broad discretion regarding the imposition of development fees and exactions for projects in their jurisdiction. Projects for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process and can also be impacted adversely by unforeseen health, safety and welfare issues, which can further delay these projects or prevent their development.

We are also subject to a variety of local, state, federal and other statutes, ordinances, rules and regulations concerning the environment. The particular environmental laws which apply to any given homebuilding site vary according to multiple factors, including the site’s location, its environmental conditions and the present and former uses of the site, as well as adjoining properties. Environmental laws and conditions may result in delays, may cause us to incur substantial compliance and other costs, and can prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas. In addition, in those cases where an endangered or threatened species is involved, environmental rules and regulations can result in the restriction or elimination of development in identified environmentally sensitive areas. From time to time, the EPA and similar federal or state agencies review homebuilders’ compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures. Any such actions taken with respect to us may increase our costs. Further, we expect that increasingly stringent requirements will be imposed on homebuilders in the future. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber. California is especially susceptible to restrictive government regulations and environmental laws.

Competition

Competition in the homebuilding industry is intense, and there are relatively low barriers to entry into our business. Homebuilders compete for, among other things, home buying customers, desirable land parcels, financing, raw materials and skilled labor. Increased competition could hurt our business, as it could prevent us from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder our market share expansion, and lead to pricing pressures on our homes that may adversely impact our margins and revenues. If we are unable to successfully compete, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected. Our competitors may independently develop land and construct housing units that are superior or substantially similar to our products. Furthermore, a number of our primary competitors are significantly larger, have a longer operating history and may have greater resources or lower cost of capital than ours; accordingly, they may be able to compete more effectively in one or more of the markets in which we operate. Many of these competitors also have longstanding relationships with subcontractors and suppliers in the markets in which we operate. We also compete for sales with individual resales of existing homes and with available rental housing.

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Employees

As of September 30, 2012, we had 53 employees, 31 of whom were executive, management and administrative personnel, 11 of whom were sales and marketing personnel and 11 of whom were involved in field construction. Although none of our employees are covered by collective bargaining agreements, certain of the subcontractors engaged by us are represented by labor unions or are subject to collective bargaining arrangements. We believe that our relations with our employees and subcontractors are good.

Legal Proceedings

We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us.

Our Offices

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MANAGEMENT

Officers, Directors and Director Nominees

Upon the completion of this offering, our board of directors will consist of seven directors. Of these seven directors, we believe that four, constituting a majority, will be considered “independent,” with independence being determined in accordance with the listing standards established by the New York Stock Exchange. Our directors will serve for one-year terms and until their successors are duly elected and qualified. There will be no cumulative voting in the election of directors. Consequently, at each annual meeting, the successors to each of our seven directors will be elected by a plurality of the votes cast at that meeting.

Set forth below are the names, ages and positions of our directors and officers as of the date of this prospectus, after giving effect to our formation transactions, and the persons who have agreed to become directors upon the completion of this offering, whom we refer to as our director nominees.


Name	Age		Position with the Company
Mr. Barry S. Sternlicht		52	Chairman of our Board of Directors
Mr. Douglas F. Bauer		51	Chief Executive Officer and Director
Mr. Thomas J. Mitchell		52	President, Chief Operating Officer and Secretary
Mr. Michael D. Grubbs		54	Chief Financial Officer and Treasurer
Mr. Jeffrey D. Frankel		38	Senior Vice President and Division President-Northern California
Mr. Matthew P. Osborn		42	Senior Vice President and Division President-Colorado
Mr. J. Marc Perrin		44	Director
Mr. Richard D. Bronson*		67	Independent Director Nominee
Mr. Wade H. Cable*		64	Independent Director Nominee
Mr. Steven J. Gilbert*		65	Independent Director Nominee
Mr. Thomas B. Rogers*		73	Independent Director Nominee

This individual has agreed to become a member of our board of directors upon the completion of this offering and is expected to be an independent director.

Biographical Information

The following is a summary of certain biographical information concerning our directors, our officers and our director nominees.

Barry S. Sternlicht . Mr. Sternlicht serves as the chairman of our board of managers and, following our formation transactions, will serve as the chairman of our board of directors. Mr. Sternlicht has been the Chairman and Chief Executive Officer of Starwood Capital Group since its formation in 1991. He also has been the Chairman of the Board of Directors and the Chief Executive Officer of Starwood Property Trust, Inc., a New York Stock Exchange-listed company (NYSE: STWD), since its formation in 2009. Over the past 21 years, Mr. Sternlicht has structured investment transactions with an asset value of more than $40 billion. From 1995 through early 2005, he was the Chairman and Chief Executive Officer of Starwood Hotels & Resorts Worldwide, Inc., a New York Stock Exchange-listed company he founded in 1995. Mr. Sternlicht is the Chairman of the Board of Société du Louvre and Baccarat. He also serves on the Board of Directors of The Estée Lauder Companies (NYSE: EL), Mammoth Mountain, Ellen Tracy, Field & Stream and National Golf. Mr. Sternlicht is a Trustee of Brown University. He serves as Vice Chairman of Robin Hood and is on the boards of the Pension Real Estate Association (PREA), the Dreamland Film & Performing Arts Center, Juvenile Diabetes Research Foundation’s National Leadership Advocacy Program and the Business Committee for the Arts. Mr. Sternlicht is a member of the Real Estate Roundtable, the Committee to Encourage Corporate Philanthropy, the Young Presidents Organization, and the Urban Land Institute. Mr. Sternlicht received his B.A., magna cum laude, with honors from Brown University. He later earned his M.B.A. with distinction from Harvard Business School.

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Douglas F. Bauer . Mr. Bauer serves as our Chief Executive Officer and as a member of our board of managers and, following our formation transactions, will serve in the same capacity on our board of directors. Prior to forming our company in April 2009, from 1989 to 2009, Mr. Bauer served in several capacities, including most recently the President and Chief Operating Officer, for William Lyon Homes, an internally managed homebuilding company whose common stock was listed on the New York Stock Exchange from 1999 until the company was taken private in 2006. His prior titles at William Lyon Homes also included Chief Financial Officer and, prior thereto, President of its Northern California Division. Prior to his 20-year tenure at William Lyon Homes, Mr. Bauer spent seven years at Security Pacific National Bank in Los Angeles, California in various financial positions. Mr. Bauer has more than 25 years of experience in the real estate finance, development and homebuilding industry. Mr. Bauer has been actively involved in both legislative efforts and community enhancement programs through his involvement in the California Building Industry Association and HomeAid Orange County, a charitable organization with the mission of building or renovating shelters for the temporarily homeless, which serves individuals and families who find themselves without shelter due to such factors as domestic violence, job loss, catastrophic illness and crisis pregnancy. Mr. Bauer received his B.A. from the University of Oregon and later received his M.B.A. from the University of Southern California.

Thomas J. Mitchell. Mr. Mitchell serves as our President, Chief Operating Officer and Secretary. Prior to forming our company in April 2009, from 1988 to 2009, Mr. Mitchell served in several capacities, including most recently Executive Vice President, for William Lyon Homes, an internally managed homebuilding company whose common stock was listed on the New York Stock Exchange from 1999 until the company was taken private in 2006. Through his various roles within that company, Mr. Mitchell developed a broad background and experience in all aspects of residential construction and land development. Prior to his 20-year tenure at William Lyon Homes, Mr. Mitchell spent over two years with The Irvine Company in their community development group and over two years with Pacific Savings Bank. Throughout his career, Mr. Mitchell has obtained significant experience in land acquisition, land entitlement, land development, project planning, product design, construction operations, project and company finance, sales and marketing, customer satisfaction, and warranty service. Mr. Mitchell served as a member of the board of managers of TPH LLC since 2010. Mr. Mitchell has more than 25 years of experience in the real estate development and homebuilding industry. His accomplishments have been recognized by, among other things, his being awarded the Outstanding Home Design and National Home of the Year awards and being identified by Home Builder Executive as a Top 100 President. In 2004, Mr. Mitchell was awarded the BIA Inland Empire Builder of the Year. Mr. Mitchell received his B.A. from California State University of Long Beach.

Michael D. Grubbs. Mr. Grubbs serves as our Chief Financial Officer and Treasurer. Prior to forming our company in April 2009, from 1992 to 2009, Mr. Grubbs served in several capacities, including most recently the Senior Vice President and Chief Financial Officer, for William Lyon Homes, an internally managed homebuilding company whose common stock was listed on the New York Stock Exchange from 1999 until the company was taken private in 2006. Prior to his 17-year tenure at William Lyon Homes, Mr. Grubbs spent five years at Kenneth Leventhal & Company where he specialized in real estate accounting and over five years at J.C. Penney Company Construction and Real Estate Division which built retail facilities throughout the Western United States. Mr. Grubbs has more than 25 years of experience in residential real estate and homebuilding finance. Mr. Grubbs is a member (inactive) of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Mr. Grubbs is also a former member of the Board of Directors for HomeAid Orange County, a charitable organization with the mission of building or renovating shelters for the temporarily homeless, which serves individuals and families who find themselves without shelter due to such factors as domestic violence, job loss, catastrophic illness and crisis pregnancy. He served as Treasurer and committee chair for the Finance Focus Group. Mr. Grubbs received his B.S., magna cum laude, with honors from Arizona State University.

Jeffrey D. Frankel . Mr. Frankel serves as our Senior Vice President and Division President—Northern California. Mr. Frankel joined our company in November 2010 to form our Northern California Division. Since

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joining our company, Mr. Frankel has acquired over 500 lots in the Greater Bay Area and has assembled a team of 15 building professionals. He currently leads his team in all facets of homebuilding, including land acquisition and development, new home construction, purchasing and customer care. To date, his team has successfully opened two new communities in the Northern California area. Prior to joining our company, Mr. Frankel worked for William Lyon Homes, Bank of America and Comerica Bank, serving in various capacities over his 15 year career in the real estate industry. Mr. Frankel was a Vice President for both Bank of America and Comerica Bank prior to joining William Lyon Homes in 2003, where his focus was primarily on land acquisition and project management. His key responsibilities included pre-development activities, such as acquisition, entitlements, site planning and product development. Mr. Frankel has extensive experience with both single-family and multi-family developments. Mr. Frankel received his B.S. from Santa Clara University.

Matthew P. Osborn. Mr. Osborn serves as our Senior Vice President and Division President—Colorado. Mr. Osborn joined our company in August 2012 to lead the startup of our Colorado Division. Prior to joining us, Mr. Osborn was the President and Chief Operating Officer of Village Homes, a Colorado community builder, since its inception in January 2010. Prior to his role with Village Homes, Mr. Osborn served for over 15 years in various capacities for Village Homes of Colorado, Inc., including Planning Director, Vice President of Marketing Operations, Senior Vice President of Home Building Operations, and President, and served as one of its Directors from 2004 to October 2012. During his management tenure at Village Homes of Colorado, Inc., the organization was recognized locally and nationally for its outstanding business practices, expanded its operations into Northern Colorado and several markets in the Mountains and Western Slope of Colorado and was awarded Community of the Year five consecutive years, from 2002 to 2006. In 2009, Village Homes of Colorado, Inc. filed for protection from creditors under the U.S. Bankruptcy Code. Mr. Osborn also was instrumental in the formation of the new homebuilding entity operating under the Village Homes name. He was a member of the Board of Directors of the Home Builders Association of Metropolitan Denver from 2004 to 2009 and was President of the Association in 2008. He has previously been a member of the Urban Land Institute and was the Assistant Chair of the Residential Neighborhood Development Council (Gold Flight) from 2006 to 2008. Mr. Osborn received his B.A. from Boston College and his M.B.A. from the University of Denver.

J. Marc Perrin. Mr. Perrin serves as a member of our board of managers and, following our formation transactions, will serve in this same capacity on our board of directors. Mr. Perrin is a Managing Director in Starwood Capital Group’s west coast office, which he opened in August of 2000. He supervises the firm’s investments on the West Coast, co-heads its U.S. investing and is a member of the firm’s Investment Committee and Executive Committee. In these roles he is responsible for originating, structuring, underwriting and closing investments in all property types. Prior to joining Starwood Capital Group, Mr. Perrin was with Salomon Brothers Inc. from 1995 to 1997, where he worked on debt, equity and strategic advisory assignments for real estate industry clients. Prior to his time with Salomon Brothers Inc., Mr. Perrin worked for Bramalea Limited from 1990 to 1993, at the time one of the largest developers in Canada, working in its Southern California residential land development and homebuilding business. Mr. Perrin’s responsibilities included land acquisitions and divestitures as well as entitlements and forward planning. Mr. Perrin serves as a Director of Mammoth Mountain Ski Area. He is a Trustee of the Urban Land Institute and a Policy Advisory Board Member of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley. Mr. Perrin received his B.A. from the University of California at Berkeley and his M.B.A. from The Anderson School at UCLA.

Richard D. Bronson. Mr. Bronson will serve as a member of our board of directors effective upon the completion of this offering. Mr. Bronson is Chairman of The Bronson Companies, LLC, a real estate development and investment entity based in Beverly Hills, California and has served in this capacity since the company’s founding in 2001. With involvement in more than 100 shopping centers, casinos, offices, hospitality and residential projects, The Bronson Companies, LLC has partnered with the world’s largest realty interests. Among the company’s signature developments is Hartford, Connecticut’s CityPlace, the tallest office building between Boston and Manhattan. Mr. Bronson served with Steve Wynn as one of two inside directors of Mirage Resorts, a New York Stock Exchange-listed company, until it was sold in 2000. Prior to that, Mr. Bronson was

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President of New City Development, an affiliate of Mirage Resorts, where he oversaw many of the company’s new business initiatives and activities outside Nevada. In 2010, Mr. Bronson co-founded US Digital Gaming, an online gaming technology provider based in Beverly Hills, California, for which he also serves as Chairman. Mr. Bronson serves as Lead Director on the Board of Directors of Starwood Property Trust, Inc., a New York Stock Exchange-listed company (NYSE: STWD), and has been a Director since the company’s inception in 2009. Mr. Bronson has also served as Vice President of the International Council of Shopping Centers, an association representing 50,000 industry professionals in more than 80 countries and is a member of the Western Real Estate Business Editorial Board. Mr. Bronson has served on the boards of trustees of numerous organizations including the Forman School in Litchfield, Connecticut and Mt. Sinai Hospital in Hartford, Connecticut. Currently, Mr. Bronson is on the Board of the Neurosurgery Division at UCLA Medical Center and he is a past Chairman of the Board of the Archer School for Girls in Los Angeles.

Wade H. Cable. Mr. Cable will serve as a member of our board of directors effective upon the completion of this offering. Mr. Cable is a retired Director, President and Chief Operating Officer of William Lyon Homes, an internally managed homebuilding company whose common stock was listed on the New York Stock Exchange from 1999 until the company was taken private in 2006. He retired from William Lyon Homes in 2007 and has more than 30 years of experience leading and managing organizations throughout the United States. Prior to his time with William Lyon Homes, he served as Chief Executive Officer, President and Director of The Presley Companies from 1985 to 1999. During his tenure, Mr. Cable took the company public and issued the company’s first bond offering of $200 million in senior subordinated debt. He also acquired the assets of William Lyon Homes and merged the two operations under the William Lyon Homes name. Prior to 1985, Mr. Cable held senior executive leadership positions with Pacific Lighting Real Estate Group and its associated subsidiaries. While there, he led the development of millions of square feet of office, industrial and apartment space throughout the United States while simultaneously leading the acquisition team that acquired The Presley Companies. Following his retirement, Mr. Cable has been a Principal in Cable Capital Ventures, which invests in real estate and other investment opportunities. He has served as a member of the University of Southern California’s Executive Committee for the Lusk Center for Real Estate Development, Chairman of the National Association of Home Builders Multi-Family Council, Chairman of the Board of the Construction Industries Alliance of the City of Hope, Treasurer of the California Coast Chapter of Young Presidents Organization and Director of the Harvard Business School Association of Orange County. He formerly sat on the Board of Directors for the Tiger Woods Learning Center. Mr. Cable received his B.A. from California State University of Long Beach and has completed the Advanced Management program at Harvard Business School.

Steven J. Gilbert. Mr. Gilbert will serve as a member of our board of directors effective upon the completion of this offering. Mr. Gilbert is Chairman of the Board of Gilbert Global Equity Partners, L.P., a billion dollar private equity fund and has served in this capacity since 1998. He is Vice Chairman of MidOcean Equity Partners, LP, and served as the Vice Chairman of Stone Tower Capital from January 2007 until April 2012 and as the Senior Managing Director and Chairman of Sun Group (USA) until 2009. From 1992 to 1997 he was a Founder and Managing General Partner of Soros Capital L.P., the principal venture capital and leveraged transaction entity of the Quantum Group of Funds, and a principal Advisor to Quantum Industrial Holdings Ltd. From 1988 to 1992, he was the Managing Director of Commonwealth Capital Partners, L.P., a private equity investment firm. Prior to that, from 1984 to 1988, Mr. Gilbert was the Managing General Partner of Chemical Venture Partners (now J. P. Morgan Capital Partners), which he founded. Mr. Gilbert was admitted to the Massachusetts Bar in 1970 and practiced law at Goodwin Procter & Hoar in Boston, Massachusetts. He was an associate in corporate finance at Morgan Stanley & Co. from 1972 to 1976, a Vice President at Wertheim & Co., Inc. from 1976 to 1978 and a Managing Director at E. F. Hutton International from 1978 to 1980. Mr. Gilbert was recently Chairman of the Board of Dura Automotive Systems, Inc., Chairman of CPM Holdings, True Temper Sports and a Director of J. O. Hambro Capital Management Group and the Asian Infrastructure Fund. He is also Senior Advisor to Continental Grain and a Director of MBIA, Inc., a New York Stock Exchange-listed company (NYSE: MBI), and is a Director Nominee of Empire State Realty Trust, Inc. Previously, Mr. Gilbert has been a Director of numerous companies, including Monteplier Re, Olympus Trust, Office Depot, Inc., Funk & Wagnalls, Inc., Parker Pen Limited, Piggly Wiggly Southern, Inc., Coast Community

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News, Inc., GTS-Duratek, Magnavox Electronic Systems Company, UroMed Corporation, Star City Casino Holdings, Ltd., Katz Media Corporation, Airport Group International, Batavia Investment Management, Ltd., Affinity Financial Group, Inc., ESAT Telecom, Ltd., Colep Holding, Ltd., NFO Worldwide, Terra Nova (Bermuda) Holdings, Limited and Veritas-DCG. He was the principal owner, Chairman and Chief Executive Officer of Lion’s Gate Films from 1980 to 1984. Mr. Gilbert is a member of the Council on Foreign Relations and the Global Agenda Council on Capital Flows of the World Economic Forum, a Trustee of the New York University Langone Medical School and a member of the Board of Governors of the Lauder Institute. Mr. Gilbert received his B.A. from the Wharton School at the University of Pennsylvania, his J.D. from the Harvard Law School and his M.B.A. from the Harvard Graduate School of Business.

Thomas B. Rogers. Mr. Rogers will serve as a member of our board of directors effective upon the completion of this offering. Until his retirement in January 2009, Mr. Rogers served as Executive Vice President in charge of City National Bank’s Southern Region. In that position, he oversaw the delivery of commercial banking, private client and wealth management services to clients throughout Orange County, the greater San Diego area and the Inland Empire. Before joining City National Bank in 2000, Mr. Rogers served for eight years as Senior Vice President and Treasurer of The Irvine Company. Prior to that, Mr. Rogers spent more than 25 years with two major financial institutions. Specifically, he served as Executive Vice President and Division Administrator of Security Pacific National Bank’s Real Estate Industries Group, Southern Division, and prior to that was Senior Vice President and Chief Credit Officer for Security Pacific’s California Corporate Group. His previous banking career also included 15 years with the National Bank of Detroit in corporate lending assignments. In his retirement, Mr. Rogers serves as Chairman of the Board of Directors of Plaza Bank, a community business bank located in Irvine, California. He was appointed to the board of Plaza Bank in June 2009 and elected Chairman in December 2009. Mr. Rogers received his B.A. in Business Administration from Eastern Michigan University, attended graduate school at Wayne State University in Detroit, and completed the curriculum of the Graduate School of Banking at the University of Wisconsin in Madison and the National Commercial Lending School at the University of Oklahoma.

Family Relationships

There are no family relationships among any of our directors or executive officers.

Board of Directors

The number of members of our board of directors will be determined from time-to-time by action of our board of directors. Immediately following the completion of this offering, our board of directors will consist of seven persons. After the completion of this offering, we expect our board of directors to determine that four of our directors, constituting a majority, satisfy the listing standards for independence of the New York Stock Exchange and Rule 10A-3 under the Exchange Act.

However, for as long as the Starwood Fund’s beneficial ownership of our common stock continues to exceed 50%, we may elect to be treated as a “controlled company” for purposes of the New York Stock Exchange, which would allow us to opt out of certain corporate governance requirements, including requirements that a majority of the board of directors consist of independent directors and that the compensation committee and nominating committee be composed entirely of independent directors. We do not currently rely on the controlled company exemptions; however, to the extent we continue to qualify, we may choose to take advantage of these exemptions in the future.

Our board of directors believes its members collectively have or will have the experience, qualifications, attributes and skills to effectively oversee the management of our company, including a high degree of personal and professional integrity, an ability to exercise sound business judgment on a broad range of issues, sufficient experience and background to have an appreciation of the issues facing our company, a willingness to devote the necessary time to board duties, a commitment to representing the best interests of our company and our stockholders and a dedication to enhancing stockholder value.

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Role of our Board of Directors in Risk Oversight

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors administers this oversight function directly, with support from three of its standing committees to be established upon the completion of this offering, our audit committee, our compensation committee and our nominating and corporate governance committee, each of which will address risks specific to its respective areas of oversight. In particular, our audit committee will have the responsibility to consider and discuss our major financial risk exposures and the steps our management takes to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our audit committee will also monitor compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. Our compensation committee will assess and monitor whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Our nominating and corporate governance committee will provide oversight with respect to corporate governance and ethical conduct and will monitor the effectiveness of our corporate governance guidelines, including whether such guidelines are successful in preventing illegal or improper liability-creating conduct.

Committees of our Board of Directors

Following the completion of this offering, our board will establish four committees: our audit committee, our compensation committee, our nominating and corporate governance committee and our executive committee. Each of these committees will consist of three members, which members, with the exception of the members of the executive committee, satisfy the New York Stock Exchange’s independence standards.

Audit Committee

Upon the completion of this offering, our board of directors will establish an audit committee, which will be comprised of three independent directors, Messrs. Cable, Gilbert and Rogers. We expect that our board of directors will determine that each of these members will be “financially literate” under the rules of the New York Stock Exchange. Mr. Rogers will serve as the chairperson of the audit committee. Our audit committee, pursuant to its written charter, will, among other matters, oversee (1) our financial reporting, auditing and internal control activities; (2) the integrity and audits of our financial statements; (3) our compliance with legal and regulatory requirements; (4) the qualifications and independence of our independent auditors; (5) the performance of our internal audit function and independent auditors; and (6) our overall risk exposure and management. Duties of the audit committee will also include the following:

•

annually review and assess the adequacy of the audit committee charter and the performance of the audit committee;

•

be responsible for the appointment, retention and termination of our independent auditors and determine the compensation of our independent auditors;

•

review with the independent auditors the plans and results of the audit engagement;

•

evaluate the qualifications, performance and independence of our independent auditors;

•

have sole authority to approve in advance all audit and non-audit services by our independent auditors, the scope and terms thereof, and the fees therefor;

•

review the adequacy of our internal accounting controls;

•

meet at least quarterly with our executive officers, internal audit staff and our independent auditors in separate executive sessions; and

•

prepare the audit committee report required by SEC regulations to be included in our annual proxy statement.

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We expect that Mr. Rogers will be designated by our board of directors as our audit committee financial expert, as that term is defined in the rules of the SEC.

Compensation Committee

Upon the completion of this offering, our board of directors will establish a compensation committee, which will be comprised of three independent directors, Messrs. Bronson, Cable and Rogers. Mr. Cable will serve as the chairperson of our compensation committee. The compensation committee, pursuant to its written charter, will, among other matters:

•

assist our board of directors in developing and evaluating potential candidates for executive officer positions and overseeing the development of executive succession plans;

•

administer, review and make recommendations to our board of directors regarding our compensation plans, including our 2013 Long-Term Incentive Plan;

•

annually review and approve our corporate goals and objectives with respect to compensation for executive officers and, at least annually, evaluate each executive officer’s performance in light of such goals and objectives to set his or her annual compensation, including salary, bonus and equity and non-equity incentive compensation, subject to approval by our board of directors;

•

provide oversight of management’s decisions regarding the performance, evaluation and compensation of other officers;

•

review our incentive compensation arrangements to confirm that incentive pay does not encourage unnecessary risk-taking and to review and discuss, at least annually, the relationship between risk management policies and practices, business strategy and our executive officers’ compensation;

•

assist management in complying with our proxy statement and annual report disclosure requirements;

•

discuss with management the compensation discussion and analysis required by SEC regulations; and

•

prepare a report on executive compensation to be included in our annual proxy statement.

Our compensation committee will have the authority to retain and terminate any compensation consultant to be used to assist in the evaluation of executive officer compensation.

Nominating and Corporate Governance Committee

Upon the completion of this offering, our board of directors will establish a nominating and corporate governance committee, which will be comprised of three independent directors, Messrs. Bronson, Cable and Gilbert. Mr. Gilbert will serve as the chairperson of our nominating and corporate governance committee. The nominating and corporate governance committee, pursuant to its written charter, will, among other matters:

•

identify individuals qualified to become members of our board of directors and ensure that our board of directors has the requisite expertise and its membership consists of persons with sufficiently diverse and independent backgrounds;

•

develop, and recommend to our board of directors for its approval, qualifications for director candidates and periodically review these qualifications with our board of directors;

•

review the committee structure of our board of directors and recommend directors to serve as members or chairs of each committee of our board of directors;

•

review and recommend committee slates annually and recommend additional committee members to fill vacancies as needed;

•

develop and recommend to our board of directors a set of corporate governance guidelines applicable to us and, at least annually, review such guidelines and recommend changes to our board of directors for approval as necessary; and

•

oversee the annual self-evaluations of our board of directors and management.

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Executive Committee

Upon the completion of this offering, our board of directors will establish an executive committee, which will be comprised of Messrs. Sternlicht, Bauer and Perrin. Mr. Sternlicht will serve as the chairperson of our executive committee. Our executive committee will have the authority to review and consider the approval of any land acquisition with a purchase price of up to $35 million, as well as the exercise of any other duties that may be delegated to our executive committee from time to time by our board of directors.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves, or in the past has served, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. None of the members of our compensation committee is, or has ever been, an officer or employee of our company.

Code of Business Conduct and Ethics

Our board of directors will adopt a code of business conduct and ethics that will apply to our officers, directors and any employees. Among other matters, our code of business conduct and ethics will be designed to deter wrongdoing and to promote the following:

•

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;

•

full, fair, accurate, timely and understandable disclosure in our communications with and reports to our stockholders, including reports filed with the SEC, and other public communications;

•

compliance with applicable governmental laws, rules and regulations;

•

prompt internal reporting of violations of the code to appropriate persons identified in the code; and

•

accountability for adherence to the code of business conduct and ethics.

Any waiver of the code of business conduct and ethics for our executive officers, directors or any employees may be made only by our nominating and corporate governance committee and will be promptly disclosed as required by law and New York Stock Exchange regulations.

Limitations on Liabilities and Indemnification of Directors and Officers

For information concerning limitations of liability and indemnification applicable to our directors and officers, see “Description of Capital Stock— Limitations on Liability, Indemnification of Officers and Directors and Insurance.”

Director Compensation

For a discussion of our director compensation arrangements, see “Executive and Director Compensation—Director Compensation.”

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EXECUTIVE AND DIRECTOR COMPENSATION

Fiscal 2011 Summary Compensation Table

The following table summarizes information regarding the compensation awarded to, earned by or paid to Douglas Bauer, our Chief Executive Officer, Thomas Mitchell, our President and Chief Operating Officer, and Michael Grubbs, our Chief Financial Officer. We refer to these individuals in this section as our named executive officers.


Name and Principal Position	Year		Salary ($)		Stock Awards ($) ⁽¹⁾		All Other Compensation ($)			Total ($)
Mr. Douglas F. Bauer		2011		300,000		155,334		8,085	⁽²⁾		463,419
Chief Executive Officer
Mr. Thomas J. Mitchell		2011		300,000		155,333		—			455,333
President, Chief Operating Officer and Secretary
Mr. Michael D. Grubbs		2011		300,000		155,333		1,794	⁽³⁾		457,127
Chief Financial Officer and Treasurer

⁽¹⁾

Represents compensation expense recognized for the year ended December 31, 2011, related to the amortization of the fair value of the equity based incentive units granted on September 24, 2010. For a discussion of the assumptions relating to the valuation of the equity based incentive units, please see note 9 of the notes to our consolidated financial statements appearing elsewhere in this prospectus.

⁽²⁾

Represents the amount paid by TPH LLC in 2011 for club membership dues for the named executive officer.

⁽³⁾

Represents the premium paid by TPH LLC in 2011 for an automobile insurance policy for the named executive officer.

Narrative to Summary Compensation Table

The framework for the compensation set forth in the 2011 Summary Compensation Table was established pursuant to the senior officer employment and equity agreements that our named executive officers entered into with TPH LLC upon the Starwood Fund’s investment in us in September 2010. As discussed below under “—Employment Agreements,” upon the completion of this offering, these senior officer employment and equity agreements with our named executive officers will be terminated, and we will enter into new employment agreements with each of our named executive officers.

Employment Agreements

Effective upon the completion of this offering, the senior officer employment and equity agreements between TPH LLC and each of Messrs. Bauer, Mitchell and Grubbs will be terminated, and we will enter into new employment agreements with each of Messrs. Bauer, Mitchell and Grubbs. The new employment agreements will have an initial term expiring . Each employment agreement will provide for automatic one-year extensions after the expiration of the initial term, unless either party provides the other with at least days’ prior written notice of non-renewal. The employment agreements will require each named executive officer to dedicate his full business time and attention to the affairs of our company.

The employment agreements will provide for, among other things:

•

an annual base salary of $ , $ and $ , respectively, for Messrs. Bauer, Mitchell and Grubbs, subject to future increases from time to time at the discretion of our board of directors;

•

eligibility for annual cash performance bonuses equal to a target bonus based on the satisfaction of performance and discretionary goals to be established by our compensation committee;

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•

participation in our 2013 Long-Term Incentive Plan and any subsequent equity incentive plans approved by our board of directors; and

•

participation in any employee benefit plans and programs that are maintained from time to time for our other senior executive officers.

The employment agreements will contain customary non-competition and non-solicitation provisions that apply during the term of the agreements and for years after the termination of their employment if their employment is terminated by us for “cause” (as defined in the employment agreements) or if they terminate their employment without “good reason” (as defined in the employment agreements) or years after the termination of their employment if we terminate their employment without cause of if they terminate their employment for good reason or due to disability. The employment agreements also will contain standard confidentiality provisions that apply during the term of the agreements and for years after the termination of their employment.

Pursuant to his employment agreement, each of our named executive officers will agree that, for a period of 36 months following the completion of this offering, during any calendar quarter, he will not sell shares of our common stock in an amount exceeding the greater of (1) 10% of the shares of our common stock owned by him on the date of the completion of this offering and (2) the percentage of shares of our common stock that has been sold or otherwise disposed of by the Starwood Fund during such calendar quarter.

We may terminate the employment of a named executive officer at any time with or without cause, and the executive may terminate his employment with or without good reason. If we terminate a named executive officer’s employment for cause, or if the named executive officer resigns without good reason, the named executive officer will be entitled to receive any earned but unpaid annual base salary, any earned but unpaid prior-year bonus, reimbursement of expenses incurred prior to the date of termination, accrued vacation and any other paid-time-off and any benefits that have been earned and accrued prior to the date of termination. In addition, any outstanding awards granted to the named executive officer under our 2013 Long-Term Incentive Plan or any subsequent equity incentive plan approved by our board of directors will vest, terminate or become exercisable, as the case may be, in accordance with their terms.

If we terminate a named executive officer’s employment without cause or if the named executive officer terminates his employment agreement for good reason or due to disability or death, the named executive officer will be entitled to the severance benefits described below. The severance benefits include the following:

•

in each case, the named executive officer will be entitled to receive any earned but unpaid annual base salary, any earned but unpaid prior-year bonus, reimbursement of expenses incurred prior to the date of termination, accrued vacation and any other paid-time-off and any benefits that have been earned and accrued prior to the date of termination;

•

in each case, we shall reimburse the COBRA premium under our major medical health and dental plan;

•

if the termination is not due to disability or death, the named executive officer will be entitled to receive a cash payment in an amount equal to the sum of (1) the named executive officer’s 12 months’ annual base salary, plus (2) a payment in lieu of the annual bonus for the fiscal year in which the named executive officer’s employment was terminated, equal to the number of months elapsed in such fiscal year (with partial months prorated) multiplied by 1/12th of the previous year’s actual bonus paid to the named executive officer, payable to the named executive officer on the date of termination;

•

in each case, all equity awards granted to the executive officer under our 2013 Long-Term Incentive Plan or any subsequent equity incentive plan approved by our board of directors will immediately vest, any forfeiture restrictions will immediately lapse and any target bonus performance criteria for the year in which such termination occurs will be treated as satisfied and, in the case of any options, will become vested and exercisable or, at the discretion of our board of directors, may be cashed out or cancelled.

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•

the employment agreements will also provide that, if a “change in control” (as defined in the employment agreements) occurs, all equity awards granted to the named executive officer under our 2013 Long-Term Incentive Plan and any subsequent equity incentive plans approved by our board of directors will immediately vest (and any relevant performance criteria will be treated as satisfied) and, if applicable, become exercisable.

Outstanding Equity Awards as of December 31, 2011

The following table provides information regarding the incentive units in TPH LLC held by our named executive officers as of December 31, 2011. None of our named executive officers held any options that were outstanding as of December 31, 2011.


	Incentive Units ⁽¹⁾
Name	Number of Units That Have Not Vested(#) ⁽²⁾		Fair Value of Units That Have Not Vested($)
Mr. Douglas F. Bauer		51.0		909,667
Mr. Thomas J. Mitchell		51.0		909,667
Mr. Michael D. Grubbs		51.0		909,666

⁽¹⁾

Pursuant to the senior officer employment and equity agreements that our named executive officers entered into with TPH LLC and upon their entry into the operating agreement of TPH LLC on September 24, 2010, each of our named executive officers was issued an aggregate of 66 ² / ₃ incentive units in TPH LLC. As Incentive Unit Holders, our named executive officers have the right to receive certain distributions, if any, from TPH LLC following distributions by TPH LLC to the common members of TPH LLC of all of their prior capital contributions plus a specified return on such capital contributions. As described under “Principal Stockholders,” the members of TPH LLC, including our named executive officers (in their capacities as common unit members and Incentive Unit Holders), will receive an aggregate of shares of our common stock as part of our formation transactions, the allocation of which depends upon a calculation of an internal rate of return to the members of TPH LLC (other than the Incentive Unit Holders) resulting from this offering, which in turn depends upon the timing of this offering and the value per share of our common stock. See “Principal Stockholders.”

⁽²⁾

Represents the aggregate number of unvested incentive units held by such named executive officer. The vesting terms of the incentive units are as follows: (1) 18.75% of such units vested on the date following the first-year anniversary of the date of such officer’s senior officer employment and equity agreement; (2) 56.25% of such units vest in equal quarterly installments between the first and fourth-year anniversary of the date of such officer’s senior officer employment and equity agreement; and (3) 25% of such units will be converted into a number of shares of restricted stock immediately prior to the completion of this offering. Such shares of restricted stock will vest upon the earlier of (A) the Starwood Fund or its affiliates selling 75% or more of the shares of our common stock to non-affiliates, (B) the Starwood Fund or its affiliates owning less than 25% of the total outstanding shares of our common stock, (C) our dissolution and (D) (x) the sale by the Starwood Fund or its affiliates of 25% or more of their shares of our common stock to non-affiliates and (y) the disposition of substantially all of our assets to non-affiliates. Each of the foregoing vesting provisions is subject to the recipient’s continued employment through the applicable vesting date. As described under “Principal Stockholders,” the members of TPH LLC, including our named executive officers (in their capacities as common unit members and Incentive Unit Holders), will receive an aggregate of shares of our common stock as part of our formation transactions. This is expected to include the shares of restricted stock referred to in this footnote. See “Principal Stockholders.”

The awards that we will grant to our named executive officers upon the completion of this offering under our 2013 Long-Term Incentive Plan are described below under “2013 Long-Term Incentive Plan—Initial Awards.”

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Director Compensation

For the fiscal year ended December 31, 2011, members of the board of managers of TPH LLC received no compensation for services rendered as such members.

Upon the completion of this offering, our board of directors will establish a compensation program for our non-employee directors. Pursuant to this compensation program, we will pay the following fees to each of our non-employee directors:

•

an annual cash retainer of $ ;

•

an initial grant of restricted stock units upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan, which restricted stock units will vest in equal installments annually over years; once vested, the restricted stock units will be settled for an equal number of shares of our common stock;

•

at the time of each annual meeting of our stockholders, each non-employee director who will continue to serve on our board of directors will receive an annual grant of options to purchase shares of common stock pursuant to our 2013 Long-Term Incentive Plan, which options will vest in equal installments annually over years, if and as determined by our board of directors;

•

an additional annual cash retainer of $ to the chair of our audit committee;

•

an additional annual cash retainer of $ to the chair of our compensation committee;

•

an additional annual cash retainer of $ to the chair of our nominating and corporate governance committee; and

•

$ for each meeting attended in person and $ for each telephonic meeting.

We will also reimburse our non-employee directors for reasonable out-of-pocket expenses incurred in connection with the performance of their duties as directors, including without limitation travel expenses in connection with their attendance in-person at board and committee meetings. Pursuant to our 2013 Long-Term Incentive Plan, any non-employee director elected or appointed to our board of directors for the first time following the completion of this offering will receive an initial grant of restricted stock units, which restricted stock units will vest in equal installments annually over years. Once vested, the restricted stock units will be settled for an equal number of shares of our common stock. Directors who are employees will not receive any compensation for their services as directors.

Barry Sternlicht, the chairman of our board, and J. Marc Perrin, a member of our board, have each waived receipt of the initial grant of restricted stock units referenced above. In addition, for as long as the Starwood Fund beneficially owns shares of our common stock, Mr. Sternlicht and Mr. Perrin shall waive any directors’ fees and grants that would otherwise be payable or made, as the case may be, to them in connection with their service on our board of directors. In the event that the Starwood Fund ceases to beneficially own any shares of our common stock, Messrs. Sternlicht and Perrin may elect to receive such fees and grants on a prospective basis.

2013 Long-Term Incentive Plan

Prior to the completion of this offering, our board will have adopted, and the members of TPH LLC will have approved, our 2013 Long-Term Incentive Plan to attract and retain directors, officers, employees and other service providers. Our 2013 Long-Term Incentive Plan provides for the grant of equity-based awards, including options to purchase shares of common stock, stock appreciation rights, common stock, restricted stock, restricted stock units and performance awards.

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Administration of our 2013 Long-Term Incentive Plan and Eligibility

Our 2013 Long-Term Incentive Plan will be administered by our compensation committee, which may delegate certain of its authority under our 2013 Long-Term Incentive Plan to our board of directors or, subject to applicable law, to our Chief Executive Officer or such other executive officer as our compensation committee deems appropriate; provided, that our compensation committee may not delegate its authority under our 2013 Long-Term Incentive Plan to our Chief Executive Officer or any other executive officer with regard to the selection for participation in our 2013 Long-Term Incentive Plan of an officer, director or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, price or amount of an award to such an officer, director or other person.

Our compensation committee has the authority to make awards to eligible participants, which includes our officers, directors, employees, consultants, agents and independent contractors, and persons expected to become our officers, directors, employees, consultants, agents and independent contractors. Our compensation committee also has the authority to determine what form the awards will take, the amount and timing of the awards and all other terms and conditions of the awards.

Share Authorization

The number of shares of our common stock that may be issued under our 2013 Long-Term Incentive Plan is shares, of which no more than shares of our common stock in the aggregate may be issued in connection with incentive stock options (which generally are stock options that meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)). The number of shares of our common stock available under our 2013 Long-Term Incentive Plan shall be reduced by the sum of the aggregate number of shares of common stock which become subject to outstanding options, outstanding stock appreciation rights, outstanding stock awards and outstanding performance-related awards. As of the first day of each calendar year beginning after the effective date of our 2013 Long-Term Incentive Plan, the number of shares of our common stock available for all awards under our 2013 Long-Term Incentive Plan, other than incentive stock options, shall automatically increase by % of the number of shares of our common stock that are issued and outstanding as of such date, unless our compensation committee approves an increase of a lesser percentage prior to such date. To the extent that shares of our common stock subject to an outstanding option, stock appreciation right, stock award or performance award granted under our 2013 Long-Term Incentive Plan or any predecessor plan are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award or the settlement of such award in cash, then such shares of our common stock generally shall again be available under our 2013 Long-Term Incentive Plan.

In the event of any equity restructuring that causes the per share value of shares of our common stock to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary dividend, then our compensation committee will appropriately adjust the number and class of securities available under our 2013 Long-Term Incentive Plan and the terms of each outstanding award under our 2013 Long-Term Incentive Plan. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization or partial or complete liquidation, our compensation committee may make such equitable adjustments as it determines to be appropriate and equitable to prevent dilution or enlargement of rights of participants. The decision of our compensation committee regarding any such adjustment shall be final, binding and conclusive.

Stock Options

Our 2013 Long-Term Incentive Plan authorizes the grant of incentive stock options and options that do not qualify as incentive stock options, except that incentive stock options will be granted only to persons who are our employees or employees of one of our subsidiaries, in accordance with Section 422 of the Code. The exercise price of each option will be determined by our compensation committee, provided that the price cannot be less than 100% of the fair market value of the shares of our common stock on the date on which the option is granted

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(or 110% of the shares’ fair market value on the grant date in the case of an incentive stock option granted to an individual who is a “ten percent stockholder” under Sections 422 and 424 of the Code). The term of an option cannot exceed ten years from the date of grant (or five years in the case of an incentive stock option granted to a “ten percent stockholder”).

Stock Appreciation Rights

Our 2013 Long-Term Incentive Plan authorizes the grant of stock appreciation rights. A stock appreciation right provides the recipient with the right to receive, upon exercise of the stock appreciation right, cash, shares of our common stock or a combination of the two. The amount that the recipient will receive upon exercise of the stock appreciation right generally will equal the excess of the fair market value of the shares of our common stock on the date of exercise over the shares’ fair market value on the date of grant. Stock appreciation rights will become exercisable in accordance with terms determined by our compensation committee. Stock appreciation rights may be granted in tandem with an option grant or as independent grants. The term of a stock appreciation right cannot exceed, in the case of a tandem stock appreciation right, the expiration, cancellation or other termination of the related option and, in the case of a free-standing stock appreciation right, ten years from the date of grant.

Stock Awards

Our 2013 Long-Term Incentive Plan also provides for the grant of common stock, restricted stock and restricted stock units. Our compensation committee will determine the number of shares of common stock subject to a restricted stock award or restricted stock unit and the restriction period, performance period (if any), the performance measures (if any) and the other terms applicable to a restricted stock award under our 2013 Long-Term Incentive Plan. Restricted stock units confer on the participant the right to receive one share of common stock or, in lieu thereof, the fair market value of such share of common stock in cash. The holders of awards of restricted stock will be entitled to receive dividends, and the holders of awards of restricted stock units may be entitled to receive dividend equivalents.

Performance Awards

Our 2013 Long-Term Incentive Plan also authorizes the grant of performance awards. Performance awards represent the participant’s right to receive an amount of cash, shares of our common stock, or a combination of both, contingent upon the attainment of specified performance measures within a specified period. Our compensation committee will determine the applicable performance period, the performance goals and such other conditions that apply to the performance award.

Change in Control

Subject to the terms of the applicable award agreement, upon a “change in control” (as defined in our 2013 Long-Term Incentive Plan), our compensation committee may, in its discretion, determine whether some or all outstanding options and stock appreciation rights shall become exercisable in full or in part, whether the restriction period and performance period applicable to some or all outstanding restricted stock awards and restricted stock unit awards shall lapse in full or in part and whether the performance measures applicable to some or all outstanding awards shall be deemed to be satisfied. Our compensation committee may further require that shares of stock of the corporation resulting from such a change in control, or a parent corporation thereof, be substituted for some or all of our shares of common stock subject to an outstanding award and that any outstanding awards, in whole or in part, be surrendered to us by the holder, to be immediately cancelled by us, in exchange for a cash payment, shares of capital stock of the corporation resulting from or succeeding us or a combination of both cash and such shares of stock.

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Termination; Amendment

Our 2013 Long-Term Incentive Plan will automatically expire on the tenth anniversary of its effective date. Our board of directors may terminate or amend our 2013 Long-Term Incentive Plan at any time, subject to any requirement of stockholder approval required by applicable law, rule or regulation. Our compensation committee may amend the terms of any outstanding award under our 2013 Long-Term Incentive Plan at any time. No amendment or termination of our 2013 Long-Term Incentive Plan or any outstanding award may adversely affect any of the rights of an award holder without the holder’s consent.

Initial Awards

Upon the completion of this offering, we will grant the following awards under our 2013 Long-Term Incentive Plan to our executive officers, director nominees and other related parties:

•

Messrs. Bauer, Mitchell and Grubbs, our Chief Executive Officer, our President and Chief Operating Officer, and our Chief Financial Officer, respectively, will be granted , and restricted stock units, respectively, and options to purchase , and shares of our common stock, respectively, at an exercise price of $ per share, which restricted stock units and options will vest ratably over years. Once vested, the restricted stock units will be settled for an equal number of shares of our common stock.

•

Each of our director nominees will be granted restricted stock units, for an aggregate of restricted stock units, which restricted stock units will vest ratably over years. Once vested, the restricted stock units will be settled for an equal number of shares of our common stock. Barry Sternlicht, the chairman of our board, and J. Marc Perrin, a member of our board, have each waived receipt of the foregoing grant of restricted stock units. In addition, for as long as the Starwood Fund beneficially owns shares of our common stock, Mr. Sternlicht and Mr. Perrin shall waive any directors’ fees and grants that would otherwise be payable or made, as the case may be, to them in connection with their service on our board of directors.

Registration Statement on Form S-8

Rule 10b5-1 Sales Plan

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our policy on insider trading and communications with the public. Our directors and executive officers may not establish any such plan prior to the expiration of the lock-up agreements described under “Underwriting.”

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Upon the completion of this offering, our executive officers, directors, director nominees and other related parties will receive material financial and other benefits, including the following:

Employment Agreements

Douglas Bauer, Thomas Mitchell and Michael Grubbs will serve as our Chief Executive Officer, our President and Chief Operating Officer, and our Chief Financial Officer, respectively. Upon the completion of this offering, we will enter into new employment agreements with each of these officers, which employment agreements will provide for salary, bonus and other benefits, including the restricted stock units and options to purchase shares of our common stock to be granted to these officers upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan, and severance upon a termination of employment under certain circumstances. We may enter into similar employment arrangements with certain executive officers that we hire in the future. See “Executive and Director Compensation—Employment Agreements” for a description of the material terms of the employment agreements.

Grants Under our 2013 Long-Term Incentive Plan

Messrs. Bauer, Mitchell and Grubbs, our Chief Executive Officer, our President and Chief Operating Officer, and our Chief Financial Officer, respectively, will be granted , and restricted stock units, respectively, and options to purchase , and shares of our common stock, respectively, at an exercise price of $ per share, in each case upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan, which restricted stock units and options will vest ratably over years. Once vested, the restricted stock units will be settled for an equal number of shares of our common stock.

Each of our director nominees will be granted restricted stock units, for an aggregate of restricted stock units, upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan, which restricted stock units will vest ratably over years. Once vested, the restricted stock units will be settled for an equal number of shares of our common stock. Barry Sternlicht, the chairman of our board, and J. Marc Perrin, a member of our board, have each waived receipt of the foregoing grant of restricted stock units. In addition, for as long as the Starwood Fund beneficially owns shares of our common stock, Mr. Sternlicht and Mr. Perrin shall waive any directors’ fees and grants that would otherwise be payable or made, as the case may be, to them in connection with their service on our board of directors.

Indemnification Agreements

Upon the completion of this offering, we will enter into an indemnification agreement with each of our officers and directors. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. See “Description of Capital Stock—Limitations on Liability, Indemnification of Officers and Directors and Insurance.”

Registration Rights

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demand registration rights to have the registrable shares registered for resale, and, in certain circumstances, the right to “piggy-back” the registrable shares in registration statements we might file in connection with any future public offering.

Notwithstanding the foregoing, any registration will be subject to cutback provisions, and we will be permitted to suspend the use, from time to time, of the prospectus that is part of the registration statement (and therefore suspend sales under the registration statement) for certain periods, referred to as “blackout periods.”

Pending Acquisition from Entity Managed by Affiliate of Starwood Capital Group

We intend to use a portion of the net proceeds from this offering to acquire 149 entitled lots located in Castle Rock, Colorado from an entity managed by an affiliate of Starwood Capital Group for a purchase price of approximately $8.6 million. We entered into a contract to acquire these lots after participating in a competitive bidding process and Mr. Sternlicht recused himself from any aspect of the acquisition process.

Reimbursement of Expenses to Starwood Capital Group

Although we do not pay any fees to Starwood Capital Group or its affiliates, we have reimbursed Starwood Capital Group for certain due diligence expenses and for the out-of-pocket travel and lodging expenses of representatives of the Starwood Fund for their attendance at board and other meetings and in connection with site visits or other business of our company. We reimbursed Starwood Capital Group $3,966, $79,464 and $0 during the nine-month period ended September 30, 2012 and the years ended December 31, 2011 and 2010, respectively.

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CONFLICTS OF INTEREST

Upon the completion of this offering, conflicts of interest may exist between our directors and officers and other related parties and our company as described below.

In addition to the acquisition of lots in Castle Rock, Colorado from an entity managed by an affiliate of Starwood Capital Group referred to above under “Certain Relationships and Related Party Transactions,” we may in the future acquire additional land from affiliates of Starwood Capital Group. Any such acquisitions will be separately considered for approval by our independent directors.

We will enter into employment agreements with Douglas Bauer, our Chief Executive Officer, Thomas Mitchell, our President and Chief Operating Officer, and Michael Grubbs, our Chief Financial Officer, effective upon the completion of this offering, pursuant to which they will devote their full business time and attention to our affairs. See “Executive and Director Compensation—Employment Agreements.” These employment agreements were not negotiated on an arm’s-length basis. We may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with the individuals party to these agreements.

Upon the completion of this offering, we intend to adopt policies to reduce potential conflicts of interest. Generally, we expect that our policies will provide that any transaction in which any of our directors, officers or employees has an interest must be approved by a vote of a majority of our disinterested directors. We cannot assure you that these policies will be successful in eliminating the influence of conflicts of interest. These policies may be amended from time to time at the discretion of our board of directors, without a vote of our stockholders.

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PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of our common stock immediately prior to and immediately after the completion of this offering by (1) each of our directors and director nominees, (2) each of our executive officers, (3) all of our directors, director nominees and executive officers as a group and (4) each person known by us to be the beneficial owner of 5% or more of our outstanding common stock.

To our knowledge, each person named in the table has sole voting and investment power with respect to all of the securities shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. The number of securities shown represents the number of securities the person “beneficially owns,” as determined by the rules of the SEC. The SEC has defined “beneficial” ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power. A security holder is also deemed to be, as of any date, the beneficial owner of all securities that such security holder has the right to acquire within 60 days after that date through (1) the exercise of any option, warrant or right, (2) the conversion of a security, (3) the power to revoke a trust, discretionary account or similar arrangement, or (4) the automatic termination of a trust, discretionary account or similar arrangement.

The percentages reflect beneficial ownership immediately prior to and immediately after the completion of this offering as determined in accordance with Rule 13d-3 under the Exchange Act and are based on shares of our common stock outstanding as of the date immediately prior to the completion of this offering and shares of our common stock outstanding as of the date immediately following the completion of this offering, in each case after giving effect to our formation transactions. The percentages assume no exercise by the underwriters of their option to purchase additional shares. Except as noted below, the address for all beneficial owners in the table below is 19520 Jamboree Road, Suite 200, Irvine, California 92612.

Amount and Nature of Beneficial Ownership

Immediately Prior
to this Offering

Immediately After
this Offering

Name and Address of Beneficial Owner

Shares Owned

Percentage

Shares Owned

Percentage

Directors, Director Nominees and Executive Officers:

Mr. Barry S. Sternlicht ⁽¹⁾⁽⁶⁾

Mr. Douglas F. Bauer ⁽²⁾

Mr. Thomas J. Mitchell ⁽³⁾

Mr. Michael D. Grubbs ⁽⁴⁾

Mr. J. Marc Perrin ⁽¹⁾

Mr. Richard D. Bronson ⁽⁵⁾

Mr. Wade H. Cable ⁽⁵⁾

Mr. Steven J. Gilbert ⁽⁵⁾

Mr. Thomas B. Rogers ⁽⁵⁾

All directors, director nominees and executive officers as a group (9 persons)

5% or more Stockholders:

VIII/TPC Holdings, L.L.C. ⁽⁶⁾

Represents less than 1% of the number of shares of our common stock outstanding.

⁽¹⁾

Mr. Sternlicht and Mr. Perrin have each waived receipt of the restricted stock units that would have been granted to them upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan in connection with their service on our board of directors.

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⁽²⁾

Includes shares of our common stock to be received by Mr. Bauer, in his capacity as a common member and Incentive Unit Holder in TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus). Excludes (i) shares of restricted stock to be received by Mr. Bauer, in his capacity as an Incentive Unit Holder of TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus), which shares of restricted stock will vest on the earlier of (A) the Starwood Fund or its affiliates selling 75% or more of their shares of our common stock to non-affiliates, (B) the Starwood Fund or its affiliates owning less than 25% of the total outstanding shares of our common stock, (C) our dissolution and (D) (x) the sale by the Starwood Fund or its affiliates of 25% or more of their shares of our common stock to non-affiliates and (y) the disposition of substantially all of our assets to non-affiliates, (ii) shares of restricted stock to be received by Mr. Bauer, in his capacity as an Incentive Unit Holder in TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus), which shares of restricted stock will vest in equal quarterly installments through September 24, 2014, (iii) restricted stock units to be granted to Mr. Bauer upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan and (iv) options to purchase shares of our common stock to be granted to Mr. Bauer upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan. See “Executive and Director Compensation—Outstanding Equity Awards as of December 31, 2011” for additional information regarding the shares of restricted stock.

⁽³⁾

Includes shares of our common stock to be received by Mr. Mitchell, in his capacity as a common member and Incentive Unit Holder in TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus). Excludes (i) shares of restricted stock to be received by Mr. Mitchell, in his capacity as an Incentive Unit Holder of TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus), which shares of restricted stock will vest on the earlier of (A) the Starwood Fund or its affiliates selling 75% or more of their shares of our common stock to non-affiliates, (B) the Starwood Fund or its affiliates owning less than 25% of the total outstanding shares of our common stock, (C) our dissolution and (D) (x) the sale by the Starwood Fund or its affiliates of 25% or more of their shares of our common stock to non-affiliates and (y) the disposition of substantially all of our assets to non-affiliates, (ii) shares of restricted stock to be received by Mr. Mitchell, in his capacity as an Incentive Unit Holder in TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus), which shares of restricted stock will vest in equal quarterly installments through September 24, 2014, (iii) restricted stock units to be granted to Mr. Mitchell upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan and (iv) options to purchase shares of our common stock to be granted to Mr. Mitchell upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan. See “Executive and Director Compensation—Outstanding Equity Awards as of December 31, 2011” for additional information regarding the shares of restricted stock.

⁽⁴⁾

Includes shares of our common stock to be received by Mr. Grubbs, in his capacity as a common member and Incentive Unit Holder in TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus). Excludes (i) shares of restricted stock to be received by Mr. Grubbs, in his capacity as an Incentive Unit Holder of TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus), which shares of restricted stock will vest on the earlier of (A) the Starwood Fund or its affiliates selling 75% or more of their shares of our common stock to non-affiliates, (B) the Starwood Fund or its affiliates owning less than 25% of the total outstanding shares of our common stock, (C) our dissolution and (D) (x) the sale by the Starwood Fund or its affiliates of 25% or more of their shares of our common stock to non-affiliates and (y) the disposition of substantially all of our assets to non-affiliates, (ii) shares of restricted stock to be received by Mr. Grubbs, in his capacity as an Incentive Unit Holder in TPH LLC, as part of our formation transactions (based upon the midpoint of the price range set forth on the cover page of this prospectus), which shares of restricted stock will vest in equal quarterly

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installments through September 24, 2014, (iii) restricted stock units to be granted to Mr. Grubbs upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan and (iv) options to purchase shares of our common stock to be granted to Mr. Grubbs upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan. See “Executive and Director Compensation—Outstanding Equity Awards as of December 31, 2011” for additional information regarding the shares of restricted stock.

⁽⁵⁾

Excludes restricted stock units to be granted to the director nominee upon the completion of this offering pursuant to our 2013 Long-Term Incentive Plan.

⁽⁶⁾

VIII/TPC Holdings, L.L.C. is one of the wholly-owned subsidiaries that constitutes the Starwood Fund. The Starwood Fund is managed by an owned affiliate of Starwood Capital Group. Barry Sternlicht is the controlling partner of Starwood Capital Group, and may be deemed to share voting power and investment control over the shares of our common stock held by the Starwood Fund. Mr. Sternlicht disclaims beneficial ownership of the shares of our common stock held by the Starwood Fund except to the extent of any pecuniary interest therein.

Special Note on Ownership of Our Common Stock

The allocation of the shares of our common stock among the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders depends upon a calculation of an internal rate of return to the members of TPH LLC (other than the Incentive Unit Holders) resulting from this offering, which in turn depends upon the timing of this offering and the value per share of our common stock. Under the operating agreement of TPH LLC, that value per share of our common stock is based initially upon the midpoint of the price range set forth on the cover page of this prospectus. Such value is subject to adjustment following the completion of this offering such that the number of shares that are allocated to the members of TPH LLC (other than the Incentive Unit Holders), on the one hand, may increase or decrease and the number of shares that are allocated to the Incentive Unit Holders, on the other hand, may correspondingly decrease or increase in an amount limited to up to 1.0% of the aggregate number of shares of our common stock outstanding immediately following the completion of this offering. The adjustment is based upon (1) the average of the closing price of the shares of our common stock on the New York Stock Exchange for the ten trading-day period initially following this offering and (2) the number of shares of our common stock outstanding on the date of the completion of this offering. Although the allocation of shares of our common stock among the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders is subject to a minor adjustment based on the foregoing, the number of shares of our common stock received by the members of TPH LLC and the Incentive Unit Holders in the aggregate will not change as a result of such adjustment.

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Based upon the foregoing, assuming this offering closes on , 2013, the initial allocation of the shares of our common stock that will be received by the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders will be as follows:


Name of Member of TPH LLC	Initial Number of Shares to be Received	Percentage of Outstanding Shares
The Starwood Fund			%
Mr. Douglas F. Bauer ⁽¹⁾			%
Mr. Thomas J. Mitchell ⁽¹⁾			%
Mr. Michael D. Grubbs ⁽¹⁾			%
Other Member			%

Total			%

⁽¹⁾

, and of the shares that will be received by Messrs. Bauer, Mitchell and Grubbs, respectively, will be shares of restricted stock. See “Executive and Director Compensation—Outstanding Equity Awards as of December 31, 2011” for additional information regarding these shares of restricted stock.

Following the completion of this offering, an adjustment will be made to the allocation of shares received by the members of TPH LLC (other than the Incentive Unit Holders), on the one hand, and the Incentive Unit Holders, on the other, if the average closing price on the New York Stock Exchange for the ten trading days following this offering is greater than (in which case shares would be reallocated from the members of TPH LLC (other than the Incentive Unit Holders) to the Incentive Unit Holders) or less than (in which case shares would be reallocated from the Incentive Unit Holders to the members of TPH LLC (other than the Incentive Unit Holders)) the midpoint of the price range set forth on the cover page of this prospectus. The range of shares resulting from this adjustment that the members of TPH LLC (other than the Incentive Unit Holders) and the Incentive Unit Holders would be allocated would be as follows (assuming this offering closes on , 2013):


Name of Member of TPH LLC	Final Allocation Range of Shares		Range of Percentages of Outstanding Shares
The Starwood Fund		—	% — %
Mr. Douglas F. Bauer ⁽¹⁾		—	% — %
Mr. Thomas J. Mitchell ⁽¹⁾		—	% — %
Mr. Michael D. Grubbs ⁽¹⁾		—	% — %
Other Member		—	% — %

Total		—	% — %

⁽¹⁾

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DESCRIPTION OF CAPITAL STOCK

The following description is intended as a summary of our certificate of incorporation (which we refer to as our “charter”) and our bylaws, which will become effective prior to the completion of this offering and which will be filed as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of the DGCL.

General

Prior to the completion of this offering, TRI Pointe Homes, LLC will be converted from a Delaware limited liability company into a Delaware corporation and renamed TRI Pointe Homes, Inc. Upon the completion of this offering and our formation transactions, our authorized capital stock will consist of 500,000,000 shares of common stock, par value of $0.01 per share, and 50,000,000 shares of preferred stock. Immediately prior to this offering, after giving effect to our formation transactions, there are shares of our common stock outstanding. Upon the completion of this offering, as a result of the issuance of shares in this offering, there will be shares of our common stock issued and outstanding and no shares of preferred stock issued and outstanding.

Common Stock

Shares of our common stock have the following rights, preferences and privileges:

•

Voting Rights . Each outstanding share of common stock entitles its holder to one vote on all matters submitted to a vote of our stockholders, including the election of directors. There are no cumulative voting rights. Generally, all matters to be voted on by stockholders must be approved by a majority of the votes cast by the shares of common stock present in person or represented by proxy and entitled to vote.

•

Dividends. Subject to the rights of the holders of any preferred stock which may be outstanding from time to time, the holders of common stock are entitled to receive dividends as, when and if dividends are declared by our board of directors out of assets legally available for the payment of dividends. We currently intend to retain our future earnings, if any, to finance the development and expansion of our business and, therefore, do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments and such other factors as our board of directors deems relevant.

•

Liquidation. In the event of a liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, after payment of our liabilities and obligations to creditors and any holders of preferred stock, our remaining assets will be distributed ratably among the holders of shares of common stock on a per share basis.

•

Rights and Preferences. Our common stock has no preemptive, redemption, conversion or subscription rights. The rights, powers, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

•

Merger. In the event we merge or consolidate with or into another entity, holders of each share of common stock will be entitled to receive the same per share consideration.

We have applied to list the shares of our common stock on the New York Stock Exchange under the symbol “TPH.”

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Preferred Stock

Our charter provides that our board of directors has the authority, without action by the stockholders, to designate and issue up to 50,000,000 shares of preferred stock in one or more classes or series and to fix for each class or series the powers, rights, preferences and privileges of each series of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any class or series, which may be greater than the rights of the holders of the common stock. There will be no shares of preferred stock outstanding immediately after the completion of this offering. Any issuance of shares of preferred stock could adversely affect the voting power of holders of common stock, and the likelihood that the holders will receive dividend payments and payments upon liquidation could have the effect of delaying, deferring or preventing a change in control. We have no present plans to issue any shares of preferred stock.

Anti-Takeover Effects of Our Charter, Our Bylaws and Delaware Law

Some provisions of Delaware law and our charter and our bylaws, as will be in effect upon the completion of this offering, contain provisions that could have the effect of delaying, deterring or preventing another party from acquiring or seeking to acquire control of us. These provisions are intended to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage anyone seeking to acquire control of us to negotiate first with our board of directors. However, these provisions may also delay, deter or prevent a change in control or other takeover of our company that our stockholders might consider to be in their best interests, including transactions that might result in a premium being paid over the market price of our common stock and also may limit the price that investors are willing to pay in the future for our common stock. These provisions may also have the effect of preventing changes in our management.

Our Charter and Bylaws

Our charter and/or bylaws include anti-takeover provisions that:

•

require that actions to be taken by our stockholders may be taken only at an annual or special meeting of our stockholders and not by written consent;

•

specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors or our chief executive officer;

•

establish advance notice procedures for stockholders to submit nominations of candidates for election to our board of directors and other proposals to be brought before a stockholders meeting;

•

provide that our bylaws may be amended by our board of directors without stockholder approval;

•

allow our directors to establish the size of our board of directors by action of our board, subject to a minimum of three members;

•

do not give the holders of our common stock cumulative voting rights with respect to the election of directors; and

•

prohibit us from engaging in certain business combinations with any “interested stockholder” unless specified conditions are satisfied as described below under “—Business Combinations.”

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Business Combinations

We have opted out of Section 203 of the DGCL, which regulates corporate takeovers. However, our charter contains provisions that are similar to Section 203 of the DGCL. Specifically, our charter provides that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the person became an interested stockholder, unless:

•

Generally, a business combination includes a merger, consolidation, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an interested stockholder is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock. However, in the case of our company, the Starwood Fund and any of its affiliates and subsidiaries and any of their respective permitted transferees receiving 15% or more of our voting stock will not be deemed to be interested stockholders regardless of the percentage of our voting stock owned by them. This provision could prohibit or delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us.

Corporate Opportunity

Our charter provides that we renounce any interest or expectancy in, or in being offered an opportunity to participate in, any business opportunity that may be from time to time presented to the Starwood Fund or any of its affiliates and subsidiaries (other than us and our subsidiaries), officers, directors, agents, stockholders, members, partners or employees and that may be a business opportunity for the Starwood Fund or any of its affiliates and subsidiaries, even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. No such person will be liable to us for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person, acting in good faith, pursues or acquires any such business opportunity, directs any such business opportunity to another person or fails to present any such business opportunity, or information regarding any such business opportunity, to us unless, in the case of any such person who is our director or officer, any such business opportunity is expressly offered to such director or officer solely in his or her capacity as our director or officer. Neither the Starwood Fund nor any of its affiliates or subsidiaries has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any of our subsidiaries.

These provisions will continue to apply until no person who is our director or officer is also a director, officer, member, partner or employee of the Starwood Fund or any of its affiliates or subsidiaries (other than us and our subsidiaries).

Limitations on Liability, Indemnification of Officers and Directors and Insurance

The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors. Our charter and bylaws include provisions that indemnify, to the fullest extent allowable under the DGCL, the personal liability of directors or officers for monetary damages for actions taken as our director or officer, or for serving at our request as a director or officer or another position at another corporation or enterprise, as the case may be.

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Our charter and bylaws also provide that we must indemnify and advance reasonable expenses to our directors and officers, subject to our receipt of an undertaking from the indemnified party as may be required under the DGCL. We are also expressly authorized to carry directors’ and officers’ insurance to protect us, our directors, officers and certain employees for some liabilities. The limitation of liability and indemnification provisions in our charter may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. However, these provisions do not limit or eliminate our rights, or those of any stockholder, to seek non-monetary relief such as injunction or rescission in the event of a breach of a director’s duty of care. The provisions will not alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. There is currently no pending material litigation or proceeding against any of our directors, officers or employees for which indemnification is sought.

We expect to maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (2) to us with respect to indemnification payments that we may make to such directors and officers.

Upon the completion of this offering, we will enter into an indemnification agreement with each of our officers and directors. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We believe that the limitation of liability and indemnification provisions in our charter and bylaws and the indemnification agreements will facilitate our ability to continue to attract and retain qualified individuals to serve as directors and officers.

Authorized but Unissued Shares

Our authorized but unissued shares of common stock will be available for future issuance without your approval. We may use additional shares for a variety of purposes, including future offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Transfer Agent and Registrar

The transfer agent and registrar for the shares of our common stock will be American Stock Transfer & Trust Company, LLC.

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SHARES ELIGIBLE FOR FUTURE SALE

General

Upon the completion of this offering, we will have outstanding shares of our common stock ( shares if the underwriters’ option to purchase additional shares is exercised in full).

Of these shares, the shares sold in this offering ( shares if the underwriters’ option to purchase additional shares is exercised in full) will be freely transferable without restriction or further registration under the Securities Act. The remaining shares of our common stock issued as part of our formation transactions will be “restricted shares” as defined in Rule 144 of the Securities Act.

Prior to this offering there has been no market for shares of our common stock. Although we have applied to list the shares of our common stock on the New York Stock Exchange under the symbol “TPH,” an active trading market for the shares of our common stock may never develop or if one develops, it may not be sustained following this offering. No assurance can be given as to (1) the likelihood that an active market for common stock will develop, (2) the liquidity of any such market, (3) the ability of the stockholders to sell their shares or (4) the prices that stockholders may obtain for any of their shares. No prediction can be made as to the effect, if any, that future sales of shares of our common stock, or the availability of shares of our common stock for future sale, will have on the market price prevailing from time to time. Sales of substantial amounts of our common stock, or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock. See “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock.”

Rule 144

After giving effect to our formation transactions and this offering, shares of our outstanding common stock will be “restricted” securities under the meaning of Rule 144 under the Securities Act, and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemption provided by Rule 144.

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale and who has beneficially owned shares considered to be restricted securities under Rule 144 for at least six months would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned shares considered to be restricted securities under Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

An affiliate of ours who has beneficially owned shares of our common stock for at least six months would be entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:

•

1% of the shares of our common stock then outstanding, which will equal approximately shares immediately after this offering ( shares if the underwriters exercise their option to purchase additional shares in full); or

•

the average weekly trading volume of our common stock on the New York Stock Exchange during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC;

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and have filed all required reports during that time period. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to manner of sale provisions, notice requirements and the availability of current public information about us.

2013 Long-Term Incentive Plan

We have adopted an equity incentive plan. The number of shares of our common stock that may be issued under our 2013 Long-Term Incentive Plan is shares. As of the first day of each calendar year beginning

154

after the effective date of our 2013 Long-Term Incentive Plan, the number of shares of our common stock available for all awards under our 2013 Long-Term Incentive Plan, other than incentive stock options, shall automatically increase by % of the number of shares of our common stock that are issued and outstanding as of such date, unless our compensation committee approves an increase of a lesser percentage prior to such date.

Upon the completion of this offering, we expect to grant an aggregate of restricted stock units to our executive officers and director nominees, as well as options to purchase an aggregate of shares of our common stock to our executive officers, pursuant to our 2013 Long-Term Incentive Plan. We expect to have shares of our common stock reserved for future issuance under our 2013 Long-Term Incentive Plan, subject to increase as noted in the prior paragraph. For a description of our 2013 Long-Term Incentive Plan and the initial awards to be made pursuant to such plan, see “Executive and Director Compensation—2013 Long-Term Incentive Plan.”

Registration Rights

Lock-Up Agreements

In connection with this offering, we, our officers and directors, the Starwood Fund and the third-party investor in TPH LLC have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Citigroup Global Markets Inc., dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock, subject to certain exceptions. Citigroup Global Markets Inc. in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice. If the restrictions under the lock-up agreements are waived, shares of our common stock may become available for resale into the market, subject to applicable law, which could reduce the market price for our common stock. See “Underwriting.”

Other Limitations on Sales by our Management Team

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CERTAIN MATERIAL FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain material United States federal income tax consequences to you of the acquisition, ownership and disposition of shares of our common stock offered pursuant to this prospectus. This discussion is not a complete analysis of all of the potential United States federal income tax consequences relating thereto, nor does it address any estate and gift tax consequences or any tax consequences arising under any state, local or foreign tax laws, or any other United States federal tax laws. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS all as in effect as of the date of this prospectus. These authorities may change, possibly retroactively, or be interpreted differently, resulting in United States federal income tax consequences different from those discussed below. No ruling has been or will be sought from the IRS with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the acquisition, ownership or disposition of the shares of our common stock, or that any such contrary position would not be sustained by a court.

This discussion is limited to holders who purchase shares of our common stock pursuant to this prospectus and who hold the shares of our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion also does not consider any specific facts or circumstances that may be relevant to holders subject to special rules under the United States federal income tax laws, including, without limitation:

•

financial institutions, banks and thrifts;

•

insurance companies;

•

tax-exempt organizations;

•

“S” corporations, partnerships or other pass-through entities;

•

traders in securities that elect to mark to market;

•

regulated investment companies and real estate investment trusts;

•

broker-dealers or dealers in securities or currencies;

•

United States expatriates;

•

persons subject to the alternative minimum tax;

•

persons holding our stock as a hedge against currency risks or as a position in a straddle; or

•

U.S. holders (as defined below) whose functional currency is not the United States dollar.

If a partnership (or other entity taxed as a partnership for United States federal income tax purposes) holds shares of our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership, and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the specific United States federal income tax consequences to them.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF SHARES OF OUR COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS AND ANY OTHER UNITED STATES FEDERAL TAX LAWS.

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For purposes of this discussion, a “U.S. holder” is any beneficial owner of shares of our common stock who, for United States federal income tax purposes, is:

•

an individual who is a citizen or resident of the United States;

•

a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or in the District of Columbia;

•

an estate the income of which is subject to United States federal income taxation regardless of its source; or

•

a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or if the trust has a valid election in place to be treated as a United States person.

A “non-U.S. holder” is any beneficial owner of our common stock that is neither a “U.S. holder” nor a partnership.

Taxation of U.S. Holders

Distributions on Shares of Our Common Stock

If we make cash or other property distributions on shares of our common stock, such distributions generally will constitute dividends for United States federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. Subject to certain limitations, these distributions may be eligible for the dividends-received deduction in the case of U.S. holders that are corporations. In general, a dividend distribution to a corporate U.S. holder may qualify for the 70% dividends received deduction if the U.S. holder owns less than 20% of the voting power and value of our stock. Distributions in excess of our current and accumulated earnings and profits, as determined under United States federal income tax principles, will constitute a return of capital and will first be applied against and reduce a U.S. holder’s tax basis in the shares of our common stock, but not below zero. Distributions in excess of our current and accumulated earnings and profits and in excess of a U.S. holder’s tax basis in its shares of our common stock will be taxable as capital gain realized on the sale or other disposition of the shares of our common stock and will be treated as described under “—Sale or Other Taxable Dispositions of Shares of Our Common Stock” below.

Sale or Other Taxable Dispositions of Shares of Our Common Stock

If a U.S. holder sells or disposes of shares of our common stock, such U.S. holder generally will recognize gain or loss for United States federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale or other disposition and the U.S. holder’s adjusted basis in the shares of our common stock for United States federal income tax purposes. This gain or loss generally will be long-term capital gain or loss if the U.S. holder has held the shares of our common stock for more than one year. The deductibility of capital losses is subject to limitations.

Backup Withholding and Information Reporting

Information reporting will generally apply to a U.S. holder with respect to payments of dividends on shares of our common stock and to certain payments of proceeds on the sale or other disposition of shares of our common stock unless the U.S. holder is an exempt recipient. Certain U.S. holders may be subject to U.S. backup withholding on payments of dividends on shares of our common stock and certain payments of proceeds on the sale or other disposition of shares of our common stock unless the beneficial owner of shares of our common stock furnishes the payor or its agent with a taxpayer identification number, certified under penalties of perjury, and certain other information, or otherwise establishes, in the manner prescribed by law, an exemption from backup withholding.

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U.S. backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a credit against a U.S. holder’s United States federal income tax liability, which may entitle the U.S. holder to a refund, provided the U.S. holder timely furnishes the required information to the IRS.

Medicare Tax

For taxable years beginning after December 31, 2012, a U.S. person that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. person’s “net investment income” for the relevant taxable year and (2) the excess of the U.S. person’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000 depending on the individual’s circumstances). Net investment income generally includes dividends, and net gains from the disposition of common stock, unless such income or gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). A U.S. holder that is an individual, estate or trust should consult its tax advisor regarding the applicability of the Medicare tax to its income and gains in respect of its investment in our common stock.

Taxation of Non-U.S. Holders

Distributions on Shares of Our Common Stock

Distributions that are treated as dividends (see “—Taxation of U.S. Holders—Distributions on Shares of Our Common Stock”) generally will be subject to United States federal withholding tax at a rate of 30% of the gross amount of the dividends, or such lower rate specified by an applicable income tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish to us or our paying agent a valid IRS Form W-8BEN (or applicable successor form) certifying such non-U.S. holder’s qualification for the reduced rate. This certification must be provided to us or our paying agent prior to the payment of dividends and must be updated periodically. Non-U.S. holders that do not timely provide us or our paying agent with the required certification, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

If a non-U.S. holder holds shares of our common stock in connection with the conduct of a trade or business in the United States, and dividends paid on the shares of our common stock are effectively connected with such non-U.S. holder’s United States trade or business (and if required by an applicable income tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the United States), the non-U.S. holder will be exempt from United States federal withholding tax. To claim the exemption, the non-U.S. holder must generally furnish to us or our paying agent a properly executed IRS Form W-8ECI (or applicable successor form).

Any dividends paid on shares of our common stock that are effectively connected with a non-U.S. holder’s United States trade or business (and if required by an applicable income tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the United States) generally will be subject to United States federal income tax on a net income basis at the regular graduated United States federal income tax rates in much the same manner as if such non-U.S. holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

Distributions in excess of our current and accumulated earnings and profits and in excess of a non-U.S. holder’s tax basis in its shares of our common stock may be subject to U.S. federal income tax as gain realized on the sale or other disposition of the shares of our common stock as described under “—Sale or Other Taxable Dispositions of Shares of Our Common Stock” below.

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Sale or Other Taxable Dispositions of Shares of Our Common Stock

Subject to the discussion of backup withholding and withholding tax relating to foreign accounts below, a non-U.S. holder generally will not be subject to United States federal income tax on any gain realized upon the sale or other disposition of the common stock, unless:

•

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, and if required by an applicable income tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the United States;

•

the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition, and certain other requirements are met; or

•

our common stock constitutes a “United States real property interest” (“USRPI”) within the meaning of the Foreign Investment in Real Property Tax Act (“FIRPTA”) by reason of our status as a “United States real property holding corporation” (“USRPHC”) for United States federal income tax purposes.

Gain described in the first bullet point above will be subject to United States federal income tax on a net income basis at the regular graduated United States federal income tax rates in much the same manner as if such non-U.S. holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules.

Gain described in the second bullet point above will be subject to United States federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty), but may be offset by United States source capital losses (even though the individual is not considered a resident of the United States).

With respect to the third bullet point above, because of our anticipated holdings of United States real property interests following the completion of our formation transactions, we believe we will be and will remain a USRPHC for United States federal income tax purposes. Because the determination of whether we are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our other trade or business assets and our foreign real property interests, it is possible we may not remain a USRPHC in the future. As a USRPHC, if a class of our stock is regularly traded on an established securities market (such as the New York Stock Exchange), such stock will be treated as a USRPI only with respect to a non-U.S. holder that actually or constructively holds more than five percent of such class of stock at any time during the shorter of the five-year period preceding the date of disposition or the holder’s holding period for such stock. We anticipate that our common stock will be regularly traded on an established securities market following this offering. However, no assurance can be given in this regard and no assurance can be given that our common stock will remain regularly traded in the future. Non-U.S. holders should consult their tax advisors concerning the consequences of disposing of shares of our common stock.

If gain on the sale or other taxable disposition of shares of our common stock were subject to taxation under FIRPTA as a sale of a USRPI, the non-U.S. holder would be subject to regular United States federal income tax with respect to such gain in the same manner as a taxable U.S. holder (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). In addition, if the sale or other taxable disposition of shares of our common stock is subject to tax under FIRPTA, the purchaser of the stock would be required to withhold and remit to the IRS 10% of the purchase price unless an exception applies. A non-U.S. holder also will be required to file a U.S. federal income tax return for any taxable year in which it realizes a gain from the disposition of our common stock that is subject to U.S. federal income tax.

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Backup Withholding Tax and Information Reporting

We must report annually to each non-U.S. holder of shares of our common stock and to the IRS the amount of payments on the shares of our common stock paid to such non-U.S. holder and the amount of any tax withheld with respect to those payments. These information reporting requirements apply even if no withholding was required because the payments were effectively connected with the non-U.S. holder’s conduct of a United States trade or business, or withholding was reduced or eliminated by an applicable income tax treaty. This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Backup withholding, however, generally will not apply to distribution payments to a non-U.S. holder of shares of our common stock provided the non-U.S. holder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN or IRS Form W-8ECI, or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s United States federal income tax liability, provided the required information is timely furnished to the IRS.

Additional Withholding Tax Relating to Foreign Accounts

Withholding taxes may apply to certain types of payments made to “foreign financial institutions” (as specially defined in the Code) and certain other non-United States entities. Specifically, a 30% withholding tax may be imposed on dividends on, and gross proceeds from the sale or other disposition of, shares of our common stock paid to a foreign financial institution or to a non-financial foreign entity, unless (1) the foreign financial institution undertakes certain diligence and reporting, (2) the non-financial foreign entity either certifies it does not have any substantial United States owners or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in clause (1) above, it must enter into an agreement with the U.S. Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to non-compliant foreign financial institutions and certain other account holders.

The IRS has issued administrative guidance providing that the withholding provisions described above will generally apply to payments of dividends made on or after January 1, 2014 and to payments of gross proceeds from a sale or other disposition of stock on or after January 1, 2017.

The preceding discussion of certain United States federal income tax consequences is for general information only and is not tax advice. Accordingly, each investor should consult its own tax advisor as to particular tax consequences to it of purchasing, holding and disposing of shares of our common stock, including the applicability and effect of any state, local or foreign tax laws, and of any pending or subsequent changes in applicable laws.

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UNDERW RITING

Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and FBR Capital Markets & Co. are acting as joint book-running managers of the offering and as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has severally agreed to purchase, and we have agreed to sell to that underwriter, the number of shares set forth opposite the underwriter’s name.


Underwriter		Number of Shares
Citigroup Global Markets Inc.
Deutsche Bank Securities Inc.
FBR Capital Markets & Co.
Moelis & Company LLC



Total

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the underwriters’ option to purchase additional shares described below) if they purchase any of the shares.

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover page of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $ per share. If all the shares are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The representatives have advised us that the underwriters do not intend to make sales to discretionary accounts.

If the underwriters sell more shares than the total number set forth in the table above, we have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares at the public offering price less the underwriting discount. To the extent the underwriters’ option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment. Any shares issued or sold under the underwriters’ option will be issued and sold on the same terms and conditions as the other shares that are the subject of this offering.

We, our officers and directors, the Starwood Fund and the third-party investor in TPH LLC have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Citigroup Global Markets Inc., dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock, subject to certain exceptions. Citigroup Global Markets Inc. in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice. Notwithstanding the foregoing, if we cease to be an emerging growth company at any time prior to the completion of the 180-day restricted period referred to in this paragraph, then if (i) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (ii) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day restricted period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

Prior to this offering, there has been no public market for our shares. Consequently, the initial public offering price for the shares was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our results of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the

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industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the price at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our shares will develop and continue after this offering.

We have applied to list the shares of our common stock on the New York Stock Exchange under the symbol “TPH.”

The following table shows the underwriting discount that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.


	Paid by TRI Pointe Homes, Inc.
	No Exercise	Full Exercise
Per Share	$	$
Total	$	$

We estimate that our total expenses for this offering, not including the underwriting discount, will be $ million. The underwriters have agreed to reimburse us for certain of our expenses associated with this offering, including a fee of $ , or approximately $ if the underwriters exercise their option to purchase additional shares in full, to be paid to Moelis & Company LLC for advisory services, as referenced below.

In connection with the offering, the underwriters may purchase and sell shares in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions, which may include purchases pursuant to the underwriters’ option to purchase additional shares, and stabilizing purchases.

•

Short sales involve secondary market sales by the underwriters of a greater number of shares than they are required to purchase in the offering.

•

“Covered” short sales are sales of shares in an amount up to the number of shares represented by the underwriters’ option to purchase additional shares.

•

“Naked” short sales are sales of shares in an amount in excess of the number of shares represented by the underwriters’ option to purchase additional shares.

•

Covering transactions involve purchases of shares either pursuant to the underwriters’ option to purchase additional shares or in the open market after the distribution has been completed in order to cover short positions.

•

To close a naked short position, the underwriters must purchase shares in the open market after the distribution has been completed. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

•

To close a covered short position, the underwriters must purchase shares in the open market after the distribution has been completed or must exercise the underwriters’ option. In determining the source of shares to close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option.

•

Stabilizing transactions involve bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum.

Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares.

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They may also cause the price of the shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

Conflicts of Interest

The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The underwriters may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments.

Moelis & Company LLC is acting as our financial advisor in connection with this offering. For its services as financial advisor, we will pay Moelis & Company LLC a fee equal to $ , or approximately $ if the underwriters exercise their option to purchase additional shares in full.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

Notice to Prospective Investors in the European Economic Area

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of shares described in this prospectus may not be made to the public in that relevant member state other than:

•

to any legal entity which is a qualified investor as defined in the Prospectus Directive;

•

to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or

•

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For purposes of this provision, the expression an “offer of securities to the public” in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant implementing measure in the relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.

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The sellers of the shares have not authorized and do not authorize the making of any offer of shares through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the shares as contemplated in this prospectus. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of the shares on behalf of the sellers or the underwriters.

Notice to Prospective Investors in the United Kingdom

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a “relevant person”). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Notice to Prospective Investors in France

Neither this prospectus nor any other offering material relating to the shares described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers . The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be:

•

released, issued, distributed or caused to be released, issued or distributed to the public in France; or

•

used in connection with any offer for subscription or sale of the shares to the public in France.

Such offers, sales and distributions will be made in France only:

•

to qualified investors ( investisseurs qualifiés ) and/or to a restricted circle of investors ( cercle restreint d’investisseurs ), in each case investing for their own account, all as defined in, and in accordance with articles L.411–2, D.411–1, D.411–2, D.734–1, D.744–1, D.754–1 and D.764–1 of the French Code monétaire et financier;

•

to investment services providers authorized to engage in portfolio management on behalf of third parties; or

•

in a transaction that, in accordance with article L.411–2–II–1°–or–2°–or 3° of the French Code monétaire et financier and article 211–2 of the General Regulations (Règlement Général ) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne ) .

The shares may be resold directly or indirectly, only in compliance with articles L.411–1, L.411–2, L.412–1 and L.621–8 through L.621–8–3 of the French Code monétaire et financier .

Notice to Prospective Investors in Hong Kong

The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or

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may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Notice to Prospective Investors in Japan

The shares offered in this prospectus have not been registered under the Securities and Exchange Law of Japan. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.

Notice to Prospective Investors in Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

•

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

•

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

•

shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

•

to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

•

where no consideration is or will be given for the transfer; or

•

where the transfer is by operation of law.

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LEGA L MATTERS

Certain legal matters in connection with this offering, including the validity of the shares of our common stock offered hereby, will be passed upon for us by Sidley Austin LLP. Certain legal matters in connection with this offering will be passed upon for the underwriters by Gibson, Dunn & Crutcher LLP, Los Angeles, California.

EXPE RTS

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements as of and for the year ended December 31, 2011 and for the period from September 24, 2010 through December 31, 2010, and for our predecessor group of entities for the period from January 1, 2010 through September 23, 2010, as set forth in its report. We have included our financial statements in this prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on its authority as an expert in accounting and auditing.

Unless otherwise indicated, all statistical and economic market data included in this prospectus, and in particular in the sections entitled “Summary,” “Market Opportunity” and “Our Business,” is derived from market information prepared for us by JBREC, a nationally recognized independent research provider and consulting firm, and is included in this prospectus in reliance on JBREC’s authority as an expert in such matters. We have paid JBREC a fee of $24,600 for its services, plus an amount charged at an hourly rate for additional information we may require from JBREC from time to time in connection with its services.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock being offered by this prospectus. This prospectus, which constitutes part of that registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. Some items included in the registration statement are omitted from the prospectus in accordance with the rules and regulations of the SEC. For further information with respect to us and the common stock offered in this prospectus, we refer you to the registration statement and the accompanying exhibits.

A copy of the registration statement and the accompanying exhibits and any other document we file may be inspected without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549 and copies of all or any part of the registration statement may be obtained from this office upon the payment of the fees prescribed by the SEC. The public may obtain information on the operation of the public reference facilities in Washington, D.C. by calling the SEC at 1-800-SEC-0330. Our filings with the SEC are available to the public from the SEC’s website at www.sec.gov.

Upon the completion of this offering, we will be subject to the information and periodic reporting requirements of the Exchange Act applicable to a company with securities registered pursuant to Section 12 of the Exchange Act. In accordance therewith, we will file proxy statements, periodic information and other information with the SEC. All documents filed with the SEC are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.tripointehomes.com. You may access our reports, proxy statements and other information free of charge at this website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this prospectus.

166

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


TRI Pointe Homes, LLC and TRI Pointe Homes, LLC Predecessor:
Historical Financial Statements:

Report of Independent Auditors			F-2

Consolidated Balance Sheets as of September 30, 2012 (unaudited), December 31, 2011 and 2010			F-3

Consolidated Statements of Operations for the Nine Months Ended September 30, 2012 and 2011 (unaudited), for the Year Ended December 31, 2011, from September 24, 2010 (Inception) through December 31, 2010, and from January 1, 2010 through September 23, 2010			F-4

Consolidated Statements of Members’ Equity for the Nine Months Ended September 30, 2012 (unaudited), for the Year Ended December 31, 2011 and from September 24, 2010 (Inception) through December 31, 2010			F-5

Consolidated Statement of Members’ Equity from January 1, 2010 through September 23, 2010			F-6

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (unaudited), for the Year Ended December 31, 2011, from September 24, 2010 (Inception) through December 31, 2010, and from January 1, 2010 through September 23, 2010			F-7

Notes to Consolidated Financial Statements for the Nine Months Ended September 30, 2012 (unaudited), for the Year Ended December 31, 2011 and from September 24, 2010 (Inception) through December 31, 2010, and from January 1, 2010 through September 23, 2010			F-8

F-1

REPORT OF INDEPENDENT AUDITORS

To the Members

TRI Pointe Homes, LLC

We have audited the accompanying consolidated balance sheets of TRI Pointe Homes, LLC (the “Company”), as of December 31, 2011 and 2010, and the related consolidated statements of operations, members’ equity and cash flows for the year ended December 31, 2011, for the period from September 24, 2010 (inception) through December 31, 2010, and for the predecessor group of entities of TRI Pointe Homes, LLC (TRI Pointe Homes Predecessor) for the period from January 1, 2010 through September 23, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TRI Pointe Homes, LLC as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the year ended December 31, 2011, for the period from September 24, 2010 (inception) through December 31, 2010, and for the predecessor group of entities of TRI Pointe Homes, LLC (TRI Pointe Homes Predecessor) for the period from January 1, 2010 through September 23, 2010 in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Irvine, CA

November 6, 2012

F-2

TRI POINTE HOMES, LLC

CONSOLIDATED BALANCE SHEETS


	September 30, 2012		December 31,
	September 30, 2012		2011		2010
	(unaudited)
Assets
Cash and cash equivalents	$	45,242,000	$	10,164,000	$	11,744,000
Real estate inventories		148,468,000		82,023,000		14,108,000
Contracts and accounts receivable		223,000		71,000		2,106,000
Contracts intangible, net		146,000		244,000		930,000
Other assets		1,435,000		1,274,000		1,208,000

	$	195,514,000	$	93,776,000	$	30,096,000


Liabilities and members’ equity
Accounts payable and accrued liabilities	$	6,488,000	$	4,412,000	$	1,776,000
Notes payable		46,436,000		6,873,000		3,462,000

		52,924,000		11,285,000		5,238,000
Commitments and contingencies (Note 8)

Common units subject to redemption (Notes 1 and 12)		37,000,000		—		—

Members’ equity		105,590,000		82,491,000		24,858,000

	$	195,514,000	$	93,776,000	$	30,096,000

See accompanying notes.

F-3

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

CONSOLIDATED STATEMENTS OF OPERATIONS


										Period From September 24, 2010 (Inception) Through December 31,			Predecessor
	Nine Months Ended September 30,						Year Ended December 31,						Period From January 1, 2010 Through September 23, 2010
	2012			2011			2011			2010
	(unaudited)
Revenues:
Home sales	$	22,277,000		$	9,279,000		$	13,525,000		$	4,143,000		$	—
Fee building		244,000			5,635,000			5,804,000			14,844,000			19,853,000

		22,521,000			14,914,000			19,329,000			18,987,000			19,853,000

Expenses:
Cost of home sales		19,663,000			8,408,000			12,075,000			3,773,000			—
Fee building		206,000			5,437,000			5,654,000			14,030,000			17,188,000
Sales and marketing		2,351,000			1,062,000			1,553,000			408,000			136,000
General and administrative		4,155,000			3,112,000			4,620,000			1,875,000			1,401,000

		26,375,000			18,019,000			23,902,000			20,086,000			18,725,000

Income (loss) from operations		(3,854,000	)		(3,105,000	)		(4,573,000	)		(1,099,000	)		1,128,000
Organizational costs		—			—			—			(1,061,000	)		—
Other income (expense), net		(86,000	)		(41,000	)		(20,000	)		(15,000	)		(43,000	)

Net income (loss)	$	(3,940,000	)	$	(3,146,000	)	$	(4,593,000	)	$	(2,175,000	)	$	1,085,000

Unaudited pro forma loss per share (Note 11)
Basic	$						$

Diluted	$						$

See accompanying notes .

F-4

TRI POINTE HOMES, LLC

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY


	VIII/TPC Holdings, L.L.C.			Minority Members			Management Incentive Units		Total Members’ Equity
Balance at September 24, 2010 (inception)	$	—		$	—		$	—	$	—
Contributions		20,000,000			9,867,000			—		29,867,000
Financial advisory fee paid on capital raised (Note1)		(1,975,000	)		(975,000	)		—		(2,950,000	)
Amortization of equity based incentive units (Note 9)		—			—			116,000		116,000
Net loss		(1,456,000	)		(719,000	)		—		(2,175,000	)

Balance at December 31, 2010		16,569,000			8,173,000			116,000		24,858,000
Contributions		64,000,000			—			—		64,000,000
Financial advisory fee paid on capital raised (Note 1)		(2,669,000	)		429,000			—		(2,240,000	)
Amortization of equity based incentive units (Note 9)		—			—			466,000		466,000
Net loss		(4,135,000	)		(458,000	)		—		(4,593,000	)

Balance at December 31, 2011		73,765,000			8,144,000			582,000		82,491,000
Contributions (unaudited)		29,000,000			—			—		29,000,000
Financial advisory fee paid on capital raised (Note 1) (unaudited)		(2,253,000	)		(57,000	)		—		(2,310,000	)
Amortization of equity based incentive units (Note 9)		—			—			349,000		349,000
Net loss (unaudited)		(3,645,000	)		(295,000	)		—		(3,940,000	)

Balance at September 30, 2012 (unaudited)	$	96,867,000		$	7,792,000		$	931,000	$	105,590,000

See accompanying notes.

F-5

TRI POINTE HOMES PREDECESSOR

CONSOLIDATED STATEMENT OF MEMBERS’ EQUITY


	Total Members’ Equity
Balance at January 1, 2010	$	9,604,000
Net income		1,085,000

Balance at September 23, 2010	$	10,689,000

F-6

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

CONSOLIDATED STATEMENTS OF CASH FLOWS


										Period From September 24, 2010 (Inception) Through December 31,			Predecessor
	Nine Months Ended September 30,						Year Ended December 31,						Period From January 1, 2010 Through September 23,
	2012			2011			2011			2010			2010
	(unaudited)
Operating activities
Net income (loss)	$	(3,940,000	)	$	(3,146,000	)	$	(4,593,000	)	$	(2,175,000	)	$	1,085,000
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Amortization of contracts intangible		98,000			666,000			686,000			1,529,000			—
Depreciation		93,000			46,000			72,000			13,000			29,000
Amortization of equity based incentive units		349,000			349,000			466,000			116,000
Changes in operating assets and liabilities:
Real estate inventories		(66,445,000	)		(61,642,000	)		(67,915,000	)		(2,537,000	)		(7,438,000	)
Contracts and accounts receivable		(152,000	)		534,000			2,035,000			(1,514,000	)		(1,208,000	)
Other assets		(152,000	)		58,000			170,000			256,000			(287,000	)
Accounts payable and accrued liabilities		781,000			420,000			2,636,000			192,000			609,000

Net cash used in operating activities		(69,368,000	)		(62,715,000	)		(66,443,000	)		(4,120,000	)		(7,210,000	)


Investing activities
Purchases of furniture and equipment		(102,000	)		(156,000	)		(308,000	)		(26,000	)		(50,000	)

Net cash used in investing activities		(102,000	)		(156,000	)		(308,000	)		(26,000	)		(50,000	)


Financing activities
Cash contributions from member		29,000,000			64,000,000			64,000,000			20,000,000			—
Financial advisory fee paid on capital raised		(1,015,000	)		(2,240,000	)		(2,240,000	)		(2,950,000	)		—
Cash from common units subject to redemption		37,000,000			—			—			—			—
Borrowings from notes payable		63,253,000			435,000			6,981,000			1,085,000			4,494,000
Repayments of notes payable		(23,690,000	)		(3,897,000	)		(3,570,000	)		(2,638,000	)		—
Cash contributed at formation		—			—			—			393,000			—

Net cash provided by financing activities		104,548,000			58,298,000			65,171,000			15,890,000			4,494,000

Net increase (decrease) in cash and cash equivalents		35,078,000			(4,573,000	)		(1,580,000	)		11,744,000			(2,766,000	)
Cash and cash equivalents – beginning of period		10,164,000			11,744,000			11,744,000			—			8,795,000

Cash and cash equivalents – end of period	$	45,242,000		$	7,171,000		$	10,164,000		$	11,744,000		$	6,029,000


Supplemental disclosure of cash flow information
Interest paid, net of amounts capitalized	$	—		$	—		$	—		$	—		$	—


Supplemental disclosure of noncash transactions
Assets contributed and liabilities assumed at formation of the Company (Note 1):
Real estate projects held for development and sale	$	—		$	—		$	—		$	11,571,000		$	—

Contracts intangible and other assets	$	—		$	—		$	—		$	4,501,000		$	—

Accounts payable and accrued liabilities	$	—		$	—		$	—		$	(1,583,000	)	$	—

Notes payable secured by real estate projects	$	—		$	—		$	—		$	(5,015,000	)	$	—

See accompanying notes.

F-7

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Organization

TRI Pointe Homes, LLC (the “Company”), a Delaware limited liability company, and its subsidiaries are primarily engaged in all aspects of residential real estate development, including acquiring land and designing, constructing and selling single-family homes located in California.

Our predecessor was not a legal entity but rather a combination of certain real estate entities, specializing in homebuilding, which included construction management to provide fee building services.

The Company intends to file a Registration Statement on Form S-1 with the Securities and Exchange Commission with respect to an initial public offering (the” Offering”). Prior to the consummation of the Offering, which is expected to be completed in 2013, the Company will engage in certain formation transactions pursuant to which the Company will be reorganized from a Delaware limited liability company into a Delaware corporation and renamed TRI Pointe Homes, Inc.

The Company commenced operations on September 24, 2010, concurrently with the execution of the Limited Liability Company Operating Agreement (the “Operating Agreement”) and the following capital contributions:

The investors in our predecessor (collectively, the “Minority Members”) contributed assets and transferred liabilities in exchange for $9,867,000 of common units. The net assets contributed by the Minority Members had a fair value of $9,867,000, and consisted primarily of two real estate projects, two construction management agreements, working capital and fixed assets, as noted below:


Cash	$	393,000
Real estate inventories		11,571,000
Contracts intangible and other assets		4,501,000
Notes payable		(5,015,000	)
Accounts payable and accrued liabilities		(1,267,000	)
Warranty reserves		(316,000	)

Net assets contributed by the Minority Members	$	9,867,000

VIII/TPC Holdings, L.L.C. (the “Starwood Fund”) contributed cash of $20,000,000 in exchange for $20,000,000 of common units and control of the Company. In accordance with the Operating Agreement, the Starwood Fund was permitted to elect to make additional capital contributions to the Company in exchange for additional common units, such that the Starwood Fund’s total capital contributions may aggregate up to $150,000,000 at a fixed price (the “Option”), with a potential common unit percentage interest in the Company of 93.83%. As of September 30, 2012, the Starwood Fund had fully funded the maximum aggregate capital contributions permitted under the Option.

The Company accounted for the Option as a freestanding equity instrument with a fair value at the date of issuance of $5,000,000. The Option was classified within the Company’s consolidated statement of members’ equity and specifically attributed to the Starwood Fund’s capital account.

F-8

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the period ended September 30, 2012 (unaudited) and the year ended December 31, 2011, the Starwood Fund made additional capital contributions of $29,000,000 (excluding the $37,000,000 contingently redeemable contribution described below) and $64,000,000, respectively, in exchange for $29,000,000 and $64,000,000, respectively, of common units. As of September 30, 2012 (unaudited) and December 31, 2011, the Starwood Fund’s cumulative capital contributions to the Company totaled $113,000,000 (excluding the $37,000,000 contingently redeemable contribution described below) and $84,000,000, respectively.

As of September 30, 2012 (unaudited), the Starwood Fund’s common unit percentage interest in the Company was 91.97%, and the Minority Members’ aggregate common unit percentage interest in the Company was the remaining 8.03%. As of December 31, 2011, the Starwood Fund’s common unit percentage interest in the Company was 89.49%, and the Minority Members’ aggregate common unit percentage interest in the Company was the remaining 10.51%. As of December 31, 2010, the Starwood Fund’s common unit percentage interest in the Company was 66.96%, and the Minority Members’ aggregate common unit percentage interest in the Company was the remaining 33.04%.

In connection with the commitment from the Starwood Fund, the Company paid a financial advisory fee to a third-party investment firm equal to 5% of the aggregate capital contributed. The Company incurred financial advisory fees of $2,310,000, $2,240,000, and $2,950,000, respectively, which have been included as a reduction of members’ equity in the accompanying consolidated financial statements. At September 30, 2012 (unaudited), $1,295,000 of the financial advisory fees was included in accounts payable. No amounts were outstanding at December 31, 2011 and 2010 related to the financial advisory fees. All financial advisory fees paid were reallocated among the members, on a cumulative basis, in proportion with each member’s respective common unit percentage in the Company at the end of each reporting period.

During the period ended September 30, 2012 (unaudited), the Starwood Fund made a contribution of $37,000,000 in exchange for $37,000,000 of common units. Concurrent with this capital contribution, the Company amended its Operating Agreement whereby the $37,000,000 must be returned to the Starwood Fund if the Offering does not close by February 28, 2013, or is cancelled prior to February 28, 2013 without the written consent of the Starwood Fund. Accordingly, the Company has deemed this capital contribution as a contingently redeemable instrument and classified it in the mezzanine section of the financial statements. In November 2012, the Company further amended its Operating Agreement to remove the redemption feature of the $37,000,000 Starwood Fund capital contribution (Note 12).

Net income and net losses are allocated among the members such that each member’s Adjusted Capital Account, as defined, is, as nearly as possible, proportionately equal to the distributions that would be made to each member if the Company were dissolved pursuant to the provisions of the Operating Agreement.

Distributions to the members are made pursuant to the Operating Agreement. Through September 30, 2012 (unaudited) and December 31, 2011 and 2010, no distributions had been made.

Each member’s liability is limited in accordance with the provisions of the Delaware Limited Liability Company Act for limited liability companies. The term of the Company shall continue until it is dissolved or its affairs are wound up in accordance with the Operating Agreement.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated upon consolidation. Subsequent events have been evaluated through the date the financial statements were issued.

F-9

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) as contained within the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).

Unless the context otherwise requires, the terms “we”, “us”, “our” and “the Company” refer to the Company and its predecessor.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies. Accordingly, actual results could differ materially from these estimates.

Cash and Cash Equivalents and Concentration of Credit Risk

We define cash and cash equivalents as cash on hand, demand deposits with financial institutions, and short term liquid investments with an initial maturity date of less than three months. The Company’s cash balances exceed federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.

Real Estate Inventories and Cost of Sales

Land, development and other common costs are typically allocated to inventory using a methodology that approximates the relative-sales-value method. Home construction costs per production phase are recorded using th e specific identification method. Cost of sales for homes closed includes the allocation of construction costs of each home and all applicable land acquisition, land development and related common costs (both incurred and estimated to be incurred) based upon the relative-sales-value of the home within each community. Changes to estimated total development costs subsequent to initial home closings in a community are generally allocated on a relative-sales-value method to remaining homes in the community. Inventory is stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to fair value. We review our real estate assets at each community for indicators of impairment. Real estate assets include projects actively selling and projects under development or held for future development. Indicators of impairment include, but are not limited to, significant decreases in local housing market values and selling prices of comparable homes, significant decreases in gross margins and sales absorption rates, costs in excess of budget, and actual or projected cash flow losses.

If there are indications of impairment, we perform a detailed budget and cash flow review of our real estate assets to determine whether the estimated remaining undiscounted future cash flows of the community are more or less than the asset’s carrying value. If the undiscounted cash flows are more than the asset’s carrying value, no impairment adjustment is required. However, if the undiscounted cash flows are less than the asset’s carrying

F-10

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

value, the asset is deemed impaired and is written down to fair value. These impairment evaluations require us to make estimates and assumptions regarding future conditions, including timing and amounts of development costs and sales prices of real estate assets, to determine if expected future undiscounted cash flows will be sufficient to recover the asset’s carrying value.

Many assumptions are interdependent and a change in one may require a corresponding change to other assumptions. For example, increasing or decreasing sales absorption rates has a direct impact on the estimated per unit sales price of a home, the level of time sensitive costs (such as indirect construction, overhead and carrying costs), and selling and marketing costs (such as model maintenance costs and advertising costs). Depending on the underlying objective of the community, assumptions could have a significant impact on the projected cash flow analysis. For example, if our objective is to preserve operating margins, our cash flow analysis will be different than if the objective is to increase sales. These objectives may vary significantly from community to community and over time. If assets are considered impaired, impairment is determined by the amount the asset’s carrying value exceeds its fair value. Fair value is determined based on estimated future cash flows discounted for inherent risks associated with real estate assets. These discounted cash flows are impacted by expected risk based on estimated land development, construction and delivery timelines; market risk of price erosion; uncertainty of development or construction cost increases; and other risks specific to the asset or market conditions where the asset is located when assessment is made. These factors are specific to each community and may vary among communities. For the nine months ended September 30, 2012 (unaudited) and the years ended December 31, 2011 and 2010, no impairment adjustments relating to real estate inventories were recorded.

Revenue Recognition

Home Sales and Profit Recognition

In accordance with ASC 360, Property, Plant, and Equipment , revenues from home sales and other real estate sales are recorded and a profit is recognized when the respective units are closed. Home sales and other real estate sales are closed when all conditions of escrow are met, including delivery of the home or other real estate asset, title passage, appropriate consideration is received and collection of associated receivables, if any, is reasonably assured. Sales incentives are a reduction of revenues when the respective unit is closed. When it is determined that the earnings process is not complete, the sale and the related profit are deferred for recognition in future periods. The profit we record is based on the calculation of cost of sales, which is dependent on our allocation of costs, as described in more detail above in the section entitled “—Real Estate Inventories and Cost of Sales.”

Fee Building

The Company enters into construction management agreements to provide fee building services whereby it will build, market and sell homes on behalf of independent third-party property owners. The independent third-

F-11

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

party property owner funds all project costs incurred by the Company to build and sell the homes. The Company primarily enters into cost plus fee contracts where it charges independent third-party property owners for all direct and indirect costs plus a negotiated management fee. For these types of contracts, the Company recognizes revenue based on the actual total costs it has expended and the applicable management fee. The management fee is typically a fixed fee based on a percentage of the cost or home sales revenue of the project depending on the terms of the agreement with the independent third-party property owner. In accordance with ASC 605, Revenue Recognition , revenues from construction management services are recognized over a cost-to-cost approach in applying the percentage-of-completion method. Under this approach, revenue is earned in proportion to total costs incurred, divided by total costs expected to be incurred. The total estimated cost plus the management fee represents the total contract value. The Company recognizes revenue based on the actual labor and other direct costs incurred, plus the portion of the management fee it has earned to date. In the course of providing its services, the Company routinely subcontracts for services and incurs other direct costs on behalf of its clients. These costs are passed through to clients and, in accordance with industry practice and GAAP, are included in the Company’s revenue and cost of revenue. Under certain agreements, the Company is eligible to receive additional incentive compensation, as certain financial thresholds defined in the agreement are achieved. The Company recognizes revenue for any incentive compensation when such financial thresholds are probable of being met and such compensation is deemed to be collectible, generally at the date the amount is communicated to us by the independent third-party property owner.

The Company also enters into fee building contracts where it does not bear risks for any services outside of its own. For these types of contracts, the Company recognizes revenue as services are performed. The Company does not recognize any revenue or costs related to subcontractors’ cost since it does not bear any risk related to them.

Warranty Reserves


	September 30, 2012			December 31,
	September 30, 2012			2011			2010
	(unaudited)
Warranty reserves, beginning of period	$	985,000		$	731,000		$	316,000	⁽¹⁾
Warranty reserves accrued		226,000			470,000			485,000
Warranty expenditures		(165,000	)		(216,000	)		(70,000	)

Warranty reserves, end of period	$	1,046,000		$	985,000		$	731,000

⁽¹⁾

Contributed at formation of the Company on September 24, 2010

Acquired Intangible Assets

Upon consummation of a business combination as defined in ASC 805, Business Combinations , the Company performs an assessment to determine the value of the acquired company’s tangible and identifiable intangible assets and liabilities. In its assessment, the Company determines whether identifiable intangible assets exist, which typically include backlog and customer relationships. The identified intangible assets are amortized over their respective calculated term.

F-12

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Variable Interest Entities

The Company accounts for variable interest entities in accordance with ASC 810, Consolidation (“ASC 810”). Under ASC 810, a variable interest entity (“VIE”) is created when: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties, including the equity holders; (b) the entity’s equity holders as a group either (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity’s equity holders have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of the equity holder with disproportionately few voting rights. If an entity is deemed to be a VIE pursuant to ASC 810, the enterprise that has both (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE. In accordance with ASC 810, we perform ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. As of September 30, 2012 (unaudited), December 31, 2011 and 2010, the Company did not have any investment that was deemed to be a VIE.

Under ASC 810, a non-refundable deposit paid to an entity is deemed to be a variable interest that will absorb some or all of the entity’s expected losses if they occur. Our land purchase and lot option deposits generally represent our maximum exposure to the land seller if we elect not to purchase the optioned property. In some instances, we may also expend funds for due diligence, development and construction activities with respect to optioned land prior to takedown. Such costs are classified as inventories owned, which we would have to write off should we not exercise the option. Therefore, whenever we enter into a land option or purchase contract with an entity and make a non-refundable deposit, a VIE may have been created. As of September 30, 2012 (unaudited), December 31, 2011 and December 31, 2010, the Company was not required to consolidate any VIEs nor did the Company write off any costs that had been capitalized under lot option contracts. In accordance with ASC 810, we perform ongoing reassessments of whether we are the primary beneficiary of a VIE.

Stock-Based Compensation

Sales and Marketing Expense

Organizational Costs

Organizational costs include legal, accounting and other expenditures incurred in connection with the formation of the Company, which were expensed in their entirety during the period ended December 31, 2010.

F-13

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Income Taxes

The Company is a limited liability company and the Company’s predecessor includes a limited partnership and a limited liability company, all of which are treated as partnerships for income tax purposes and are subject to certain minimal taxes and fees; however, income taxes on taxable income or losses realized by the Company are the obligation of the members. The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements, nor has the Company been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluation was performed for the tax years ended December 31, 2011 and 2010.

The Company’s predecessor has a subsidiary that is treated as a C Corporation. Federal and state income taxes are provided for these entities in accordance with the provisions of ASC 740, Income Taxes . The provision for, or the benefit from, income taxes is calculated using the asset and liability method, under which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are evaluated to determine whether a valuation allowance should be established based on its determination of whether it is more likely than not that some or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends primarily on the generation of future taxable income during the periods in which those temporary differences become deductible. Judgment is required in determining future tax consequences of events that have been recognized in the consolidated financial statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on the consolidated financial position or results of operations.

The Company’s predecessor followed certain accounting guidance with respect to how uncertain tax positions should be accounted for and disclosed in the consolidated financial statements. The guidance requires the assessment of tax positions taken or expected to be taken in the tax returns and to determine whether the tax positions are “more-likely-than-not” of being sustained upon examination by the applicable taxing authority. Tax positions deemed to meet the more-likely-than-not criteria would be recorded as a tax benefit or expense in the current year. We are required to assess open tax years, as defined by the statute of limitations, for all major jurisdictions, including federal and certain states. Open tax years are those that are open for examination by taxing authorities. We have no examinations in progress and believe that there are no uncertain tax positions that do not meet the more-likely-than-not level of authority.

Recently Issued Accounting Standards

F-14

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

required to perform the two-step goodwill impairment test. ASU 2011-08 will be effective for our fiscal year beginning December 1, 2012, with early adoption permitted. The adoption of ASU 2011-08 is not expected to have a material effect on our consolidated financial statements.

Unaudited Interim Information

The financial statements as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011 are unaudited. In the opinion of management, such financial statements reflect all adjustments necessary for a fair presentation of the respective interim periods. All such adjustments are of a normal recurring nature.

2. Real Estate Inventories

Real estate inventories consisted of the following:


	September 30, 2012		December 31,
	September 30, 2012		2011		2010
	(unaudited)
Inventories owned:
Deposits and pre-acquisition costs	$	18,961,000	$	12,124,000	$	335,000
Land held and land under development		73,434,000		58,434,000		4,643,000
Homes completed or under construction		45,047,000		8,918,000		8,000,000
Model homes		11,026,000		2,547,000		1,130,000

	$	148,468,000	$	82,023,000	$	14,108,000

Model homes, homes completed, and homes under construction include all costs associated with home construction, including land, development, indirects, permits, and vertical construction. Land under development includes costs incurred during site development such as land, development, indirects, and permits. Land is classified as held for future development if no significant development has occurred.

F-15

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Interest Capitalization

Interest is capitalized on inventory during development and other qualifying activities. Interest capitalized as cost of inventory is included in cost of sales as related units are closed. For the nine months ended September 30, 2012 (unaudited), the year ended December 31, 2011, the period from September 24, 2010 (inception) through December 31, 2010 and the period from January 1, 2010 through September 23, 2010, interest incurred, capitalized, and expensed was as follows:


													Predecessor
	Nine Months Ended September 30,						Year Ended December 31, 2011			Period From September 24, 2010 (Inception) Through December 31, 2010			Period From January 1, 2010 Through September 23, 2010
	2012			2011			Year Ended December 31, 2011
	(unaudited)
Interest incurred	$	1,297,000		$	108,000		$	171,000		$	185,000		$	160,000

Interest expensed		—			—			—			—			—

Capitalized interest in beginning inventory	$	159,000		$	257,000		$	257,000		$	160,000		$	—
Interest capitalized as a cost of inventory		1,297,000			108,000			171,000			185,000			160,000
Interest previously capitalized as a cost of inventory, included in cost of sales		(211,000	)		(181,000	)		(269,000	)		(88,000	)		—

Capitalized interest in ending inventory	$	1,245,000		$	184,000		$	159,000		$	257,000		$	160,000

3. Contracts and Accounts Receivable

Contracts and accounts receivable primarily represents the fees earned but not collected, and reimbursable project costs incurred in connection with the Company’s construction management agreements. The Company periodically evaluates the collectability of its contracts and accounts receivable, and if it is determined that a receivable might not be fully collectible, an allowance is recorded for the amount deemed uncollectible. As of September 30, 2012 (unaudited), and December 31, 2011 and 2010, no allowance was recorded related to contracts and accounts receivable.

F-16

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Contracts and accounts receivable consisted of the following:


	September 30, 2012		December 31,
	September 30, 2012		2011			2010
	(unaudited)
Costs incurred on construction management agreement projects	$	—	$	5,654,000		$	14,030,000
Estimated earnings		—		150,000			814,000

				5,804,000			14,844,000
Less: billings to date		—		(5,804,000	)		(13,754,000	)

Subtotal—contracts receivable		—		—			1,090,000

Add: accounts receivable		—		—			—
Onsite personnel project costs from construction management agreement projects and other advances		135,000		70,000			144,000
Other		88,000		1,000			17,000
Warranty reimbursements due from construction management agreement projects		—		—			605,000
Refundable land deposit for canceled contract		—		—			250,000

Subtotal—accounts receivable		223,000		71,000			1,016,000

Contracts and accounts receivable	$	223,000	$	71,000		$	2,106,000

4. Contracts Intangible

The formation of the Company was accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combination s. As such, the Company allocated amounts to acquired tangible and intangible assets and liabilities based upon their fair values.

Contracts intangible represents the fair value attributable to the construction services contracts contributed by the Minority Members at formation. Contracts intangible is amortized as a cost of construction services over the lives of the related fee building projects, and consisted of the following:


	September 30, 2012			December 31,
	September 30, 2012			2011			2010
	(unaudited)
Contracts intangible	$	2,459,000		$	2,459,000		$	2,459,000

Beginning accumulated amortization		(2,215,000	)		(1,529,000	)		—
Amortization expense		(98,000	)		(686,000	)		(1,529,000	)

Ending accumulated amortization		(2,313,000	)		(2,215,000	)		(1,529,000	)

Contracts intangible, net	$	146,000		$	244,000		$	930,000

The Company expects to recognize the remaining net contract intangible in fiscal 2012.

F-17

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:


	September 30, 2012		December 31,
	September 30, 2012		2011		2010
	(unaudited)
Accounts payable and accrued expenses	$	3,942,000	$	3,223,000	$	453,000
Accrued payroll liabilities		205,000		204,000		592,00
Financial advisory fee (Note 1)		1,295,000		—		—
Warranty reserves (Note 1)		1,046,000		985,000		731,000

	$	6,488,000	$	4,412,000	$	1,776,000

6. Notes Payable

Notes payable consisted of the following:


	September 30, 2012		December 31,
	September 30, 2012		2011		2010
	(unaudited)
Revolving credit facility	$	7,152,000	$	2,025,000	$	—
Acquisition and development loans		19,582,000		4,848,000		—
Construction loans		19,702,000		—		3,462,000

	$	46,436,000	$	6,873,000	$	3,462,000

As of September 30, 2012 (unaudited), the Company has a secured revolving credit facility which has a maximum loan commitment of $20.0 million, an initial maturity date of April 19, 2014 and a final maturity date of April 19, 2015. The Company may borrow under its facility in the ordinary course of business to fund its operations, including its land development and home building activities. The amount the Company may borrow is subject to applicable borrowing base provisions and concentration limitations, which may also limit the amount available or outstanding under the facility. The facility is secured by deeds of trust on the real property and improvements thereon, and the borrowings are repaid with the net sales proceeds from the sales of homes, subject to a minimum release price. Interest rates charged under the facility include LIBOR and prime rate pricing options, subject to a minimum interest rate floor. As of September 30, 2012 (unaudited), the interest rate was 5.5% per annum, and the Company had approximately $11,009,000 of availability under the facility.

The Company enters into secured acquisition and development loan agreements to purchase and develop land parcels. In addition, the Company enters into secured construction loan agreements for the construction of its model and production homes. The acquisition and development loans will be repaid as lots are released from the loans based upon a specific release price, as defined in each respective loan agreement. The construction loans will be repaid with proceeds from home closings based upon a specific release price, as defined in each respective loan agreement.

As of September 30, 2012 (unaudited), the Company had approximately $36.0 million of aggregate acquisition and development loan commitments and $30.0 million of aggregate construction loan commitments, of which $19.6 million and $19.7 million was outstanding, respectively. The loans have maturity dates ranging from May 2013 to February 2015, including the six month extensions which are at our election (subject to certain conditions) and bear interest at a rate based on LIBOR or Prime Rate pricing options, with interest rate floors ranging from 4.0% to 6.0%. As of September 30, 2012 (unaudited), the weighted average interest rate was 5.9% per annum.

F-18

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of December 31, 2011, the Company had one secured acquisition and development loan with a $13.1 million commitment, of which $4.8 million was outstanding. The loan has a maturity date of April 2014, including the six month extension which is at our election (subject to certain conditions) and bears interest at a rate based on LIBOR or Prime Rate pricing options, with an interest rate floor of 6.0%. As of December 31, 2011, the weighted average interest rate was 6.0% per annum.

As of December 31, 2010, the Company had approximately $14.1 million of aggregate construction loan commitments, of which $3.5 million was outstanding. During March 2011, the Company repaid the two construction notes payable outstanding as of December 31, 2010. Each note had an interest rate of 12.0% per annum.

During the nine months ended September 30, 2012 (unaudited), the year ended December 31, 2011, the period from September 24, 2010 (inception) through December 31, 2010, and the period from January 1, 2010 through September 23, 2010, the Company incurred interest of $1,297,000, $171,000, $185,000, and $160,000, respectively, related to its notes payable, all of which was capitalized to real estate inventories. As of September 30, 2012 (unaudited), December 31, 2011 and 2010, accrued interest of $226,000, $33,000 and $20,000, respectively, was included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

Under the revolving credit facility and construction notes payable, the Company is required to comply with certain financial covenants, including but not limited to (i) a minimum tangible net worth; (ii) a maximum total liabilities to tangible net worth ratio; and (iii) a minimum liquidity amount. The Company was in compliance with all financial covenants as of September 30, 2012 (unaudited), and December 31, 2011 and 2010.

7. Fair Value Disclosures

ASC 820, Fair Value Measurements and Disclosures , defines fair value as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:

•

Level 1—Quoted prices for identical instruments in active markets

•

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date

•

Level 3—Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date

At December 31, 2011 and 2010, as required by ASC 820, Financial Instruments , the following presents net book values and estimated fair values of notes:


	Liabilities at Fair Value as of December 31, 2011
	Total		Level 1		Level 2		Level 3
Revolving credit facility	$	2,025,000	$	—	$	—	$	2,025,000
Acquisition and development loans		4,848,000		—		—		4,848,000

Total liabilities measured at fair value	$	6,873,000	$	—	$	—	$	6,873,000


	Liabilities at Fair Value as of December 31, 2010
	Total		Level 1		Level 2		Level 3
Construction loans	$	3,462,000	$	—	$	—	$	3,462,000

Total liabilities measured at fair value	$	3,462,000	$	—	$	—	$	3,462,000

F-19

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Estimated fair values of the outstanding revolving credit facility, acquisition and development loans, and construction loans at December 31, 2011 and 2010 were based on cash flow models discounted at market interest rates that considered underlying risks of the debt.

Nonfinancial assets and liabilities include items such as inventory and long lived assets that are measured at fair value when acquired and resulting from impairment, if deemed necessary. During the nine months ended September 30, 2012 (unaudited) and the years ended December 31, 2011 and 2010, the Company did not record any fair value adjustments to those financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

8. Commitments and Contingencies

Lawsuits, claims and proceedings have been or may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants. We are also subject to local, state and federal laws and regulations related to land development activities, house construction standards, sales practices, employment practices and environmental protection. As a result, we are subject to periodic examinations or inquiry by agencies administering these laws and regulations.

We record a reserve for potential legal claims and regulatory matters when they are probable of occurring and a potential loss is reasonably estimable. We accrue for these matters based on facts and circumstances specific to each matter and revise these estimates when necessary.

In view of the inherent difficulty of predicting outcomes of legal claims and related contingencies, we generally cannot predict their ultimate resolution, related timing or eventual loss. If our evaluations indicate loss contingencies that could be material are not probable, but are reasonably possible, we will disclose their nature with an estimate of possible range of losses or a statement that such loss is not reasonably estimable. At September 30, 2012 (unaudited) and December 31, 2011 and 2010, the Company did not have any accruals for asserted or unasserted matters.

We obtain surety bonds in the normal course of business to ensure completion of certain infrastructure improvements of our projects. As of September 30, 2012 (unaudited) and December 31, 2011 and 2010, the Company had outstanding surety bonds totaling $12,455,000, $7,476,000 and $1,125,000, respectively. The beneficiaries of the bonds are various municipalities. In the unlikely event that any such surety bond issued by third parties are called because the required improvements are not completed, the Company could be obligated to reimburse the issuer of the bond.

We lease certain property and equipment under non-cancelable operating leases. Office leases are for terms up to five years and generally provide renewal options for terms up to an additional five years. In most cases, we expect that, in the normal course of business, leases that expire will be renewed or replaced by other leases. Equipment leases are typically for terms of three to four years.

F-20

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company occupies office space under two operating lease agreements that expire in 2014 and 2016. As of September 30, 2012 (unaudited), future minimum lease payments under non-cancelable operating lease agreements are as follows:


2013	$	397,000
2014		377,000
2015		343,000
2016		293,000
2017		—

	$	1,410,000

For the nine months ended September 30, 2012 and 2011 and for the years ended December 31, 2011 and 2010, rental expense was $277,000, $91,000, $167,000 and $35,000, respectively.

9. Equity Based Incentive Units

On September 24, 2010, the Company granted equity based incentive units to management. Recipients of the equity based incentive units have the right to receive certain distributions, if any, from the Company following distributions to the common unit members of all of their prior capital contributions plus a specified return on such capital contributions. The vesting terms of the equity based incentive units are as follows: 18.75% of such units vested on the date following the first-year anniversary of the date of such officer’s employment; 56.25% of such units vest in equal quarterly installments between the first and fourth-year anniversary of the date of such officer’s employment; and 25% of such units will be converted into a number of shares of restricted stock immediately prior to a qualified public offering or a similar liquidity event, as defined.

The fair value for equity based incentive units was established at the date of grant using an option based model. The fair value of the equity based incentive units was determined using the following assumptions:


	September 24, 2010
Dividend yield		0.0%
Expected volatility		70%
Risk-free interest rate		1.03%
Term		4 years

The Company did not grant any equity based incentive units during the nine months ended September 30, 2012 (unaudited) or the year ended December 31, 2011. No equity based incentive units were cancelled or issued during the nine months ended September 30, 2012 (unaudited) or the years ended December 31, 2011 and 2010.

The grant-date fair value of the equity based incentive units granted during the period ended December 31, 2010 was $3,311,000. The Company recognized $349,000, $466,000, and $116,000 of compensation expense, net of estimated forfeitures during the nine months ended September 30, 2012 (unaudited), and for the years ended December 31, 2011 and 2010, respectively, and all such compensation expense was included in general and administrative. Unrecognized compensation expense related to equity based incentive units was $2,380,000, $2,729,000 and $3,195,000 at September 30, 2012 (unaudited), December 31, 2011 and 2010, respectively.

10. Segment Information

The Company’s operations are organized into two reportable segments: homebuilding and construction services. In accordance with ASC 280, Segment Reporting , in determining the most appropriate reportable

F-21

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

segments, we considered similar economic and other characteristics, including product types, average selling prices, gross profits, production processes, suppliers, subcontractors, regulatory environments, land acquisition results, and underlying demand and supply.

The reportable segments follow the same accounting policies as our consolidated financial statements described in Note 1. Operational results of each reportable segment are not necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented.

Financial information relating to reportable segments was as follows:


							Period From September 24, 2010 (Inception) Through December 31, 2010		Predecessor
	Nine Months Ended September 30,				Year Ended December 31, 2011				Period From January 1, 2010 Through September 23, 2010
	2012		2011		Year Ended December 31, 2011				Period From January 1, 2010 Through September 23, 2010
	(unaudited)
Revenues
Homebuilding	$	22,277,000	$	9,279,000	$	13,525,000	$	4,143,000	$	—
Fee building		244,000		5,635,000		5,804,000		14,844,000		19,853,000

Total	$	22,521,000	$	14,914,000	$	19,329,000	$	18,987,000	$	19,853,000

Gross profit
Homebuilding	$	2,614,000	$	871,000	$	1,450,000	$	370,000	$	—
Fee building		38,000		198,000		150,000		814,000		2,665,000

Total	$	2,652,000	$	1,069,000	$	1,600,000	$	1,184,000	$	2,665,000

Contracts intangible amortization (included in cost of sales)
Homebuilding	$	—	$	—	$	—	$	—	$	—
Fee building		98,000		666,000		686,000		1,529,000		—

Total	$	98,000	$	666,000	$	686,000	$	1,529,000	$	—


	September 30,		December 31,
	2012		2011		2010
	(unaudited)
Assets
Homebuilding	$	194,699,000	$	92,604,000	$	27,296,000
Fee building		815,000		1,172,000		2,800,000

Total	$	195,514,000	$	93,776,000	$	30,096,000

11. Unaudited Pro Forma Loss per Share

Unaudited pro forma basic and diluted net loss per share for the nine months ended September 30, 2012 and the year ended December 31, 2011 gives effect to the conversion of the Company’s common units subject to redemption (Notes 1 and 12) into common stock as though the conversion had occurred as of the beginning of the

F-22

TRI POINTE HOMES, LLC AND TRI POINTE HOMES PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

period or the original date of issuance, if later. The number of shares to be converted is based on an assumed initial public offering price of $ per share. In addition, the pro forma amounts give effect to reflect any income tax adjustments as if the Company was a taxable entity as of the beginning of the period. The pro forma income tax adjustments did not have any impact as the Company was in a loss position for the periods presented and any deferred tax assets associated with the losses would have a full valuation allowance applied against them.


	Nine Months Ended September 30, 2012		Year Ended December 31, 2011
Net loss as reported	$	3,940,000	$	4,593,000

Pro forma weighted-average shares used to compute basic and diluted net loss per share before adjustment to reflect conversion of common units subject to redemption
Pro forma adjustment to reflect conversion of common units subject to redemption

Weighted-average shares used to compute pro forma basic and diluted net loss per share

12. Subsequent Events

As disclosed in Note 1, during the period ended September 30, 2012 (unaudited), the Starwood Fund made a contribution of $37,000,000 in exchange for $37,000,000 of common units which were deemed contingently redeemable and classified in the mezzanine section between debt and equity on the Company’s balance sheet. In November 2012, the Company obtained approval from the Starwood Fund, pursuant to an amendment of its Operating Agreement, to remove the redemption feature such that the $37,000,000 of common units were no longer redeemable outside the control of the Company. The removal of the redemption feature was not deemed to be an extinguishment because the redemption was originally deemed to be remote. Accordingly, in November 2012, the $37,000,000 of common units have been reclassified as members’ equity.

F-23

LOGO

Shares

TRI POINTE HOMES, INC.

Common Stock

LOGO

PRELIMINARY PROSPECTUS

, 2013

Joint Book-Running Managers



Citigroup	Deutsche Bank Securities	FBR

Lead Manager

Moelis & Company

Until , 2013 (25 days after the date of this prospectus), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.

Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses, other than the underwriting discount, payable in connection with the sale of common stock being registered. All amounts shown are estimates, except the Securities and Exchange Commission registration fee, the Financial Industry Regulatory Authority filing fee and the New York Stock Exchange listing fee.


Securities and Exchange Commission registration fee	$	23,529
Financial Industry Regulatory Authority filing fee		26,375
New York Stock Exchange listing fee		*
Legal fees and expenses		*
Accountants’ fees and expenses		*
Printing expenses		*
Transfer agent and registrar fees and expenses		*
Blue Sky fees and expenses		*
Miscellaneous		*

Total		$*

To be provided by amendment.

Item 14.

Indemnification of Directors and Officers.

Delaware General Corporation Law. Under Section 145 of the Delaware General Corporation Law, which we refer to as the “DGCL,” a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding (1) if such person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the corporation and (2) with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe such conduct was unlawful. In actions brought by or in the right of the corporation, a corporation may indemnify such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which that person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the Court of Chancery or other such court shall deem proper. To the extent that such person has been successful on the merits or otherwise in defending any such action, suit or proceeding referred to above or any claim, issue or matter therein, he or she is entitled to indemnification for expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. The indemnification and advancement of expenses provided for or granted pursuant to Section 145 of the DGCL is not exclusive of any other rights of indemnification or advancement of expenses to which those seeking indemnification or advancement of expenses may be entitled, and a corporation may purchase and maintain insurance against liabilities asserted against any former or current director, officer, employee or agent of the corporation, or a person who is or was serving at the request of the corporation as a

II-1

director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, whether or not the power to indemnify is provided by the statute.

Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director’s duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or for any transaction from which the director derived an improper personal benefit. Our amended and restated certificate of incorporation (which we refer to as our “charter”) provides for such limitation of liability.

Our Charter. Article X of our charter provides that we shall, to the fullest extent authorized by the DGCL, indemnify any person made, or is threatened to be made, a party to, or is otherwise involved in, any action, suit or proceeding (whether civil, criminal or otherwise) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Company. We may, by action of our board of directors, provide indemnification to employees and agents of the Company to such extent and to such effect as our board of directors shall determine to be appropriate and authorized by the DGCL. Article X of our charter also provides that no director of the Company shall be personally liable to the Company or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director’s duty of loyalty to the Company or our stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL, or (4) for any transaction from which the director derived an improper personal benefit.

Our Bylaws. Article VII of our amended and restated bylaws (which we refer to as our “bylaws”) provides that we shall, to the fullest extent permitted by law, indemnify any person made or threatened to be made a party or is otherwise involved in any action, suit or proceeding (whether civil, criminal or otherwise) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise. We shall not be required to indemnify any person in connection with an action, suit or proceeding initiated by such person, including a counterclaim or crossclaim, unless such action, suit or proceeding was authorized by our board of directors. We may, by action of our board of directors, provide indemnification to such employees and agents of the Company to such extent and to such effect as our board of directors shall determine to be appropriate and authorized by Delaware law.

Indemnification Agreements. In addition to the provisions of our charter and bylaws described above, upon the completion of this offering, we will enter into an indemnification agreement with each of our officers and directors. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.

Insurance. We expect to maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (2) to us with respect to indemnification payments that we may make to such directors and officers.

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Item 15.

Recent Sales of Unregistered Securities.

During the three years preceding the filing of this registration statement, we sold unregistered securities to a limited number of persons, as described below:

•

As part of our formation transactions, the members of TRI Pointe Homes, LLC will receive an aggregate of shares of our common stock. The members of TPH LLC include a private equity fund managed by an affiliate of Starwood Capital Group Global, L.P., the members of our management team and a third-party investor. Such issuance will be exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof.

Item 16.

Exhibits and Financial Statement Schedules.

(a)

Exhibits

The following documents are filed as exhibits to this Registration Statement:


Exhibit Number		Exhibit Description
1.1*		Form of Underwriting Agreement
2.1*		Form of Plan of Conversion of TRI Pointe Homes, LLC
3.1		Form of Certificate of Incorporation of TRI Pointe Homes, Inc., to be effective prior to the completion of this offering
3.2		Form of Bylaws of TRI Pointe Homes, Inc., to be effective prior to the completion of this offering
4.1		Specimen Common Stock Certificate of TRI Pointe Homes, Inc.
5.1		Form of Opinion of Sidley Austin LLP regarding the validity of the securities being registered
10.1		Amended and Restated Revolving Line of Credit Loan Agreement by and between California Bank & Trust and TRI Pointe Homes, LLC, dated as of May 29, 2012
10.2*		2013 Long-Term Incentive Plan
10.3*		Form of Registration Rights Agreement among TRI Pointe Homes, Inc. and the members of TRI Pointe Homes, LLC, to be effective upon the completion of this offering
10.4*		Form of Amended and Restated Employment Agreement by and among TRI Pointe Homes, Inc., Douglas F. Bauer and VIII/TPC Holdings, L.L.C.
10.5*		Form of Amended and Restated Employment Agreement by and among TRI Pointe Homes, Inc., Thomas J. Mitchell and VIII/TPC Holdings, L.L.C.
10.6*		Form of Amended and Restated Employment Agreement by and among TRI Pointe Homes, Inc., Michael D. Grubbs and VIII/TPC Holdings, L.L.C.
10.7		Form of Indemnification Agreement between TRI Pointe Homes, Inc. and each of its directors and officers, to be effective upon the completion of this offering
21.1		List of subsidiaries of TRI Pointe Homes, Inc., upon completion of this offering
23.1		Consent of Ernst & Young LLP
23.2		Consent of John Burns Real Estate Consulting, LLC
23.3		Consent of Sidley Austin LLP (included in Exhibit 5.1)
24.1		Power of Attorney (included in the signature page of this Registration Statement)
99.1		Consent of Richard D. Bronson to be named as an Independent Director
99.2		Consent of Wade H. Cable to be named as an Independent Director
99.3		Consent of Steven J. Gilbert to be named as an Independent Director
99.4		Consent of Thomas B. Rogers to be named as an Independent Director

To be filed by amendment.

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(b)

Financial Statement Schedules

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or the notes thereto.

Item 17.

Undertakings.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Irvine, in the State of California, on this 21 ^st day of December, 2012.


TRI Pointe Homes, LLC

By:		/s/ Douglas F. Bauer
		Douglas F. Bauer
		Chief Executive Officer and Manager

Each person whose signature appears below hereby severally constitutes and appoints Douglas F. Bauer, Thomas J. Mitchell and Michael D. Grubbs, and each of them singly (with full power to each of them to act alone), his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any other registration statement for the same offering pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Barry S. Sternlicht Barry S. Sternlicht	Chairman of the Board of Managers	December 21, 2012

/s/ Douglas F. Bauer Douglas F. Bauer	Chief Executive Officer and Manager (Principal Executive Officer)	December 21, 2012

/s/ Thomas J. Mitchell Thomas J. Mitchell	President, Chief Operating Officer and Manager	December 21, 2012

/s/ Michael D. Grubbs Michael D. Grubbs	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	December 21, 2012

/s/ J. Marc Perrin J. Marc Perrin	Manager	December 21, 2012

/s/ Daniel Schwaegler Daniel Schwaegler	Manager	December 21, 2012

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INDEX TO EXHIBITS


Exhibit Number		Exhibit Description
1.1*		Form of Underwriting Agreement
2.1*		Form of Plan of Conversion of TRI Pointe Homes, LLC
3.1		Form of Certificate of Incorporation of TRI Pointe Homes, Inc., to be effective prior to the completion of this offering
3.2		Form of Bylaws of TRI Pointe Homes, Inc., to be effective prior to the completion of this offering
4.1		Specimen Common Stock Certificate of TRI Pointe Homes, Inc.
5.1		Form of Opinion of Sidley Austin LLP regarding the validity of the securities being registered
10.1		Amended and Restated Revolving Line of Credit Loan Agreement by and between California Bank & Trust and TRI Pointe Homes, LLC, dated as of May 29, 2012
10.2*		2013 Long-Term Incentive Plan
10.3*		Form of Registration Rights Agreement among TRI Pointe Homes, Inc. and the members of TRI Pointe Homes, LLC, to be effective upon the completion of this offering
10.4*		Form of Amended and Restated Employment Agreement by and among TRI Pointe Homes, Inc., Douglas F. Bauer and VIII/TPC Holdings, L.L.C.
10.5*		Form of Amended and Restated Employment Agreement by and among TRI Pointe Homes, Inc., Thomas J. Mitchell and VIII/TPC Holdings, L.L.C.
10.6*		Form of Amended and Restated Employment Agreement by and among TRI Pointe Homes, Inc., Michael D. Grubbs and VIII/TPC Holdings, L.L.C.
10.7		Form of Indemnification Agreement between TRI Pointe Homes, Inc. and each of its directors and officers, to be effective upon the completion of this offering
21.1		List of subsidiaries of TRI Pointe Homes, Inc., upon completion of this offering
23.1		Consent of Ernst & Young LLP
23.2		Consent of John Burns Real Estate Consulting, LLC
23.3		Consent of Sidley Austin LLP (included in Exhibit 5.1)
24.1		Power of Attorney (included in the signature page of this Registration Statement)
99.1		Consent of Richard D. Bronson to be named as an Independent Director
99.2		Consent of Wade H. Cable to be named as an Independent Director
99.3		Consent of Steven J. Gilbert to be named as an Independent Director
99.4		Consent of Thomas B. Rogers to be named as an Independent Director

To be filed by amendment.

Exhibit 3.1

CERTIFICATE OF INCORPORATION

TRI POINTE HOMES, INC.

(a Delaware corporation)

ARTICLE I

NAME

The name of the Corporation is TRI Pointe Homes, Inc. (hereinafter called the “ Corporation ”).

ARTICLE II

REGISTERED OFFICE

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801, and the name of the registered agent at that address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (the “ DGCL ”).

ARTICLE IV

STOCK

SECTION 4.01 Authorized Stock . The aggregate number of shares which the Corporation shall have authority to issue is Five Hundred Fifty Million (550,000,000), of which Five Hundred Million (500,000,000) shall be designated as Common Stock, par value $0.01 per share (“ Common Stock ”), and Fifty Million (50,000,000) shall be designated as Preferred Stock, par value $0.01 per share (“ Preferred Stock ”).

SECTION 4.02 Common Stock .

(a) Voting . Except as otherwise provided (i) by the DGCL, (ii) by Section 4.03 of this Article IV, or (iii) by resolutions, if any, of the Board of Directors of the Corporation (“ Board of Directors ”) fixing the relative powers, preferences and rights and the qualifications, limitations or restrictions of the Preferred Stock, the entire voting power of the shares of the Corporation for the election of directors and for all other purposes shall be vested exclusively in the Common Stock. Each share of Common Stock shall have one vote upon all matters to be voted on by the holders of the Common Stock.

(b) Dividends . Subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, each share of Common Stock shall be entitled to receive and share equally in all dividends paid out of any funds of the Corporation legally available therefor when, as and if declared by the Board of Directors.

(c) Liquidation . Upon the dissolution, liquidation or winding up of the Corporation, subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive the assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them.

SECTION 4.03 Preferred Stock . The Preferred Stock may be issued at any time and from time to time in one or more series. Subject to the provisions of this Certificate of Incorporation (this “ Certificate of Incorporation ”), the Board of Directors is authorized to fix from time to time by resolution or resolutions the number of shares of any class or series of Preferred Stock, and to determine the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of any such class or series. Further, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any such class or series, the Board of Directors is authorized to increase or decrease (but not below the number of shares of such class or series then outstanding) the number of shares of any such class or series subsequent to the issuance of shares of that class or series.

ARTICLE V

BOARD OF DIRECTORS

SECTION 5.01 Number . Subject to the rights and preferences of any series of outstanding Preferred Stock, the number of directors constituting the whole Board of Directors shall be not fewer than three (3) and shall be fixed from time to time solely by resolution adopted by affirmative vote of a majority of such directors then in office and may not be fixed by any other person or persons, including stockholders.

SECTION 5.02 Vacancies . Subject to the rights and preferences of any series of outstanding Preferred Stock, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise provided by law, be filled solely by the affirmative vote of a majority of the remaining directors then in office, even if such a majority is less than a quorum of the Board of Directors, or by a sole remaining director, and shall not be filled by any other person or persons, including stockholders. Any director so chosen shall hold office for the remainder of the full term of the class for which such director shall have been chosen or in which such vacancy occurred and until his successor shall be elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

SECTION 5.03 Powers . Except as otherwise expressly provided by the DGCL or this Certificate of Incorporation, the management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors.

SECTION 5.04 Election .

(a) Ballot Not Required . The directors of the Corporation need not be elected by written ballot unless the Bylaws of the Corporation so provide.

(b) Notice . Advance notice of stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation.

ARTICLE VI

STOCKHOLDER ACTION

The authority contemplated by Section 228 of the DGCL which permits stockholders to act by written consent is expressly denied to the stockholders of the Corporation. Accordingly, the stockholders have no ability to take any action unless such action is taken at an annual or special meeting of the stockholders.

ARTICLE VII

SPECIAL MEETINGS OF STOCKHOLDERS

A special meeting of the stockholders of the Corporation may be called at any time only by the Chairman of the Board of Directors, the Chief Executive Officer (or if there is no Chief Executive Officer, the President) or the Board of Directors of the Corporation pursuant to a resolution adopted by a majority of the total number of directors then in office. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.

ARTICLE VIII

EXISTENCE

The Corporation shall have perpetual existence.

ARTICLE IX

AMENDMENT

SECTION 9.01 Amendment of Certificate of Incorporation . The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation.

SECTION 9.02 Amendment of Bylaws . The Bylaws of the Corporation may be altered, changed or repealed, and new Bylaws made, by the majority vote of the whole Board of Directors.

ARTICLE X

LIABILITY OF DIRECTORS

SECTION 10.01 Personal Liability . To the fullest extent elimination or limitation of personal liability of directors is permitted by the DGCL, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

SECTION 10.02 Indemnification . Each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Corporation shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the DGCL. The right to indemnification conferred in this Article X shall also include the right to be paid by the Corporation the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by the DGCL. The rights to indemnification and advancement conferred in this Article X shall be contract rights and shall become vested by virtue of the director’s or officer’s service at the time when the state of facts giving rise to the claim occurred. The Corporation may, by action of its Board of Directors, provide indemnification to such of the employees and agents of the Corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by the DGCL.

SECTION 10.03 Insurance . The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the DGCL.

SECTION 10.04 Non-Exclusivity . The rights and authority conferred in this Article X shall not be exclusive of any other right which any person may otherwise have or hereafter acquire.

SECTION 10.05 Applicability . Neither the amendment nor repeal of this Article X, nor the adoption of any provision of this Certificate of Incorporation or the Bylaws of the Corporation, nor, to the fullest extent permitted by the DGCL, any modification of law, shall eliminate or reduce the effect of this Article X in respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification. Any vested rights to indemnification or advancement hereunder may not be amended or otherwise modified or limited without the express written consent of the affected director.

ARTICLE XI

BUSINESS OPPORTUNITIES

SECTION 11.01 Business Opportunities . To the fullest extent permitted by the DGCL and except as may be otherwise expressly agreed in writing by the Corporation and VIII/TPC Holdings, L.L.C. or any affiliate or subsidiary thereof (other than the Corporation and its subsidiaries) (collectively, the “Starwood Fund”) the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, any business opportunity that may be from time to time presented to the Starwood Fund or any of their officers, directors, agents, stockholders, members, partners, affiliates and subsidiaries (other than the Corporation and its subsidiaries) and that may be a business opportunity for the Starwood Fund or any of their affiliates and subsidiaries, even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no such person shall be liable to the Corporation or any of its subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person, acting in good faith, pursues or acquires any such business opportunity, directs any such business opportunity to another person or fails to present any such business opportunity, or information regarding any such business opportunity, to the Corporation or its subsidiaries unless, in the case of any such person who is a director or officer of the Corporation, any such business opportunity is expressly offered to such director or officer solely in his or her capacity as a director or officer of the Corporation. Neither the Starwood Fund nor any of their affiliates or subsidiaries shall have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries.

SECTION 11.02 Termination . The provisions of this Article XI shall have no further force or effect with respect to the Starwood Fund or any of their affiliates or subsidiaries on the date that no person who is a director or officer of the Corporation is also a director, officer, member, partner or employee of the Starwood Fund or any of their affiliates or subsidiaries. Neither the alteration, amendment or repeal of this Article XI nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article XI nor the termination of applicability pursuant to the immediately preceding sentence shall eliminate or reduce the effect of this Article XI in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article XI, would accrue or arise, prior to such alteration, amendment, repeal, adoption or termination.

SECTION 11.03 Deemed Notice . Any person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XI.

ARTICLE XII

DGCL SECTION 203 AND BUSINESS COMBINATIONS

SECTION 12.01 The Corporation hereby expressly elects not to be governed by Section 203 of the DGCL.

SECTION 12.02 Notwithstanding the foregoing, the Corporation shall not engage in any business combination (as defined below) with any interested stockholder (as defined below) for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:

(a) prior to such time, the Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

(b) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock (as defined below) of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares of voting stock outstanding those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

(c) at or subsequent to such time, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock of the Corporation which is not owned by the interested stockholder.

SECTION 12.03 The restrictions contained in Section 12.02 shall not apply if:

(a) the Corporation does not have a class of voting stock that is: (i) listed on a national securities exchange; or (ii) held of record by more than 2,000 stockholders, unless any of the foregoing results from action taken, directly or indirectly, by an interested stockholder or from a transaction in which a person becomes an interested stockholder; or

(b) a stockholder becomes an interested stockholder inadvertently and (i) as soon as practicable divests itself of ownership of sufficient shares so that the stockholder ceases to be an interested stockholder; and (ii) would not, at any time within the three-year period immediately prior to a business combination between the Corporation and such stockholder, have been an interested stockholder but for the inadvertent acquisition of ownership.

SECTION 12.04 For purposes of this Article XII, references to:

(a) “affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.

(b) “associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.

(c) “business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:

(i) any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (a) with the interested stockholder, or (b) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section 12.02 is not applicable to the surviving entity;

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;

(iii) any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (A) pursuant to the exercise, exchange or conversion of any security exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (B) pursuant to a merger under Section 251(g) of the DGCL; (C) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (D) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (E) any issuance or transfer of stock by the Corporation; provided, however , that in no case under items (C)-(E) of this subsection (iii) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation;

(iv) any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or of securities exercisable for, exchangeable for or convertible into the stock of any class or series, of

the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or

(v) any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.

(d) “control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of any corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article XII, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.

(e) “Existing Holder” means the Starwood Fund and their affiliates and subsidiaries.

(f) “Existing Holder Direct Transferee” means any person (and its affiliates) who acquires (other than in a registered public offering) directly in one or more related transactions from the Existing Holder or any “group”, or any member of any such group, to which such Existing Sponsor is a party under Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), beneficial ownership of 15% or more in the aggregate of the then outstanding voting stock of the Corporation.

(g) “Existing Holder Indirect Transferee” means any person (and its affiliates) who acquires (other than in a registered public offering) directly in one or more related transactions from any Existing Holder Direct Transferee or any other Existing Holder Indirect Transferee beneficial ownership of 15% or more in the aggregate of the then outstanding voting stock of the Corporation.

(h) “interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder; and the affiliates and associates of such person; but “interested stockholder” shall not include (A) the Existing Holder, any Existing Holder Direct Transferee, any Existing Holder Indirect Transferee or any of their respective affiliates or successors or any “group”, or any member of any such group, to which such persons are a party under Rule 13d-5 of the Exchange Act, or (B) any person whose

ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation, provided, in the case of this clause (B), that such person shall be an interested stockholder if thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(i) “person” means any individual, corporation, partnership, unincorporated association or other entity.

(j) “stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.

(k) “voting stock” means, with respect to any corporation, stock of any class or series entitled to vote generally in the election of directors and, with respect to any entity that is not a corporation, any equity interest entitled to vote generally in the election of the governing body of such entity. Every reference to a percentage of voting stock shall refer to such percentage of the votes of such voting stock.

(l) “owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its affiliates or associates:

(i) beneficially owns (as determined pursuant to Rule 13d-3 of the Exchange Act or any successor provision) such stock, directly or indirectly;

(ii) has (A) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s affiliates or associates until such tendered stock is accepted for purchase or exchange; or (B) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or

(iii) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (B) of subsection (l)(ii) above), or disposing of such stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such stock.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Incorporation to be executed, signed and acknowledged by the undersigned as of the date set forth below.

Dated:


TRI POINTE HOMES, INC.

By:
		Name: Douglas F. Bauer
		Title: Chief Executive Officer and Director

[ Signature Page to Certificate of Incorporation ]

Exhibit 3.2

BYLAWS

TRI POINTE HOMES, INC.

(Adopted as of , 2013)

ARTICLE I

Offices

Section 1.1 Registered Offices . The registered office of TRI Pointe Homes, Inc. (the “Corporation”) in the State of Delaware shall be located at 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of the Corporation’s registered agent at such address shall be The Corporation Trust Company. The registered office and/or registered agent of the Corporation may be changed from time to time by action of the Board of Directors.

Section 1.2 Other Offices . The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require

Section 1.3 Books . The books of the Corporation may be kept within or without of the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

Stockholders Meetings

Section 2.1 Annual Meetings .

(a) An annual meeting of stockholders shall be held for the election of directors and the transaction of such other business as may properly be brought before the meeting in accordance with these Bylaws at such date, time and place, if any, as may be fixed by resolution of the Board of Directors of the Corporation from time to time.

(b) Only such business (other than stockholder nominations of directors, which shall be made in compliance with, and shall be exclusively governed by, Section 3.1(a)) shall be conducted at an annual meeting of stockholders as shall have been properly brought before the meeting. For business to be properly brought before the meeting, it must be (i) authorized by the Board of Directors and specified in the notice, or a supplemental notice, of the meeting, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder of the Corporation who was a stockholder of record both at the time of giving of notice by the stockholder as provided for in this Section 2.1(b) and at the time of the annual meeting of stockholders, who is entitled to vote at the meeting on any such business and who has complied with the notice and other requirements set forth in these Bylaws; clause (iii) shall be the exclusive means for a stockholder to submit such business (other than proposals properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and included in the Corporation’s notice of the meeting, which proposals are not governed by these Bylaws) before an annual meeting of stockholders.

(c) For business to be properly brought before an annual meeting by a stockholder pursuant to Section 2.1(b)(iii), the stockholder must have given timely written notice thereof to the Secretary of the Corporation as hereinafter provided and such proposal must otherwise be a proper subject for action by the Corporation’s stockholders. To be timely, a stockholder’s written notice shall set forth all information required under this Section 2.1(c) and shall be delivered or mailed to and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the date on which the Corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the immediately preceding year’s annual meeting; provided , however , that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is not within 30 days from the first anniversary of the immediately preceding year’s annual meeting date, written notice by a stockholder in order to be timely must be received not earlier than the 120 ^th day before the date of such annual meeting and not later than the later of the 90 ^th day before the date of such annual meeting, as originally convened, or the close of business on the tenth day following the day on which the first public disclosure of the date of such annual meeting was made. In no event shall the public disclosure of an adjournment or postponement of an annual meeting commence a new time period for the giving of stockholder’s notice as described above. A stockholder’s notice to the Secretary delivered pursuant to this Section 2.1(c) shall set forth:

(i)

as to each matter the stockholder proposes to bring before the meeting, (A) a description of the proposal or business (including the complete text of any resolutions to be presented at the annual meeting, and, in the event that such business includes a proposal to amend these Bylaws, the text of the proposed amendment) desired to be brought before the annual meeting, (B) the reasons for conducting such business at the annual meeting, and (C) any material interest in such business of such stockholder or any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom;

(ii)

to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the proposal of business on the date of such stockholder’s notice;

(iii)

as to the stockholder giving the notice and any Stockholder Associated Person:

(A) the class or series and number of shares of capital stock or other securities of the Corporation (collectively, “Company Securities”), if any, which are owned beneficially or of record by such person, the date(s) on which such Company Securities were acquired and the investment intent of such acquisition(s), and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person,

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(B) the nominee holder for, and number of, any Company Securities owned beneficially but not of record by such person,

(C) whether and the extent to which such person, directly or indirectly (through brokers, nominees or otherwise), is subject to or during the last six months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (x) manage risk or benefit of changes in the price of Company Securities for such person, or (y) increase or decrease the voting power of such person in the Corporation disproportionately to such person’s economic interest in the Company Securities; and

(D) a representation that such stockholder or Stockholder Associated Person intends to appear in person or by proxy at the annual meeting to bring such business before the meeting;

(iv)

as to the stockholder giving the notice or any Stockholder Associated Person with an interest or ownership referred to in clause (i) or clause (iii)(C) of this Section 2.1(c):

(A) the name and address of such stockholder, as they appear on the Corporation’s stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person, and

(B) the investment strategy or objective, if any, of such stockholder and each such Stockholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder and each such Stockholder Associated Person;

(v)

as to the stockholder giving the notice and any Stockholder Associated Person, a description of all arrangements or understandings between such person and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder or such beneficial owner in such business, including any anticipated benefit to the stockholder or such beneficial owner therefrom; and

(vi)

as to the stockholder giving the notice and any Stockholder Associated Person, a representation that such person intends to appear in person or by proxy at the annual meeting to bring such business before the meeting (the information described in clauses (iii) through (vi), the “Proposing Stockholder Information”).

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(d) Unless otherwise required by law, if a stockholder (or qualified representative) does not appear at the meeting of stockholders to present business proposed by such stockholder pursuant to this Section 2.1(c), such proposed business shall not be transacted, even though proxies in respect of such vote may have been received by the Corporation. No business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (c). The chairman of the meeting at which any business is proposed by a stockholder shall, if the facts warrant, determine and declare to the meeting that such business was not properly brought before the meeting in accordance with the provisions of this Section 2.1(c), and in such event, the business not properly before the meeting shall not be transacted.

Section 2.2 Special Meetings . Special meetings of stockholders may be called only as set forth in the Certificate of Incorporation (the “Certificate of Incorporation”) of the Corporation.

Section 2.3 Notice of Meetings . A written notice of each annual or special meeting of stockholders shall be given stating the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting) and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, such notice of meeting shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting, personally, by mail or, to the extent and in the manner permitted by applicable law, electronically. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.

Section 2.4 Adjournments . Any annual or special meeting of stockholders may be adjourned from time to time to reconvene at the same or some other place, if any, and notice need not be given of any such adjourned meeting if the date, time and place, if any, thereof and the means of remote communication, if any, by which stockholders and proxyholders may be deemed present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with Section 2.3. If the Board of Directors shall fix a new record date for determination of stockholders entitled to vote at an adjourned meeting, the Board of Directors shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as the record date determined for stockholders entitled to vote at the adjourned meeting.

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Section 2.5 Quorum . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the presence in person or by proxy of the holders of stock having a majority of the votes which could be cast by the holders of all outstanding stock entitled to vote at the meeting shall constitute a quorum at each meeting of stockholders. In the absence of a quorum, the stockholders so present may, by the affirmative vote of the holders of stock having a majority of the votes which could be cast by all such holders, adjourn the meeting from time to time in the manner provided in Section 2.4 of these Bylaws until a quorum is present. If a quorum is present when a meeting is convened, the subsequent withdrawal of stockholders, even though less than a quorum remains, shall not affect the ability of the remaining stockholders lawfully to transact business.

Section 2.6 Conduct; Remote Communication

(a) Meetings of stockholders shall be presided over by the Chairman of the Board or, in his or her absence, by the Chief Executive Officer, or in his or her absence, by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

(b) If authorized by the Board of Directors in accordance with these Bylaws and applicable law, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication, (1) participate in a meeting of stockholders and (2) be deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

Section 2.7 Voting .

(a) Except as otherwise provided by the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power on the matter in question.

(b) Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors of election unless so required by Section 2.9 of these Bylaws or so determined by the holders of stock having a majority of the votes which could be cast by the holders of all outstanding stock entitled to vote which are present in person or by proxy at such meeting. Unless otherwise provided in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast in the election of directors. Each other question shall, unless

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otherwise provided by law, the Certificate of Incorporation or these Bylaws, be decided by the vote of the holders of stock having a majority of the votes which could be cast by the holders of all stock entitled to vote on such question which are present in person or by proxy at the meeting.

(c) Stock of the Corporation standing in the name of another corporation and entitled to vote may be voted by such officer, agent or proxy as the bylaws or other internal regulations of such other corporation may prescribe or, in the absence of such provision, as the board of directors or comparable body of such other corporation may determine.

(d) Stock of the Corporation standing in the name of a deceased person, a minor, an incompetent or a debtor in a case under Title 11, United States Code, and entitled to vote may be voted by an administrator, executor, guardian, conservator, debtor-in-possession or trustee, as the case may be, either in person or by proxy, without transfer of such shares into the name of the official or other person so voting.

(e) A stockholder whose voting stock of the Corporation is pledged shall be entitled to vote such stock unless on the transfer records of the Corporation the pledgor has expressly empowered the pledgee to vote such shares, in which case only the pledgee, or such pledgee’s proxy, may represent such shares and vote thereon.

(f) If voting stock is held of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one votes, such act binds all; (ii) if more than one vote, the act of the majority so voting binds all; and (iii) if more than one vote, but the vote is evenly split on any particular matter each faction may vote such stock proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery of the State of Delaware or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the stock, which shall then be voted as determined by a majority of such persons and the person appointed by the Court. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even split for the purpose of this subsection shall be a majority or even split in interest.

(g) Stock of the Corporation belonging to the Corporation, or to another corporation a majority of the shares entitled to vote in the election of directors of which are held by the Corporation, shall not be voted at any meeting of stockholders and shall not be counted in the total number of outstanding shares for the purpose of determining whether a quorum is present. Nothing in this Section 2.7 shall limit the right of the Corporation to vote shares of stock of the Corporation held by it in a fiduciary capacity.

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Section 2.8 Proxies .

(a) Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy filed with the Secretary before or at the time of the meeting. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary an instrument in writing revoking the proxy or another duly executed proxy bearing a later date.

(b) A stockholder may authorize another person or persons to act for such stockholder as proxy (i) by executing a writing authorizing such person or persons to act as such, which execution may be accomplished by such stockholder or such stockholder’s authorized officer, director, partner, employee or agent (or, if the stock is held in a trust or estate, by a trustee, executor or administrator thereof) signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, facsimile signature, or (ii) by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission (each, a “Transmission”) to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such Transmission; provided that any such Transmission must either set forth or be submitted with information from which it can be determined that such Transmission was authorized by such stockholder.

(c) Any inspector or inspectors appointed pursuant to Section 2.9 of these Bylaws shall examine Transmissions to determine if they are valid. If no inspector or inspectors are so appointed, the Secretary or such other person or persons as shall be appointed from time to time by the Board of Directors shall examine Transmissions to determine if they are valid. If it is determined that a Transmission is valid, the person or persons making that determination shall specify the information upon which such person or persons relied. Any copy, facsimile telecommunication or other reliable reproduction of such a writing or Transmission may be substituted or used in lieu of the original writing or Transmission for any and all purposes for which the original writing or Transmission could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or Transmission.

Section 2.9 Voting Procedures and Inspectors of Elections .

(a) If the Corporation has a class of voting stock that is (i) listed on a national securities exchange, (ii) authorized for quotation on an interdealer quotation system of a registered national securities association or (iii) held of record by more than 2,000 stockholders, the Board of Directors shall, in advance of any meeting of stockholders, appoint one or more inspectors (individually an “Inspector,” and collectively the “Inspectors”) to act at such meeting and make a written report thereof. The Board of Directors may designate one or more persons as alternate Inspectors to replace any Inspector who shall fail to act. If no Inspector or alternate is able to act at such meeting, the chairman of the meeting shall appoint one or more other persons to act as Inspectors. Each Inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of Inspector with strict impartiality and according to the best of his or her ability.

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(b) The Inspectors shall (i) ascertain the number of shares of stock of the Corporation outstanding and the voting power of each, (ii) determine the number of shares of stock of the Corporation present in person or by proxy at such meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the Inspectors and (v) certify their determination of the number of such shares present in person or by proxy at such meeting and their count of all votes and ballots. The Inspectors may appoint or retain other persons or entities to assist them in the performance of their duties.

(c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at such meeting. No ballots, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by any stockholder shall determine otherwise.

(d) In determining the validity and counting of proxies and ballots, the Inspectors shall be limited to an examination of the proxies, any envelopes submitted with such proxies, any information referred to in paragraphs (b) and (c) of Section 2.8 of these Bylaws, ballots and the regular books and records of the Corporation, except that the Inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by a stockholder of record to cast or more votes than such stockholder holds of record. If the Inspectors consider other reliable information for the limited purpose permitted herein, the Inspectors, at the time they make their certification pursuant to paragraph (b) of this Section 2.9, shall specify the precise information considered by them, including the person or persons from whom such information was obtained, when and the means by which such information was obtained and the basis for the Inspectors’ belief that such information is accurate and reliable.

Section 2.10 Fixing Date of Determination of Stockholders of Record .

(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall, unless otherwise required by law, be not more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting, unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors in respect of a meeting, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next

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preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty (60) days prior to such action. If no such record date is so fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 2.11 List of Stockholders Entitled to Vote . The Secretary shall prepare, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, the list shall be open to the examination of any stockholder during the whole time thereof on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

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ARTICLE III

Board of Directors

Section 3.1 Election; Resignation; Vacancies .

(a) Only persons who are nominated in accordance with the procedures set forth in this Section 3.1(a) shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders by the Board of Directors or by any stockholder of the Corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (a). Any nomination by a stockholder must be made by timely written notice to the Secretary as hereinafter provided. To be timely, a stockholder’s written notice shall set forth all information required under this Section 3.1(a) and shall be delivered or mailed to and received at the principal executive offices of the Corporation: (i) with respect to an election to be held at an annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the first anniversary of the date on which the Corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the immediately preceding year’s annual meeting; provided , however , that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is not within 30 days from the first anniversary of the immediately preceding year’s annual meeting date, written notice by a stockholder in order to be timely must be received not earlier than the 120 ^th day before the date of such annual meeting and not later than the later of the 90 ^th day before the date of such annual meeting, as originally convened, or the close of business on the tenth day following the day on which the first public disclosure of the date of such annual meeting was made, and (ii) with respect to an election to be held at a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which the first public disclosure of the date of such special meeting was made. In no event shall the public disclosure of an adjournment or postponement of any annual or special meeting commence a new time period for giving of a stockholder notice as described above. A stockholder’s notice to the Secretary delivered pursuant to this Section 3.1(a) shall set forth:

(i)

as to each person whom the stockholder proposes to nominate for election or re-election as a director (each, a “Proposed Nominee”), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder; and

(ii)

as to the stockholder giving the notice and any Stockholder Associated Person, the Proposing Stockholder Information with respect to such person.

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Such notice shall be accompanied by a written representation and agreement, in the form provided by the Secretary upon written request, executed by the Proposed Nominee, that such Proposed Nominee (i) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director that has not been disclosed to the Corporation, (ii) consents to being named as a nominee and to serve as a director if elected, (iii) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such Proposed Nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such Proposed Nominee’s ability to comply, if elected as a director of the Corporation, with such Proposed Nominee’s fiduciary duties under applicable law and (iv) would be in compliance if elected as a director of the Corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary (in accordance with any applicable time periods prescribed for delivery of notice under these Bylaws) that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

Notwithstanding anything in this Section 3.1(a) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased, and there is no public disclosure of such action at least 90 days prior to the first anniversary of the date on which the Corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the immediately preceding year’s annual meeting, a stockholder’s notice required by this Section 3.1(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive office of the Corporation not later than the tenth day following the day on which such public disclosure is first made by the Corporation.

No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.1(a). Unless otherwise required by law, if a stockholder (or qualified representative) does not appear at the meeting of stockholders to present a nomination proposed by such stockholder pursuant to this Section 3.1(a), such nomination shall be disregarded, even though proxies in respect of such vote may have been received by the Corporation. The chairman of the meeting at which a stockholder nomination is presented shall, if the facts warrant, determine and declare to the meeting that such nomination was not made in accordance with the procedures prescribed by this Section 3.1(a), and, in such event, the defective nomination shall be disregarded.

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(b) Any director may resign at any time by giving written notice to the Chairman of the Board, the Chief Executive Officer or the Secretary. A resignation shall take effect when the resignation is delivered to the officer to whom it is directed unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events, without any need for its acceptance. A resignation that is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable.

(c) Any newly created directorship or any vacancy occurring in the Board of Directors for any reason shall be filled as set forth in the Certificate of Incorporation.

Section 3.2 Regular Meetings . Unless otherwise determined by the Board of Directors, a regular annual meeting of the Board of Directors shall be held, without call or notice, immediately after and, if the annual meeting of stockholders is held at a place, at the same place as the annual meeting of stockholders, for the purpose of electing officers and transacting any other business that may properly come before such meeting. Additional regular meetings of the Board of Directors may be held without call or notice at such times as shall be fixed by resolution of the Board of Directors.

Section 3.3 Special Meetings . Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer, the Secretary or by any member of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting. The purpose or purposes of a special meeting need not be stated in the call or notice.

Section 3.4 Organization . Meetings of the Board of Directors shall be presided over by the Chairman of the Board or, in his or her absence, by the Chief Executive Officer, or in his or her absence, by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting. A majority of the directors present at a meeting, whether or not they constitute a quorum, may adjourn such meeting to any other date, time or place without notice other than announcement at the meeting.

Section 3.5 Quorum; Vote Required for Action . At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. Unless the Certificate of Incorporation or these Bylaws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3.6 Committees . The Board of Directors may, by resolution, designate one or more committees, including but not limited to an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and an Executive Committee, each committee to consist of one or more directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members present at any meeting

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and not disqualified from voting, whether or not a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and provided in these Bylaws or in the resolution of the Board of Directors designating such committee, or an amendment to such resolution, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.

Section 3.7 Telephonic Meetings . Directors, or any committee of directors designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.7 shall constitute presence in person at such meeting.

Section 3.8 Board of Director Action by Written Consent Without a Meeting . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing (which may be in counterparts) or by electronic transmission, and the written consent or consents or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or such committee. Such filing shall be made in paper form if the minutes of the Corporation are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Such action by written consent or consent by electronic transmission shall have the same force and effect as a unanimous vote of the Board of Directors.

Section 3.9 Committee Rules . Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules not inconsistent with the provisions of law for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to this Article III of these Bylaws.

Section 3.10 Reliance upon Records . Every director, and every member of any committee of the Board of Directors, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters the director or member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, including, but not limited to, such records, information, opinions, reports or statements as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid, or with which the Corporation’s capital stock might properly be purchased or redeemed.

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Section 3.11 Interested Directors . A director who is directly or indirectly a party to a contract or transaction with the Corporation, or is a director or officer of or has a financial interest in any other corporation, partnership, association or other organization which is a party to a contract or transaction with the Corporation, may be counted in determining whether a quorum is present at any meeting of the Board of Directors or a committee thereof at which such contract or transaction is considered or authorized, and such director may participate in such meeting and vote on such authorization to the extent permitted by applicable law, including Section 144 of the General Corporation Law of the State of Delaware.

Section 3.12 Compensation . Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of directors. The directors shall be paid their reasonable expenses, if any, of attendance at each meeting of the Board of Directors or a committee thereof and may be paid a fixed sum for attendance at each such meeting and an annual retainer or salary for services as a director or committee member. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

ARTICLE IV

Officers

Section 4.1 Executive Officers; Election; Qualification; Term of Office . The Board of Directors shall elect a Chairman of the Board from among its members and shall elect a Chief Executive Officer and a Chief Financial Officer. The Board of Directors shall also elect a Secretary and may elect a President, one or more Vice Presidents, and one or more Assistant Secretaries. Any number of offices may be held by the same person. Each officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier death, resignation or removal.

Section 4.2 Resignation; Removal; Vacancies . Any officer may resign at any time by giving written notice to the Chairman of the Board, the Chief Executive Officer or the Secretary. Unless otherwise stated in a notice of resignation, it shall take effect when received by the officer to whom it is directed, without any need for its acceptance. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. A vacancy occurring in any office of the Corporation may be filled for the unexpired portion of the term thereof by the Board of Directors at any regular or special meeting.

Section 4.3 Powers and Duties of Executive Officers . The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his or her duties.

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Section 4.4 Chief Executive Officer . The Chief Executive Officer of the Corporation shall in general supervise and control all of the business affairs of the Corporation, subject to the direction of the Board of Directors. The Chief Executive Officer may execute, in the name and on behalf of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors or a committee thereof has authorized to be executed, except in cases where the execution shall have been expressly delegated by the Board of Directors or a committee thereof to some other officer or agent of the Corporation.

Section 4.5 President . The President, if there be one, shall perform such duties and possess such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer, the President shall perform the duties of the Chief Executive Officer and, when so performing, shall have all the powers and be subject to all the restrictions upon the office of Chief Executive Officer.

Section 4.6 Chief Financial Officer . The Chief Financial Officer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Controlling Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all such officer’s transactions as Chief Financial Officer and of the financial condition of the Corporation. If required by the Board of Directors, the Chief Financial Officer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office and for the restoration to the Corporation, in case of such person’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

Section 4.7 Secretary . In addition to such other duties, if any, as may be assigned to the Secretary by the Board of Directors, the Chairman of the Board or the Chief Executive Officer, the Secretary shall (i) keep the minutes of proceedings of the stockholders, the Board of Directors and any committee of the Board of Directors in one or more books provided for that purpose; (ii) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (iii) be the custodian of the records and seal of the Corporation; (iv) affix or cause to be affixed the seal of the Corporation or a facsimile thereof, and attest the seal by his or her signature, to all documents the execution of which under seal is authorized by the Board of Directors; and (v) unless such duties have been delegated by the Board of Directors to a transfer agent of the Corporation, keep or cause to be kept a register of the name and address of each stockholder, as the same shall be furnished to the Secretary by such stockholder, and have general charge of the stock transfer records of the Corporation.

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Section 4.8 Assistant Secretaries . Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, if there be one, or any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of such person’s disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

Section 4.9 Vice Presidents . Except as may be otherwise provided in these Bylaws, Vice Presidents, if there be any, shall perform such duties and possess such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer or the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other such title.

Section 4.10 Other Officers . Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

ARTICLE V

Stock Certificates and Transfers

Section 5.1 Certificated and Uncertificated Shares . Shares of the Corporation’s stock may be certificated or uncertificated, as provided under Delaware law. All certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. The certificates shall be signed by (i) the Chairman of the Board of Directors, the Chief Executive Officer, the President, if any, or a Vice President, if any, and (ii) the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, and certify the number of shares owned by such holder in the Corporation.

Section 5.2 Signatures . Any signature required to be on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

Section 5.3 Lost Certificates; Issuance of New Certificates . The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

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Section 5.4 Transfers of Stock . Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the record holder of such stock, or by their attorney lawfully constituted in writing, and, in the case of stock represented by a certificate, upon the surrender of the certificate.

Section 5.5 Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten days before the date of such meeting, nor more than sixty days prior to any such other corporate action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 5.6 Beneficial Owners . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

ARTICLE VI

Notices

Section 6.1 Manner of Notice .

(a) Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, whenever notice is required to be given to any stockholder, director or member of any committee of the Board of Directors, such notice may be given by (i) personal delivery, (ii) depositing it, in a sealed envelope, in the United States mails, first class, postage prepaid, addressed, (iii) delivering to a company for overnight or second day mail or delivery, (iv) delivering it to a telegraph company, charges prepaid, for transmission, or by transmitting it via telecopier, or (v) any other reliable means permitted by applicable law (including, subject to Section 6.1(b), electronic transmission) to such stockholder, director or member, either at the address of such stockholder, director or member as it appears on the records of the Corporation or, in the case of such a director or member, at his or her business address; and such notice shall be deemed to be given at the time when it is thus personally delivered, deposited, delivered or transmitted, as the case may be. Such requirement for notice shall also be deemed satisfied, except in the case of stockholder meetings, if actual notice is received orally or by other writing by the person entitled thereto as far in advance of the event with respect to which notice is being given as the minimum notice period required by law or these Bylaws.

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(b) Without limiting the foregoing, any notice to stockholders given by the Corporation pursuant to these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation and shall also be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the Secretary of the Corporation, the transfer agent or other person responsible for the giving of notice; provided, however, that the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given by a form of electronic transmission in accordance with these Bylaws shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network, together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by another form of electronic transmission, when directed to the stockholder.

Section 6.2 Dispensation with Notice .

(a) Whenever notice is required to be given by law, the Certificate of Incorporation or these Bylaws to any stockholder to whom (i) notice of two consecutive annual meetings of stockholders, and all notices of meetings of stockholders to such stockholder during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities of the Corporation during a 12-month period, have been mailed addressed to such stockholder at the address of such stockholder as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such stockholder shall not be required. Any action or meeting which shall be taken or held without notice to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver to the Corporation a written notice setting forth the then current address of such stockholder, the requirement that notice be given to such stockholder shall be reinstated.

(b) Whenever notice is required to be given by law, the Certificate of Incorporation or these Bylaws to any person with whom communication is unlawful, the giving of such notice to such person shall not be required, and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given.

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Section 6.3 Waiver of Notice . Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee or directors need be specified in any written waiver of notice.

ARTICLE VII

Indemnification

Section 7.1 Right to Indemnification .

(a) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by law as in effect on the date of adoption of these Bylaws or as it may thereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise, against any and all liability and loss (including judgments, fines, penalties and amounts paid in settlement) suffered or incurred and expenses reasonably incurred by such person. The Corporation may, by action of its Board of Directors, provide indemnification to such of the employees and agents of the Corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by Delaware law. The Corporation shall not be required to indemnify a person in connection with a proceeding initiated by such person, including a counterclaim or crossclaim, unless the proceeding was authorized by the Board of Directors.

(b) For purposes of this Article VII: (i) any reference to “other enterprise” shall include all plans, programs, policies, agreements, contracts and payroll practices and related trusts for the benefit of or relating to employees of the Corporation and its related entities (“employee benefit plans”); (ii) any reference to “fines”, “penalties”, “liability” and “expenses” shall include any excise taxes, penalties, claims, liabilities and reasonable expenses (including reasonable legal fees and related expenses) assessed against or incurred by a person with respect to any employee benefit plan; (iii) any reference to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation or trustee or administrator of any employee benefit plan which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, beneficiaries, fiduciaries, administrators and service providers; (iv) any reference to serving at the request of the Corporation as a director, officer, employee or agent of a partnership or trust shall include service as a partner or trustee; and (v) a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” for purposes of this Article VII.

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Section 7.2 Prepayment of Expenses . The Corporation shall pay or reimburse the reasonable expenses incurred in defending any proceeding in advance of its final disposition if the Corporation has received an undertaking by the person receiving such payment or reimbursement to repay all amounts advanced if it should be ultimately determined that he or she is not entitled to be indemnified under this Article VII or otherwise.

Section 7.3 Claims . If a claim for indemnification or payment of expenses under this Article VII is not paid in full within 60 days after a written claim therefor has been received by the Corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

Section 7.4 Non-Exclusivity of Rights . The rights conferred on any person by this Article VII shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

Section 7.5 Other Indemnification . The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee, partner or agent of another corporation, partnership, joint venture or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture or other enterprise.

Section 7.6 Amendment or Repeal . Any repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

ARTICLE VIII

General

Section 8.1 Fiscal year . The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. Initially, the fiscal year of the Corporation shall end on December 31 of each year.

Section 8.2 Seal . The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.

Section 8.3 Definitions .

(a) For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

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(b) For purposes of these Bylaws, “public disclosure” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(c) For purposes of these Bylaws, a “qualified representative” of a stockholder shall mean a duly authorized officer, manager or partner of such stockholder or a person authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders, which writing (or a reliable reproduction thereof) shall be produced at the meeting of stockholders.

(d) For purposes of these Bylaws, “Stockholder Associated Person” of any stockholder means (i) any person acting in concert with such stockholder, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder (other than a stockholder that is a depositary) and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such stockholder or such Stockholder Associated Person.

Section 8.4 Amendment of Bylaws . These Bylaws may be altered or repealed, and new Bylaws made, by the majority vote of the whole Board of Directors; provided , however , that a Bylaw adopted by the holders of stock representing a majority of the votes which could be cast by the holders of all outstanding stock that prescribes the required vote for the election of directors may not be altered by the Board of Directors. The holders of stock representing a majority of the votes which could be cast by the holders of all outstanding stock may make additional Bylaws and may alter and repeal any Bylaws whether adopted by them or otherwise.

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Exhibit 4.1


NUMBER				SHARES

SEE REVERSE FOR IMPORTANT NOTICE

ON TRANSFER RESTRICTIONS, CERTAIN

DEFINITIONS AND OTHER INFORMATION

TRI POINTE HOMES, INC.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE


THIS CERTIFIES THAT				CUSIP

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE, OF

TRI POINTE HOMES, INC.

(hereinafter called the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by a duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Certificate of Incorporation of the Corporation (the “Charter”) and the Bylaws of the Corporation and any amendments thereto. This Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by facsimile signatures of its duly authorized officers.

Dated:



Chief Executive Officer and Director						Secretary

Countersigned and Registered:


American Stock Transfer & Trust Company LLC Transfer Agent and Registrar

By:
		Authorized Signatory

IMPORTANT NOTICE

THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF THE INFORMATION REQUIRED BY SECTION 151(F) OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE WITH RESPECT TO THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS A COPY OF THE CHARTER AND BYLAWS OF THE CORPORATION. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE OR TO THE TRANSFER AGENT.

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:


TEN COM –	as tenants in common	UNIF GIFT MIN ACT — Custodian
TENENT –	as tenants by the entireties	(Cust) (Minor)
JT TEN –	as joint tenants with right of survivorship and not as tenants in common	under Uniform Gifts to Minors Act (State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO

Please insert social security or other identifying number of assignee

(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)

SHARES OF COMMON STOCK OF THE CORPORATION REPRESENTED BY THIS CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT

ATTORNEY TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE CORPORATION WITH THE POWER OF SUBSTITUTION IN THE PREMISES.


Dated:	Signature:
		NOTICE: The Signature To This Assignment Must Correspond With The Name As Written Upon the Face Of The Certificate In Every Particular, Without Alteration Or Enlargement Or Any Change Whatsoever.

Signature Guaranteed by:

Exhibit 5.1


SIDLEY AUSTIN LLP 787 SEVENTH AVENUE New York, NY 10019 (212) 839 5300 (212) 839 5599 FAX	BEIJING BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG HOUSTON LONDON	LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C.

	Founded 1866

, 2013

TRI Pointe Homes, Inc.

19520 Jamboree Road, Suite 200

Irvine, California 92612

Re:

TRI Pointe Homes, Inc.

Registration Statement on Form S-1 (Registration No. 333- )

Ladies and Gentlemen:

We refer to the Registration Statement on Form S-1 (File No. 333- ) (as amended, the “ Registration Statement ”) filed by TRI Pointe Homes, Inc. (the “ Company ”), a Delaware corporation to be formed upon the statutory conversion of TRI Pointe Homes, LLC from a Delaware limited liability company to a Delaware corporation (the “ Conversion ”), with the Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended (the “ Securities Act ”). The Registration Statement relates to the registration of shares of common stock, par value $0.01 per share (the “ Shares ”), of the Company (including an aggregate of Shares which may be sold by the Company to the underwriters pursuant to the exercise of the underwriters’ option to purchase additional Shares under the Underwriting Agreement (as defined below)). The Shares are to be sold by the Company pursuant to an underwriting agreement among the Company and the Underwriters named therein, the form of which has been filed as Exhibit 1.1 to the Registration Statement (the “ Underwriting Agreement ”).

This opinion letter is being delivered in accordance with the requirements of Item 16 of Form S-1 and Item 601(b)(5) of Regulation S-K, each under the Securities Act.

In rendering the opinions expressed below, we have acted as counsel for the Company and have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of (i) the Registration Statement, (ii) the form of Certificate of Conversion relating to the Conversion to be filed with the Secretary of State of the State of Delaware prior to the closing of the sale of the Shares contemplated by the Registration Statement and the Underwriting Agreement, filed as part of Exhibit 2.1 to the Registration Statement, (iii) the form of Certificate of Incorporation of the Company to be filed with the Secretary of State of the

Sidley Austin (NY) LLP is a Delaware limited liability partnership doing business as Sidley Austin LLP and practicing in affiliation with other Sidley Austin partnerships.

LOGO

TRI Pointe Homes, Inc.

, 2013

Page 2

State of Delaware prior to the closing of the sale of the Shares contemplated by the Registration Statement and the Underwriting Agreement, filed as Exhibit 3.1 to the Registration Statement, (iv) the form of the Bylaws of the Company to become effective prior to the closing of the sale of the Shares contemplated by the Registration Statement and the Underwriting Agreement, filed as Exhibit 3.2 to the Registration Statement, (v) the preliminary prospectus contained within the Registration Statement, (vi) the form of the Underwriting Agreement and (vii) such other documents and records of the Company, certificates of public officials and representatives of the Company, resolutions and other documents and have examined such questions of law and have satisfied ourselves as to such matters of fact, as we have deemed necessary or appropriate as a basis for the opinions set forth herein. We have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, the legal capacity of all natural persons and the conformity with the original documents of any copies thereof submitted to us for our examination.

Based upon the foregoing, and subject to the qualifications and limitations set forth herein, we are of the opinion that, after giving effect to the Conversion, the Shares, when issued and sold as contemplated in the Registration Statement, and upon payment and delivery in accordance with the Underwriting Agreement, will be validly issued, fully paid and non-assessable.

This opinion letter is limited to the General Corporation Law of the State of Delaware. We express no opinion as to matters relating to securities or blue sky laws of any jurisdiction or any rules or regulations thereunder.

We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement and further consent to the reference to this Firm under the caption “Legal Matters” in the prospectus constituting a part of the Registration Statement. This consent is not to be construed as an admission that we are a party whose consent is required to be filed with the Registration Statement under Section 7 of the Securities Act or the rules and regulations of the SEC promulgated thereunder.

Very truly yours,

Exhibit 10.1

LOGO

AMENDED AND RESTATED

REVOLVING LINE OF CREDIT LOAN AGREEMENT

(Borrowing Base)

By and Between

CALIFORNIA BANK & TRUST

a California banking corporation

1900 Main Street, Suite 200, Irvine, California 92614

(“ Lender ”)

And

TRI POINTE HOMES, LLC ,

a Delaware limited liability company

19520 Jamboree Road, Suite 200, Irvine, California 92612

(“ Borrower ”)

Dated as of May 29, 2012

M AXIMUM R EVOLVING L INE OF C REDIT A MOUNT : $20,000,000.00

TABLE OF CONTENTS


				Page
1.	DEFINITIONS AND GENERAL PROVISIONS				1
	1.1	Definitions			1
	1.2	General Provisions			18

2.	BORROWING BASE				19
	2.1	Loan Facility			19
		2.1.1	Commitment		19
		2.1.2	Purpose of the Loan		19
		2.1.3	Purpose of the Project Loans		20
		2.1.4	Approval of Qualified Projects		20
		2.1.5	Interest Payments		21
		2.1.6	Principal Payments		22
		2.1.7	Loan Term		23
		2.1.8	Terms of Project Advances		23

	2.2	Available Commitment; Borrowing Base			23
		2.2.1	Available Commitment		23
		2.2.2	Amount of Borrowing Base and Borrowing Availability		23
		2.2.3	Determination of Borrowing Availability		24

	2.3	Letter of Credit Advances			25
		2.3.1	Issuance of Letter of Credit		25
		2.3.2	Issuance Procedure		25
		2.3.3	Purpose of Letter of Credit; General Letter of Credit Terms and Conditions		26
		2.3.4	Reimbursement of Lender for Payment of Drafts Drawn or Drawn and Accepted Under the Letter of Credit		26
		2.3.5	Reimbursement Obligations		26
		2.3.6	Nature of Reimbursement Obligations		26

	2.4	Loan Advances; Project Monitoring			27
		2.4.1	Method for Advances		27
		2.4.2	Use of Advances		27
		2.4.3	Draw Requests		27
		2.4.4	Limitations on Borrower’s Rights to Advances		27
		2.4.5	Excess Loan Balance Repayment		28
		2.4.6	Appraisals and Evaluations		28
		2.4.7	Borrower’s Accounts		28
		2.4.8	Project Cost Savings and Excess Costs		28

	2.5	Fees			29
		2.5.1	Commitment Fee		29
		2.5.2	Borrowing Base Fees		29
		2.5.3	Letter of Credit Fee		29
		2.5.4	Unused Fee		29
		2.5.5	Other Fees		29

3.	THE COLLATERAL				30
	3.1	Security			30
	3.2	Releases of Collateral			30
		3.2.1	General Requirements for Releases		30


		3.2.2	Sales of Lots or Homes Pursuant to a Purchase Contract	31
		3.2.3	Dedications	31

4.	CONDITIONS PRECEDENT			31
	4.1	Conditions Precedent to Effectiveness of this Agreement and to the Effectiveness of the Commitment		31
		4.1.1	Representations and Warranties Accurate	31
		4.1.2	Defaults	31
		4.1.3	Documents	32
		4.1.4	Plat and/or Survey	32
		4.1.5	Restrictive Covenants	32
		4.1.6	Soils Test	32
		4.1.7	Environmental Assessment	32
		4.1.8	Environmental Indemnity	32
		4.1.9	Preliminary Title Report	33
		4.1.10	Flood Report	33
		4.1.11	Deed of Trust/Title Policy	33
		4.1.12	Completion of Filings and Recordings	33
		4.1.13	Payment of Costs, Expenses, and Fees	33
		4.1.14	Appraisal	33
		4.1.15	Other Items or Actions by Borrower	33

	4.2	Amendment Closing Date		33

	4.3	Conditions Precedent to Admission of Land as Lots Under Development		33
		4.3.1	Request	34
		4.3.2	Defaults	34
		4.3.3	Documents and Information	34
		4.3.4	Inspection	34
		4.3.5	Map	34
		4.3.6	Utilities	34
		4.3.7	Lot Limitations	34
		4.3.8	Other	34

	4.4	Conditions Precedent to Admission of Land as Developed Lots		34
		4.4.1	Request	34
		4.4.2	Defaults	34
		4.4.3	Documents and Information	35
		4.4.4	Lot Limitations	35
		4.4.5	Other	35

	4.5	Conditions Precedent to Admission of Land as Presold, Spec and/or Model Homes		35
		4.5.1	Request	35
		4.5.2	Defaults	35
		4.5.3	Documents and Information	35
		4.5.4	Home Construction Information	35
		4.5.5	Other	36

	4.6	Additional Conditions Precedent to All Advances		36

	4.7	Waiver of Conditions Precedent		37

5.	BORROWER’S REPRESENTATIONS AND WARRANTIES			37
	5.1	Closing Representations and Warranties		37
		5.1.1	Limited Liability Company Existence and Authorization	37
		5.1.2	No Approvals, etc	37
		5.1.3	No Conflicts	37


		5.1.4	Execution and Delivery and Binding Nature of Loan Documents	37
		5.1.5	Legal Proceedings; Hearings, Inquiries, and Investigations	37
		5.1.6	No Event of Default	37
		5.1.7	Approvals and Permits; Assets and Property	38
		5.1.8	ERISA	38
		5.1.9	Compliance with Law	38
		5.1.10	Full Disclosure	38
		5.1.11	Use of Proceeds; Margin Stock	38
		5.1.12	Governmental Regulation	38
		5.1.13	Material Agreements; No Material Defaults	39
		5.1.14	Title to Property	39
		5.1.15	Payment of Taxes	39
		5.1.16	No Condemnation	39
		5.1.17	Borrowing Base	39

	5.2	Representations and Warranties Upon Requests for Advances		40

	5.3	Representations and Warranties Upon Delivery of Financial Statements, Documents, and Other Information		40

	5.4	USA Patriot Act Notification		40

6.	BORROWER AFFIRMATIVE COVENANTS			40
	6.1	Limited Liability Company Existence		40

	6.2	Books and Records; Access By Lender		40

	6.3	Special Covenants Relating to Collateral		40
		6.3.1	Defense of Title	40
		6.3.2	Further Assurances	41
		6.3.3	Plats, Annexations and Approvals	41
		6.3.4	Utilities	42
		6.3.5	Plans and Specifications	42
		6.3.6	Compliance with Permitted Exceptions	42
		6.3.7	Project Development	42
		6.3.8	Title Policy Endorsements	43
		6.3.9	Improvement Districts	43
		6.3.10	Appraisals	44

	6.4	Information and Statements		44
		6.4.1	Monthly Sales Reports	44
		6.4.2	Quarterly Financial Statements	44
		6.4.3	Annual Financial Statements	44
		6.4.4	Annual Business Plan	45
		6.4.5	Compliance Certificates	45
		6.4.6	Monthly Borrowing Base Certificate	45
		6.4.7	Other Items and Information	45

	6.5	Law; Judgments; Material Agreements; Approvals and Permits		45

	6.6	Taxes and Other Debt		46

	6.7	Assets and Property		46

	6.8	Insurance		46
		6.8.1	Property	46
		6.8.2	Liability	46
		6.8.3	Flood	46
		6.8.4	Worker’s Compensation	46
		6.8.5	Contractors	46

iii


		6.8.6	Additional Insurance	47

	6.9	Commencement and Completion		47

	6.10	Rights of Inspection; Agency		48

		6.10.1	Generally	48
		6.10.2	Inspector(s)	48

	6.11	Verification of Costs		48

	6.12	Use of Proceeds		48

	6.13	Costs and Expenses of Borrower’s Performance of Covenants and Satisfaction of Conditions		48

	6.14	Notification		48

	6.15	Financial Covenants		48

		6.15.1	No Other Debt	49
		6.15.2	No Other Loan Defaults	49

	6.16	Books and Records; Names; Place of Business and Chief Executive Office		49

	6.17	Proceeds of Purchase Contracts		49

		6.17.1	After Event of Default or Unmatured Event of Default	49
		6.17.2	Payments to Lender	49

7.	BORROWER NEGATIVE COVENANTS			49
	7.1	Corporate Restrictions		49
	7.2	Name, Fiscal Year, Accounting Method, and Lines of Business		49
	7.3	Change in Ownership		49
	7.4	Loans		50
	7.5	Liens and Encumbrances		50
	7.6	Indebtedness		50
	7.7	Acquisition of Assets		50

8.	EVENTS OF DEFAULT AND REMEDIES			50

	8.1	Events of Default		50
	8.2	Rights and Remedies of Lender		52

9.	BANK’S OBLIGATIONS TO BORROWER ONLY AND DISCLAIMER BY BANK			53

10.	NO BROKERS			53

11.	PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT			53

12.	COUNTERPART EXECUTION			53

13.	MISCELLANEOUS			54
	13.1	Assignment		54
	13.2	Notices		54
	13.3	Authority to File Notices		54
	13.4	Inconsistencies with the Loan Documents		55
	13.5	No Waiver		55
	13.6	Lender Approval of Instruments and Parties		55
	13.7	Lender Determination of Facts		55


	13.8	Incorporation of Preamble: Recitals and Exhibits	55
	13.9	Third-Party Consultants	55
	13.10	Payment of Expenses	55
	13.11	Disclaimer by Lender	55
	13.12	Indemnification	56
	13.13	Titles and Headings	56
	13.14	Brokers	56
	13.15	Change, Discharge, Termination or Waiver	56
	13.16	Choice of Law	56
	13.17	Disbursements in Excess of Loan Amount	56
	13.18	Participations	56
	13.19	Time Is of the Essence	57
	13.20	Attorneys’ Fees	57
	13.21	Signs	57
	13.22	Subordination to Certain Easements, Dedications and Restrictions	57
	13.23	Waiver of Right to Trial by Jury	57

14.	EXHIBITS		57

15.	ADDITIONAL ADVANCES		58

LOGO

AMENDED AND RESTATED

REVOLVING LINE OF CREDIT LOAN AGREEMENT

(Borrowing Base)

THIS AMENDED AND RESTATED REVOLVING LINE OF CREDIT LOAN AGREEMENT (Borrowing Base) (“ Agreement ”), is entered into as of the date set forth above by and between TRI POINTE HOMES, LLC, a Delaware limited liability company (“ Borrower ”), and CALIFORNIA BANK & TRUST, a California banking corporation (“ Lender ”).

RECITALS

A. Borrower has applied to Lender for an increase to its current revolving line of credit loan to the maximum sum not to exceed Twenty Million Dollars ($20,000,000.00) for the purpose of providing Borrower with funds for the development of residential lots, the construction of existing and future residential home projects within the state of California (individually, a “ Qualified Project ”, collectively “ Qualified Projects ”), and the issuance of letters of credit for the payment of costs incurred or associated with said projects (“ Loan ”).

B. Borrower is executing in connection with this Agreement, among other things, a Amended and Restated Construction Loan Promissory Note (Construction Revolving Line of Credit) of even date herewith (“ Note ”).

C. As Qualified Projects are admitted into the Loan, as provided herein, Borrower’s obligations under the Loan shall be secured by, among other things, each and every “ Deed of Trust ” and certain other “ Security Documents ” (as defined below) pursuant to which Borrower shall grant to Lender a first and prior lien on and security interest in all the real and personal property comprising each said Qualified Project.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender agree as follows:

AGREEMENT

1. DEFINITIONS AND GENERAL PROVISIONS .

1.1 Definitions . In this Agreement, the following terms shall have the following meanings:

“ A&D Budget ” shall mean, for each Qualified Project for which A&D Improvements are to be constructed, the cost breakdown/budget for such A&D Improvements, which budget shall be satisfactory to Lender in all respects. For purposes of this Agreement, all such budgets shall be referred to individually and collectively in the singular.

“ A&D Improvements ” shall mean, for each and every Qualified Project financed hereunder, (i) those certain offsite improvements on the Property (including without limitation curbs, grading, storm and sanitary sewers, paving, sidewalks, landscaping, hardscaping, sprinklers, electric lines, gas lines, telephone lines, cable television lines, fiber optic lines, pipelines and other utilities) necessary to make the Property suitable for the construction of single family residential homes thereon, and (ii) any common area improvements to be constructed on the Property. For purposes of this Agreement, all such improvements for each and every Qualified Project funded by a Loan made hereunder shall be referred to individually and collectively in the singular.

“ Advance ” means an advance of Loan proceeds by Lender to Borrower hereunder, including without limitation Project Advances and Letter of Credit Advances.

“ Affiliate ” of any Person means (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person and (ii) any other Person that beneficially owns at least ten percent (10%) of the voting common stock or partnership interest or limited liability company interest, as applicable, of such Person. For the purposes of this definition, “ control ” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, partnership interests, by contract or otherwise: and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.

“ Agreement ” means this Revolving Line of Credit Loan Agreement (Borrowing Base).

“ Amendment Closing Date ” shall mean the date on which all of the conditions precedent set forth in Section 4.2 of this Agreement for the increase in the Loan as set forth herein are satisfied as determined by Lender.

“ Appraisal ” means each appraisal of the Land and the Improvements (a) ordered by Lender, (b) prepared by an appraiser satisfactory to Lender, (c) in compliance with all federal and state standards for appraisals, (d) reviewed by Lender, and (e) in form and substance satisfactory to Lender based on its standards and practices applied in reviewing real estate appraisals.

“ Appraised Value ”, for each Qualified Project to be financed hereunder, (a) shall mean the bulk sale value of the Lots after completion of any and all required development and infrastructure improvements, and (b) shall mean, with respect to each Home, the lesser of (i) the value of such Home as determined by the Appraisal (as adjusted by Lender in its discretion), which value shall be determined without lot premiums, options or upgrades, or (b) Borrower’s estimated sales price of such Home, as set forth in the Appraisal and as approved by Lender pursuant to the terms of this Agreement.

“ Approvals and Permits ” means, for each and every Qualified Project financed hereunder, each and all approvals, authorizations, bonds, consents, certificates, franchises, licenses, permits, registrations, qualifications, and other actions and rights granted by or filings with any Persons necessary, or appropriate, for the improvement and development of the Land or for the conduct of the business and operations of Borrower.

“ Architect ” shall mean the architect for each Qualified Project to be financed hereunder, which architect shall be reviewed and approved by Lender in its discretion. For purposes of this Agreement, all such architects shall be referred to individually and collectively in the singular.

“ Architect’s Agreement ” shall mean any agreement between the Architect and Borrower for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such agreements shall be referred to individually and collectively in the singular.

“ Assignment of Architect’s Agreement ” shall mean, for each Qualified Project financed by a Loan to be made hereunder, that certain Assignment of Architect’s Contract, Plans and Specifications executed by Borrower for the benefit of Lender (including the consent of Architect to said assignment), pursuant to which Borrower shall assign to Lender, subject to and in accordance with the provisions thereof, all of Borrower’s right, title and interest in, to and under the Architect’s Agreement and the Plans and Specifications. For purposes of this Agreement, all such assignments shall be referred to individually and collectively in the singular.

“ Assignment of Engineering Contract ” shall mean, for each Qualified Project financed by a Loan to be made hereunder, that certain Assignment of Engineering Contract, Plans and Specifications by Borrower for the benefit of Lender (including the consent of Engineer to said assignment), pursuant to which Borrower shall assign to Lender, subject to and in accordance with the provisions thereof, all of

Borrower’s right, title and interest in, to and under the Engineering Contract and/or Plans and Specifications (as applicable). For purposes of this Agreement, all such assignments shall be referred to individually and collectively in the singular.

“ Assignment of Permits ” shall mean, for each Qualified Project financed by a Loan to be made hereunder, that certain Assignment of Agreements, Permits, Licenses and Approvals executed by Borrower. For purposes of this Agreement, all such assignments shall be referred to individually and collectively in the singular.

“ Authorization Form ” shall mean that certain Signature Authorization Form and Disbursement Instructions of even date herewith executed by Borrower.

“ Available Commitment ” shall be the lesser of (i) the Commitment Amount, as in effect from time to time, or (ii) the Borrowing Base, subject to the limitations set forth in Sections 2.1.1 and 2.2.1.

“ Base Appraisal ” shall mean, with respect to each Home financed by a Loan to be made hereunder, the lesser of (i) the value of such Home as determined by the Appraisal (as adjusted by Lender in its reasonable discretion) for the model plan type of said Home, which value shall be determined without lot premiums, options or upgrades (unless included by Lender in its sole discretion), or (ii) Borrower’s estimated sales price of such Home. For purposes of this Agreement, all such appraisals shall be referred to individually and collectively in the singular. Any and all FNMA appraisals shall establish the retail value of each model plan type to be financed in connection with each Qualified Project.

“ Borrowing Availability ” shall mean:

(a) An amount equal to the lesser of the Commitment Amount or Reduced Commitment Amount, as applicable, or the Borrowing Base as calculated each Calendar Month,

less

(b) The sum of the Loan Balance,

less

(c) Any reductions as provided in Section 2.1.3(d).

“ Borrowing Base ” shall be equal to the sum of:

(a) The respective Maximum Allowed Advances multiplied by the applicable Draw Percentages for all Lots Under Development, Developed Lots, Spec Homes, Presold Homes and Model Homes for all Qualified Projects; and

(b) Any committed portion of the Letter of Credit Line under this Loan.

“ Borrowing Base Certificate ” means a certificate, in form and substance reasonably satisfactory to Lender, delivered to Lender by Borrower in accordance with Section 6.4.6 setting forth, among other things, a current and detailed computation of the Borrowing Base and Borrowing Availability with respect to Lots Under Development, Developed Lots, Spec Homes, Presold Homes, and Model Homes, and containing such other information as Lender may reasonably request. An initial form of the Borrowing Base Certificate is attached hereto as Exhibit “ A ”.

“ Borrowing Base Fees ” shall mean the following fees which are due and payable upon entry of Qualified Projects into the Borrowing Base:

(a) A closing fee of Five Thousand Dollars ($5,000.00) for each Project Loan.

“ Budget ” shall mean each and every A&D Budget and/or Home Construction Budget approved by Lender for each and every Qualified Project to be financed by a Loan to be made hereunder.

“ Bulk Finished Lot Value ” shall mean, for each Qualified Project financed hereunder, the bulk sale value of the Lots included in said Project after completion of the A&D Improvements as determined by a qualified appraiser, which appraisal shall be satisfactory to Lender in all respects.

“ Bulk Lot Sale ” shall have the meaning given to such term in Section 2.1.6(a) below.

“ Business Day ” means each day of the year other than Saturdays, Sundays, Holidays, and days on which banking institutions are generally authorized or obligated by law or executive order to close in California.

“ Business Hour ” means each hour of each Business Day between 9:00 a.m. to 4:00 p.m. (California time).

“ Calendar Month ” shall mean the twelve (12) calendar months of the year. Any payment or obligation that is due or required to be performed within a specified number of Calendar Months shall become due on the day in the last of such specified number of Calendar Months that corresponds numerically to the date on which such payment or obligation was incurred or commenced, provided, however, that with respect to any obligation that is incurred or commences on the 29th, 30th, or 31st day of any Calendar Month and if the Calendar Month in which such payment or obligation would otherwise be due does not have a numerically corresponding date, such payment or obligation shall become due on the first day of the next succeeding Calendar Month.

“ Calendar Quarter ” shall mean a period of three (3) consecutive Calendar Months, commencing on the Initial Closing Date and continuing through the Loan Term.

“ Capital Contributions ” means the contributions to the capital of Borrower made or required to be made by Capital Contributor pursuant to the Operating Agreement and made or required to be made by Capital Contributor pursuant to this Agreement.

“ Capital Contributor ” means, individually and collectively, VII/TPC HOLDINGS, L.L.C., a Delaware limited liability company.

“ Closing Date ” shall mean, individually and collectively, as applicable, (a) the date upon which all of the initial conditions precedent set forth in Section 4.1 of this Agreement were satisfied (“ Initial Closing Date ”), (b) the date upon which all of the additional conditions precedent set forth in Section 4.2 of this Agreement have been satisfied (“ Amendment Closing Date ”), and (c) the future date(s) upon which future Deeds of Trust for any Future Projects are recorded in the Official Records of each applicable County (each, a “ Subsequent Closing Date ”).

“ Collateral ” means all property, interests in property, and rights to property securing any or all Obligations from time to time.

“ Commitment ” means the agreement by Lender in Section 2.1.1 to make Advances pursuant to the terms and conditions herein.

“ Commitment Amount ” means (a) during the Initial Line Period, the sum of Twenty Million Dollars ($20,000,000.00), and (b) during the Reduction Period, beginning upon the last day of the first Calendar Quarter following the Initial Line Maturity Date, and on or prior to the last day of each Calendar Quarter thereafter during the Reduction Period, the Commitment Amount shall be reduced in the amount of Five Million Dollars ($5,000,000.00) (each, “ Reduced Commitment Amount ”):


Date	Reduced Commitment Amount
Initial Line Maturity Date	$	20,000,000.00
First Calendar Quarter	$	15,000,000.00


Date	Reduced Commitment Amount
Second Calendar Quarter	$	10,000,000.00
Third Calendar Quarter	$	5,000,000.00
Fourth Calendar Quarter	$	0.00

“ Commitment Fee ” means that certain facility fee (a) that is calculated, during the Initial Line Period, commencing on April 19, 2012, at the rate of one-half of one percent (0.50%) per annum on the full Commitment Amount, and (b) that is calculated, during the Reduction Period, at the rate of one-half of one percent (0.50%) per annum based on the then-applicable Reduced Commitment Amount, and all said fees shall be payable pursuant to Section 2.5.1 below. During the Initial Line Period from and after April 19, 2012, said fees shall be paid in advance on an annual basis, and during the Reduction Period, said fees shall be paid in advance on a quarterly basis such that each quarterly fee payment shall be based on a one-eighth of one percent (0.125%) of the then-applicable Reduced Commitment Amount.

“ Construction Assignments ” shall mean, for each Qualified Project to be entered into the Borrowing Base, the Assignment of Permits, Assignment of Engineering Contract, Assignment of Architect’s Agreement, and all other assignment and other related documents encumbering the Collateral, which assignments may be included within a single document to be executed by Borrower in connection with each Qualified Project to be financed hereunder.

“ Contractor ” shall mean the general contractor for each Qualified Project to be financed hereunder, which contractor shall be reviewed and approved by Lender in its discretion. For purposes of this Agreement, all such contractor shall be referred to individually and collectively in the singular. Borrower shall be permitted to act as an “ owner/builder ” for any Qualified Project and, as a result, Borrower shall not be required to enter into any contract, agreement or other document with a general contractor to perform general contracting services for said Project, unless and until (a) Lender shall have reviewed and approved of said general contractor and the terms of any such contract, agreement or other document with Borrower relating to said Project, and (b) Borrower shall have delivered to Lender a fully executed assignment in form and content acceptable to Lender in its sole discretion assigning to Lender all of Borrower’s rights, title and interest in said contract, agreement or other document, and said general contractor shall have consented in writing in form and content acceptable to Lender in its sole discretion to said assignment.

“ Construction Contract ” shall mean any agreement between the Contractor and Borrower for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such agreements shall be referred to individually and collectively in the singular.

“ County ” shall mean each and every county in which a Qualified Project to be financed hereunder is located.

“ Debt ” means, as to any Person, without limitation, (i) all obligations of such Person which in accordance with GAAP would be shown on a balance sheet of such Person as a liability (including without limitation obligations for borrowed money and for the deferred purchase price of property or services and obligations evidenced by bonds, debentures, notes or similar instruments), (ii) all rental obligations under leases required to be capitalized under GAAP, (iii) the stated amount of all letters of credit issued for the account of such Person or upon which such Person would be obligated to reimburse the issuer thereof for draws, (iv) liabilities in respect of unfunded vested benefits under plans covered by ERISA, and (v) indebtedness of others secured by any lien upon property owned by such Person whether or not assumed.

“ Dedication ” means a transfer by Borrower, or the granting of easements, rights of way, and licenses by Borrower, to municipalities, utility providers, municipal districts, property owners, and property owners’ associations in connection with the development of the Project, for the purpose of providing

streets, common areas, parks, open space, water, waste water and sewage treatment facilities, hillside and other areas, and similar land and improvements.

“ Deed of Trust ” shall mean, for each Qualified Project entered into the Borrowing Base, a Construction Deed of Trust, Assignment of Leases and Rents and Security Agreement (Including Fixture Filing) (as the same may be amended from time to time) executed by Borrower, as trustor, to Title Company, as trustee, and naming Lender as beneficiary, creating a first lien on the Property, the Improvements, and all other buildings, fixtures and improvements now or hereafter owned or acquired by Borrower and situated thereon, and all rights and easements appurtenant thereto, which Deed of Trust shall be in form and content acceptable to Lender in its discretion. Each Deed of Trust shall secure indebtedness in the Commitment Amount. Upon the entry of each Qualified Project into the Borrowing Base, a separate Deed of Trust shall encumber all of the Lots in the applicable Future Project. All Lots in a Qualified Project shall be subject to a Tentative Map or a Final Map, and Lender shall have no obligation to make any Advances of Hard Costs for the construction of any Homes in said Qualified Project, unless and until Lender receives evidence satisfactory to Lender in its discretion of the recording of the Final Map for said Qualified Project. If, with Lender’s prior approval, additional Lots Under Development, Developed Lots, Spec Homes, Presold Homes and Model Homes for a Qualified Project are added into the Borrowing Base, the Deed of Trust for said Qualified Project shall be amended to secure such additional property being added into the Borrowing Base in the form and content required by Lender in its discretion, and Borrower shall pay all costs and expenses incurred by Lender in connection with encumbering all of said property with the applicable Deed of Trust, including without limitation the payment of title insurance and endorsement costs, closing and recording fees, legal fees and all other related charges. For purposes of this Agreement, all such deeds of trust and amendments thereto securing the Loan may be referred to individually and collectively in the singular as the “ Deed of Trust .”

“ Default Interest Rate ” shall have the meaning given to such term in the Note.

“ Developed Lots ” means those certain Lots in a Qualified Project for which all A&D Improvements have been constructed and completed and said Lots are in condition for the construction of Homes thereon.

“ Draw Percentage ” shall mean (a) for the A&D Improvements, the percentage of completion for said improvements as certified by Borrower in its Borrowing Base Certificate, and (b) for all Home Improvements, the applicable percentage for the subject Improvements pursuant to the Home Construction Draw Reference Chart attached hereto as Exhibit “ D ”.

“ Draw Request ” means a completed, written request for an Advance from Borrower to Lender, which request shall be in form reasonably satisfactory to Lender, and shall be accompanied by such other documents and information as Lender may require or specify from time to time.

“ EBITDA ” means, with respect to any Person (or any asset of any Person) for a period, an amount equal to the earnings of such Person before the payment of interest expenses, taxes, depreciation expenses and amortization costs. The EBITDA of a Person shall be adjusted to reflect the Person’s allocable share of such amounts from any Person (or asset of any Person) the accounts of which are not consolidated with the financial statements of the first Person in accordance with GAAP, but only to the extent that such amounts could have been paid to such Person.

“ Engineer ” shall mean the engineer for each Qualified Project to be financed hereunder, which engineer shall be reviewed and approved by Lender in its discretion. For purposes of this Agreement, all such engineers shall be referred to individually and collectively in the singular.

“ Engineering Contract ” shall mean any agreement between the Engineer and Borrower for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such agreements shall be referred to individually and collectively in the singular.

“ Environmental Indemnity ” means, for each Qualified Project, that certain Environmental Indemnity executed by Borrower, which indemnity shall be in form and content acceptable to Lender in its discretion.

“ ERISA ” means the Employee Retirement Income Security Act of 1974 and the regulations and published interpretations thereunder, as in effect from time to time.

“ Event of Default ” shall mean all of the events described in Section 8.1.

“ Existing Projects ” shall mean those certain Qualified Projects included in the Loan as of the date of this amendment, which Qualified Projects are listed in Exhibit “E” attached hereto and incorporated herein by reference.

“ Final Map ” shall mean the final tract or plat map for the Property for each Qualified Project to be financed by a Project Loan to be made hereunder, which map shall be in form and content acceptable to Lender in its discretion.

“ Financing Statement ” shall mean, for each Qualified Project to be entered into the Borrowing Base to be made hereunder, a UCC-1 financing statement executed by Borrower, as debtor, in favor of Lender, as secured party, perfecting Lender’s security interest in the Collateral now owned or hereafter acquired by Borrower. The Financing Statement shall be in form and content satisfactory to Lender, and shall be filed in the Office of the Secretary of State of the State in which the subject Collateral is located (and in such other offices for recording or filing such statements in such jurisdictions as Lender shall require to perfect Lender’s security interest or reflect such interest in appropriate public records). For purposes of this Agreement, all such financing statements shall be referred to individually and collectively in the singular.

“ First Payment Date ” shall mean the first day of the first Calendar Month after the Closing Date or, in Lender’s sole discretion, the first day of the second Calendar Month after the Closing Date.

“ Force Majeure Event ” shall mean acts of God or the elements, including fire, flood, windstorm, hailstorm, earthquake and lightning, acts of war, riot or civil insurrection, and strikes, labor disputes, delays in delivery of materials and disruption of shipping (to the extent such strikes, labor disputes, delays in delivery of materials and disruption of shipping affect not only Borrower but also similarly situated real estate owners and/or contractors in the vicinity of the Property, or are otherwise not the result of an intentional or grossly negligent act or failure to act by Borrower) and other natural causes reasonably beyond the control of Borrower; provided, however, that inclement weather shall be considered a Force Majeure Event only to the extent it is significantly more severe than typical for the location and time of year in which such inclement weather occurred.

“ Funding Disbursement Account ” shall mean that certain deposit account in the name of Borrower, maintained as account number 3090391061 at Lender, into which account all Advances shall be deposited to be applied by Borrower as provided herein.

“ Future Project ” shall mean each Qualified Project for which a Project Loan will be made hereunder after the Amendment Closing Date.

“ GAAP ” means generally accepted accounting principles consistently applied.

“ Geographic Concentration Limitation ” shall have the meaning given to such term in the Maximum Aggregate Loan Allocation(s).

“ Governmental Authority ” means any government, any court, and any agency, authority, body, bureau, department, or instrumentality of any government.

“ Hard Costs ” means, for each Qualified Project to be financed hereunder, the onsite cost of labor and materials directly related to the construction of the Improvements, including the A&D Improvements and each Home as set forth in the A&D Budget and Home Construction Budget, as applicable, including without limitation construction costs, which costs shall be subject to Lender’s review and approval and shall specifically exclude costs to be funded from general budget categories for overhead, supervision, general and administrative, and marketing expenses, and shall also not include any costs and expenses related to upgrades, options or decorator items; provided, however, that with respect to any Model Home, Hard Costs may include costs and expenses related to upgrades, options or decorator items as may be approved by Lender.

“ Home ” or “ Unit ” shall mean, for each Qualified Project to be financed hereunder, a single family dwelling unit which shall be a Spec, Presold or Model Home to be constructed on the Property of any one (1) of the model, design and type generally described in the Plans and Specifications for the applicable Project, including any furniture, furnishings, fixtures and equipment to be installed therein as shown on said Plans and Specifications. A Home may include an attached unit, which shall include any completed Home that is designed pursuant to the Plans and Specifications to share at least one (1) common wall with another Home. Homes may be entered into the Borrowing Base upon confirmation of trenching by Lender.

“ Home Construction Budget ” shall mean, for each Qualified Project in which Homes are to be constructed that are to be financed hereunder, the detailed line-item cost breakdown and budget for the Presold, Spec and Model Homes approved by Lender, which budget shall be comprised of the Lot Release Price for the release of the Lot into the Loan for the construction of a Home thereon, and the Hard Costs and Soft Costs for the Home to be constructed on said Lot, and which budget shall be in conformity with the sources and uses of funds for the Presold, Spec and Model Homes as approved by Lender in its sole discretion. For purposes of this Agreement, all such budgets shall be referred to individually and collectively in the singular.

“ Home Advance Maturity Date(s) ” shall mean the term in which a Home may remain in the Borrowing Base for the purposes of calculating the Borrowing Availability:

(a) With respect to Presold or Spec Homes, twelve (12) Calendar Months after the initial entry of such Presold or Spec Home into the Borrowing Base; and

(b) With respect to Model Homes, twenty-four (24) Calendar Months after the initial entry of such Model Home into the Borrowing Base (provided, however, that said maturity date may be extended for a six-month period if Borrower is in compliance with the Model Extension Conditions, and provided that an additional extension may be permitted only at Lender’s sole discretion).

Provided, however, that in no event shall a Home remain in the Borrowing Base beyond the Maturity Date.

“ Improvements ” means, for each and every Qualified Project to be financed hereunder, the improvements to be made on the Land (or applicable portion thereof), which shall include all construction and development of the infrastructure and all other housing improvements made in preparation for the development and marketing of the Land (or applicable portion thereof).

“ Initial Closing Date ” shall mean the date on which all of the initial conditions precedent set forth in Section 4.1 of this Agreement were satisfied as determined by Lender.

“ Initial Line Maturity Date ” shall mean April 19, 2014.

“ Initial Line Period ” shall mean that certain thirty-six (36) Calendar Month period commencing on April 19, 2011, and ending on the Initial Line Maturity Date ( i.e. , April 19, 2014).

“ Intangible Assets ” means all intangible assets of Borrower under GAAP, including without limitation copyrights, franchises, goodwill, licenses, loan origination fees, non-competition agreements, conveyance/organization/formation costs (to the extent required to be capitalized under GAAP), patents, service marks, service names, trademarks, trade names, write up in the book value of any asset in excess of the acquisition cost of the asset, any amount (however designated on the balance sheet) representing the excess of the purchase price paid for assets or stock acquired over the value assigned thereto on the books of Borrower, loans and advances to partners/employees/affiliates of Borrower, unamortized leasehold improvement expenses not recoverable at the end of the lease term, and unamortized Debt discount and deferred discount.

“ Interest Incurred ” shall mean, for any period, the sum of all interest incurred by a Person on a consolidated basis during such period, whether capitalized or expensed.

“ Interest Rate ” shall mean the rate of interest set forth in the Note.

“ Land ” or “ Property ” means that certain real property more particularly described in each Deed of Trust with respect to each and every real property and all improvements located or to be constructed thereon located in each and every County for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such properties shall be referred to individually and collectively in the singular.

“ Letter of Credit ” shall mean any letter of credit to be issued by Lender under the Letter of Credit Line.

“ Letter of Credit Advance ” shall mean each and every Advance of Loan funds to be made by Lender if there is any draw upon any Letter of Credit issued pursuant to this Agreement.

“ Letter of Credit Fee ” means that certain fee due and payable by Borrower on each Letter of Credit issued hereunder, which fee shall be calculated at the rate of one percent (1.00%) per annum on the face amount of the Letter of Credit, and said fee shall be payable as a condition to the issuance of each Letter of Credit and on each twelve-month anniversary of the issuance date of said Letter of Credit, if said Letter of Credit is to be extended beyond a twelve-month term.

“ Letter of Credit Request ” means each and every written request by Borrower for the issuance of a Letter of Credit hereunder, which request shall include the fully-executed application and/or amendment documents in the forms attached hereto as Exhibit “B” .

“ Letter of Credit Line ” shall mean that certain line of credit to be provided under the Loan for the purposes set forth in Section 2.3 of this Agreement, which line of credit shall not exceed at any time the sum of Two Million Dollars ($2,000,000.00) (“ LOC Total Commitment Amount ”). The Letter of Credit Line shall be a revolving line of credit. Prior to the Maturity Date, the Letter of Credit Line may be drawn, repaid and drawn again through individual Advances in repetition, subject to the limitations herein, so long as:

(1) The sum of (a) the amounts outstanding on the Letter of Credit Line, and (b) the cumulative Letter of Credit Line amounts that are committed but not yet advanced on the Letter of Credit Line, never exceed the LOC Total Commitment Amount; and

(2) The sum of (a) the amounts outstanding on the Loan, and (b) the cumulative Loan amounts that are committed but not yet advanced on the Loan, never exceed the Commitment Amount; and

(3) No Event of Default has occurred and is continuing.

Upon the Maturity Date, if the Loan is not renewed as provided herein, all amounts outstanding on the Letter of Credit Line shall be repaid during the Reduction Period as set forth herein.

“ LOC Maximum Commitment Amount ” shall mean the amount committed under each Letter of Credit, which sum shall not exceed the sum equal to (a) the lesser of (i) Two Million Dollars ($2,000,000.00) or (ii) ten percent (10%) of the then applicable Commitment Amount, less (b) any outstanding committed portion of the Letter of Credit Line that Borrower has requested and Lender has approved in its discretion be available for disbursement under the Loan.

“ LOC Total Commitment Amount ” shall mean the sum of all amounts committed under any Letters of Credit issued hereunder plus all Letter of Credit Advances in the aggregate, which sum shall not exceed Two Million Dollars ($2,000,000.00).

“ Lien or Encumbrance ” and “ Liens and Encumbrances ” mean, respectively, each and all of the following: (i) any lease or other right to use; (ii) any assignment as security, conditional sale, grant in trust, lien, mortgage, pledge, security interest, title retention arrangement, other encumbrance (voluntary or involuntary), stop notice, or other interest or right securing the payment of money or the performance of any other liability or obligation, whether voluntarily or involuntarily created and whether arising by agreement or under any law, ordinance, regulation, or rule (federal, state, or local); and (iii) any option, right of first refusal, or other right to purchase.

“ Liquidity ” shall mean the amount of any Person’s unencumbered cash, marketable securities (including without limitation stocks and bonds), undrawn availability under lines of credit and unencumbered cash equivalents, as determined in accordance with GAAP.

“ Loan Balance ” means an amount, at any point in time, equal to (a) the sum of all outstanding Advances disbursed under the Loan, after giving effect to any borrowings and prepayments or repayments of Advances occurring prior thereto, plus (b) with respect to all outstanding Letters of Credit issued hereunder, the aggregate amount of all said Letters of Credit and all unreimbursed Letter of Credit Advances.

“ Loan ” means the revolving line of credit from Lender to Borrower described in this Agreement, which Loan shall include all the aggregate of all Project Loans made and all Letters of Credit issued hereunder.

“ Loan Allocation ” shall mean:

(a) With respect to each Lot to be constructed in a Qualified Project, the lesser of:

(1) the pro rata sum of the costs to be advanced by Lender as shown in the A&D Budget delivered to Lender with respect to such Lot; or

(2) the Maximum Allowed Advance for said Lot.

(b) With respect to each Home to be constructed in a Qualified Project, the lesser of:

(1) the sum of the costs to be advanced by Lender as shown in the Home Construction Budget delivered to Lender with respect to such Home; or

(2) the Maximum Allowed Advance for said Home.

“ Loan Documents ” means this Agreement, the Note, the Deeds of Trust, the Environmental Indemnities and other Security Documents, and all other guaranties, agreements, documents, or instruments signed by Borrower and evidencing, guarantying, securing or containing agreements with respect to any

and all Advances made hereunder, as such agreements, documents, and instruments may be amended, modified, extended, renewed, or supplemented from time to time.

“ Loan Payment Date ” means the first day of each Calendar Month after the Closing Date provided, however, that at Lender’s option, the First Payment Date may be the first day of the second calendar month after the Closing Date.

“ Loan Term ” means the period commencing with the Closing Date and ending on the applicable Maturity Date.

“ Lot Advance Maturity Date(s) ” shall mean the term in which a Lot may remain in the Borrowing Base for the purposes of calculating the Borrowing Availability:

(a) With respect to Developed Lots, twenty-four (24) Calendar Months after the initial entry of such Developed Lots into the Borrowing Base (less any time that has elapsed from the entry of said Lots into the Borrowing Base as either Lots Under Development to the date of entry into the Borrowing Base as Developed Lots); or

(b) With respect to Lots Under Development, twelve (12) Calendar Months after the initial entry of such Lots Under Development into the Borrowing Base.

Provided, however, that in no event shall a Lot remain in the Borrowing Base beyond the Maturity Date.

“ Lot Concentration Limitation ” shall have the meaning given to such term in the Maximum Aggregate Loan

Allocation(s).

“ Lots ” means, with respect to each Qualified Project to be financed hereunder, one (1) or more than one (1) of the lots into which the subject Property is to be or has been divided, as set forth on the Final Map.

“ Lots Under Development ” means a portion of the Land for which Borrower has satisfied the conditions set forth in Section 4.3.

“ Material Adverse Change ” means any change in the assets, business, financial condition, operations, or results of operations of Borrower or any Project or any other event or condition that in the reasonable opinion of Lender (i) is reasonably likely to affect in a material adverse respect the likelihood of performance by Borrower of any of the obligations in the Loan Documents, (ii) is reasonably likely to affect in a material adverse respect the ability of any Borrower to perform any of the Obligations in any of the Loan Documents, (iii) is reasonably likely to affect in a material adverse respect the legality, validity, or binding nature of any of the Obligations in the Loan Documents or any lien, security interest, or other encumbrance securing any of the Obligations under the Loan Documents, or (iv) could affect the priority of any lien or encumbrance securing any of the Obligations in the Loan Documents.

“ Maturity Date ” means (a) the final maturity date — i.e., April 19, 2015, subject to extension of the maturity of the Loan during the Reduction Period as set forth in Section 2.1.7(a) below, or (b) such earlier date upon the acceleration of the repayment of the Loan as provided in the Loan Documents after the occurrence of the Event of Default.

“ Maximum Allowed Advance ” shall have the following meanings:

•

Lots Under Development : The sum of all Advances and Reserved Allocations committed but not disbursed for said Lots shall not exceed the lesser of (i) fifty percent (50%) of Total Project Costs, or (ii) fifty percent (50%) of the Bulk Finished Lot Value for said Lots, subject to Lender’s approval.

•

Developed Lots : The sum of all Advances and Reserved Allocations committed but not disbursed for said Lots shall not exceed the lesser of (i) fifty percent (50%) of Total Project Costs, or (ii) fifty percent (50%) of the Bulk Finished Lot Value for said Lots, subject to Lender’s approval.

•

Spec Homes : The sum of all Advances and Reserved Allocations committed but not disbursed for said Homes shall not exceed the lesser of (i) seventy percent (70%) of Total Project Costs, or (ii) sixty-five percent (65%) of the Base Appraisal for said Homes, subject to Lender’s approval.

•

Presold Homes : The sum of all Advances and Reserved Allocations committed but not disbursed for said Homes shall not exceed the lesser of (i) seventy-five percent (75%) of Total Project Costs, or (ii) seventy percent (70%) of the Base Appraisal for said Homes, subject to Lender’s approval.

•

Model Homes : The sum of all Advances and Reserved Allocations committed but not disbursed for said Homes shall not exceed the lesser of (i) seventy-five percent (75%) of Total Project Costs, or (ii) seventy-five percent (75%) of the Base Appraisal for said Homes, subject to Lender’s approval.

“ Maximum Aggregate Loan Allocation(s) ” shall mean each and every one of the following:

(a) All Qualified Projects included in the Borrowing Base must be located in the State of California (“ Geographic Concentration Limitation ”).

(b) With respect to all Lots to be included in the Borrowing Base, (“ Lot Concentration Limitation ”):

(1) For all Qualified Projects financed hereunder, the aggregate Loan Allocations for all Lots Under Development and Developed Lots for all said Qualified Projects (whether Advances have been made and/or have been committed but have not yet advanced) shall not exceed twenty-five percent (40%) of the Commitment Amount ( i.e. , $8,000,000.00 in the aggregate); and/or

(2) For each and every Qualified Project financed hereunder, the total number of Lots Under Development and Developed Lots shall not exceed the lesser of: (A) twenty-four (24) months’ appraised absorption per Qualified Project; or (B) twenty-four (24) months’ actual absorption per Project, as determined by Lender from time to time based upon the actual prior three-month Home sales average for said Qualified Project.

(c) With respect to all Spec Homes to be included in the Borrowing Base (“ Spec Home Concentration Limitation ”):

(1) For all Qualified Projects financed hereunder, the aggregate Loan Allocations for all Spec Homes for all said Projects (whether Advances have been made and/or have been committed but have not yet advanced) shall not exceed thirty percent (30%) of the Commitment Amount; and/or

(2) For each and every Qualified Project financed hereunder, the total number of Spec Homes shall not exceed the lesser of: (A) twelve (12) Spec Homes for the subject Project; (B) four (4) months’ appraised absorption for the subject Project; or (C) four (4) months’ actual absorption for the subject Project, as determined by Lender from time to time based upon the actual prior three-month Home sales average for said Qualified Project.

(d) With respect to the total number of all Homes to be included in the Borrowing Base, (“ Home Concentration Limitation ”):

(1) For each and every Qualified Project financed hereunder, the total number of Homes shall not exceed the lesser of: (A) nine (9) months’ appraised absorption per Project; or (B) nine (9) months’ actual absorption per Project, as determined by Lender from time to time based upon the actual prior three-month Home sales average for said Project.

“ Model Extension Conditions ” shall mean (a) at the time the applicable notice of such extension is given to Lender and at the time of such extension, no Event of Default, or no Unmatured Event of Default, shall have occurred and be continuing; and (b) there shall have been no Material Adverse Change in the financial condition of Borrower since the Initial Closing Date.

“ Model Home ” shall mean, with respect to each Qualified Project to be financed hereunder, a Home constructed and furnished initially for inspection by prospective purchasers, which Model Home will not be sold until all of the other Homes of its respective plan type in said Project are sold, and which otherwise shall remain as collateral for the Loan until the Loan is paid in full. If permitted by Lender in its sole discretion for any Project, a Model Home may be sold and leased back to Borrower pursuant to a lease that is assigned to Lender and that is acceptable in form and content to Lender and, in such event, said Model Home shall remain as a model for said Project to be used for the marketing of the Project until all Homes in the Project of the same plan type as said Model Home have been sold.

“ Net Sales Proceeds ” means, for any sale of any portion of the Qualified Project, the gross sales price, less to the extent paid by or charged to Borrower: (a) customary tax prorations; (b) customary real estate brokerage commissions payable to any Person who is neither (i) an Affiliate of Borrower or employed by Borrower, nor (ii) engaged in on-site sales at said Project; and (c) reasonable and customary closing costs, including escrow fees, title insurance premiums, prorations, and recording costs as reflected on the settlement statement and reasonably approved by Lender.

“ Net Income ” means, for any period, without duplication, the net income (or loss) of Borrower determined in accordance with GAAP; provided, however, for purposes of determining compliance with the covenants set forth in Section 6.15 below, Net Income may not be zero dollars $0.00 or less.

“ Net Worth ” shall mean the amount by which a Person’s Total Assets exceeds Total Liabilities less, to the extent included in Total Assets, the sum of:

(a) the total book value of all assets of a Person and its subsidiaries properly classified as intangible assets under GAAP, including such items as good will, the purchase price of acquired assets in excess of the fair market value thereof, trademarks, trade names, service marks, brand names, copyrights, patents and licenses, and rights with respect to the foregoing; plus

(b) all amounts representing any write-up in the book value of any assets of a Person and its subsidiaries resulting from a revaluation thereof subsequent to said Person’s balance sheet date;

(c) Intangible Assets.

“ Non-Related Party ” shall mean a person or entity that is not an Affiliate of Borrower, nor an officer of, or parent or subsidiary corporation of a shareholder of Borrower, or any person or entity otherwise controlled directly or indirectly by Borrower or Borrower’s shareholders, or a parent or subsidiary corporation or partnership of Borrower or its shareholders.

“ Note ” means that certain Amended and Restated Construction Loan Promissory Note (Construction Revolving Line of Credit) of even date herewith, executed by Borrower and payable to Lender, evidencing Borrower’s indebtedness hereunder.

“ Obligations ” means the obligations of Borrower under the Loan Documents.

“ Organizational Documents ” shall include Borrower’s articles of incorporation and by-laws and any amendments thereto, and any certificates required to be filed by said corporation with any Governmental Authority.

“ Permitted Exceptions ” means (i) all items shown in Schedule B Part 1 of the Title Policy; (ii) Liens and Encumbrances granted to Lender to secure the Obligations; and (iii) other permitted exceptions pursuant to the Deed of Trust.

“ Permitted Expenses ” shall mean all expenses to be paid or reimbursed for the purposes set forth in Section 2.4.2 that are budgeted by Borrower in any and all Budgets for Project Loans and are budgeted in Borrower’s annual business plan submitted to Lender and that are approved by Lender in its reasonable discretion.

“ Person ” means a natural person, a partnership, a joint venture, an unincorporated association, a limited liability company, a corporation, a trust, any other legal entity, or any Governmental Authority.

“ Plans and Specifications ” means, with respect to any Qualified Project financed by a Loan to be made hereunder, the plans and specifications for the construction of the A&D Improvements and/or the Homes, as applicable, that have been approved by Lender pursuant to this Agreement.

“ Presold Home ” shall mean a Home that is subject to:

(a) A duly executed Purchase Contract, escrow instructions or deposit receipt without contingencies (other than the sale of an existing residency contingency);

(b) A prequalification letter or mortgage commitment from an institutional mortgage lender or such other information or verification as Lender may require concerning the ability of the prospective buyer to obtain financing or otherwise acquire the Home; and

(c) A cash earnest money deposit or down payment of at least Five Thousand Dollars ($5,000.00) (which deposit requirement shall be increased to twenty percent (20%) of the purchase price for said Home if the prospective buyer failed to satisfy the requirement in subsection (b) above, unless said buyer demonstrates availability of funds for an all-cash purchase offer, in which case the deposit shall not be required to be increased to twenty percent (20%) of the purchase price).

“ Project ” means the Land and the Improvements to be constructed for the development and marketing of a residential subdivision, each of which project shall be acquired, developed and constructed with the proceeds of a Loan to be made hereunder as approved by Lender. No Advances for any Project shall be approved and made unless and until a Tentative Map or Final Map has been recorded for the subject Property. In any event, no Advance shall be made for any Homes to be constructed in a Project unless and until a Final Map has been recorded for the subject Project. For purposes of this Agreement, all such projects shall be referred to individually and collectively in the singular. In the event a Qualified Project is entered into the Borrowing Base prior to the recordation of the Final Map for the applicable Project, Lender shall require, among other things, that an ALTA survey must be delivered to Lender for review and approval and/or Title Company shall agree in writing to issue the required Title Policy with all requested survey endorsements.

“ Project Advance ” means an advance of Loan proceeds by Lender to Borrower hereunder for the payment or reimbursement of any Permitted Expenses for Qualified Projects, which advance shall not be a Letter of Credit Advance.

“ Project Loan ” shall mean, for each Qualified Project to be included in the Borrowing Base, the aggregate of all Loan Allocations for all Lots and/or Homes to be included in the Borrowing Base for said Qualified Project. For purposes of this Agreement, all such loans shall be referred to individually and collectively in the singular.

“ Project Loan Request ” means each and every written request by Borrower for the inclusion of a Qualified Project into the Borrowing Base.

“ Project Revenues ” means all lease or rent payments, profits, proceeds, revenues and receipts received by Borrower or on its behalf in connection with or arising out of the Qualified Projects.

“ Property ” or “ Land ” means that certain real property more particularly described in each Deed of Trust with respect to each and every real property and all improvements located or to be constructed thereon located in each and every County for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such properties shall be referred to individually and collectively in the singular.

“ Purchase Contract ” means:

(a) For the sale of any Lot or Lots, a bona fide written agreement between Borrower and a Non-Related Party (provided that an Affiliate of Borrower may be a purchaser) for sale in the ordinary course of Borrower’s business, accompanied by a cash earnest money deposit or down payment in an amount that is customary and is not subject to any contingencies (including without limitation “ free look ” or other similar contingencies related to the sale of other property of the purchaser, but excluding conditions precedent to the closing of any such sale to a Non-Related Party); and/or

(b) For the sale of any Home or Homes, a bona fide, arm’s-length written agreement entered into between Borrower and a Non-Related Party for the sale in the ordinary course of Borrower’s business of any Home for a sales price at least equal to the Maximum Allowed Advance. The Sales Agreement shall be conforming to any and all rules or regulations promulgated by any federal, state or local governmental entity with jurisdiction over the subject Project. A Sales Agreement shall be considered “ without contingencies ” if the buyer’s obligation to purchase is not contingent upon the sale of the buyer’s existing residence and provided there are no other contingencies to the buyer’s obligation to purchase the Home other than financing, title and inspection contingencies which are normally included in Sales Agreements for newly constructed residences in the Project.

“ Qualified Project ” means any Project that satisfies the following conditions:

(a) Lender has received a Project Loan Request executed by Borrower;

(b) Borrower has satisfied all of the terms and conditions set forth in Section 2.1.4 prior to entry of the Project into the Loan;

(c) Lender has received a fully executed Deed of Trust for the Property included in the Project, which Deed of Trust shall be recorded in the County in which said Property is located;

(d) Lender has received a fully executed Environmental Indemnity for the Property included in the Project, and has received fully executed Construction Assignments for the Project;

(e) Upon recordation of said Deed of Trust, Lender shall have received a Title Policy issued by the Title Company; and

(f) Lender shall have received, reviewed and approved any and all Project information required by Lender hereunder.

“ Reduced Commitment Amount ” shall mean the mandatory reductions in the Commitment Amount during the Reduction Period, as set forth above in the definition of Commitment Amount.

“ Reduction Period ” shall mean, as set forth in Section 2.1.7 below, that twelve (12) month period during which all existing Qualified Projects entered into the Borrowing Base as of the Initial Line Maturity Date shall remain in the Borrowing Base and during which Lender’s obligation to include any new Qualified Projects into the Borrowing Base shall terminate.

“ Release Price ” means, for all Lots and Homes to be sold and released and hereunder, the greater of (i) one hundred percent (100%) of the Net Sales Proceeds for said Lot or Home, or (ii) the Maximum Allowed Advance for said Lot or Home.

“ Required Principal Payment ” means (a) in connection with each Release Price paid to Lender in connection with the sale of a Lot or Home, the Release Note Payment Amount to be applied to the outstanding Loan Balance, and (b) that certain quarterly principal payment to be made during the Reduction Period in order to reduce the outstanding Loan Balance to an amount not greater than the then-applicable Reduced Commitment Amount.

“ Requirements ” means any and all obligations, other terms and conditions, requirements, and restrictions in effect now or in the future by which Borrower or any or all of the Project is bound or which are otherwise applicable to any or all of the Project, construction of any improvements thereon, or occupancy, ownership, or use of the Project (including, without limitation, such obligations, other terms and conditions, restrictions, and requirements imposed by: (i) any law, ordinance, regulation, or rule (federal, state, or local); (ii) any Approvals and Permits; (iii) any Permitted Exceptions; (iv) any condition, covenant, restriction, easement, right of way, or reservation applicable to the Land; (v) insurance policies; (vi) any other agreement, document, or instrument to which Borrower is a party or by which Borrower or any or all of the Project or the business or operations of Borrower is bound; or (vii) any judgment, order, or decree of any arbitrator, other private adjudicator, or Governmental Authority to which Borrower is party or by which Borrower or any of the Project is bound).

“ Reserved Allocation ” shall mean, for each Lot and Home included in the Borrowing Base, the difference at any time and from time to time between (i) the Loan Allocation for said Lot or Home less (ii) the principal amount with respect to such Lot and Home previously included in an Advance for the construction of Improvements on such Lot and Home.

“ Sale Deposits ” shall have the meaning given to such term in Section 2.1.6 below.

“ Security Documents ” means the Deeds of Trust, the Construction Assignments, the Financing Statements, and such other assignments and security interests as may be required or granted pursuant to the terms of the Loan Documents.

“ Spec Home ” means any Home in a Qualified Project that is not a Presold Home or Model Home.

“ Spec Home Concentration Limitation ” shall have the meaning given to such term in the Maximum Aggregate Loan Allocation(s).

“ Soft Costs ” means, for each Qualified Project to be financed hereunder, the fees and costs that are not directly related to the onsite construction of the A&D Improvements or Homes for said Project, as applicable, which fees and costs shall include any Loan fees, plus any other costs, fees or expenses

approved by Lender, including without limitation interest, inspection fees, escrow and title fees, processing and closing fees, wiring fees, legal fees, appraisals and all closing costs, insurance costs, and costs of direct project supervision, and also including without duplication costs to be funded from general budget categories for overhead, supervision, general and administrative, and marketing expenses, provided that the foregoing in the aggregate shall not exceed the amount of the Soft Costs set forth in the A&D Budget or Home Construction Budget, as applicable.

“ Subsequent Closing Date ” shall mean the date on which each Deed of Trust for a Future Project is recorded and a Qualified Project is entered into the Borrowing Base.

“ Taking ” means the taking of any or all of the Project, any interest therein, or any right thereto for public or quasi public use by the power of eminentVII/TPC Holdings, L.L.C., a Delaware limited liability company domain, by condemnation (including, without limitation inverse condemnation), or any event in lieu thereof and any damage to the Project as the result of any taking of any other part of the Project or any property in the vicinity of the Project.

“ Tangible Net Worth ” shall mean a Person’s Net Worth less Intangible Assets.

“ Tentative Map ” shall mean the tentative tract map for the Property for each Qualified Project to be financed by a Loan to be made hereunder, which map shall be in form and content acceptable to Lender in its discretion and shall not be subject to any conditions that, in Lender’s reasonable judgment, cannot be reasonably satisfied by Borrower.

“ Title Company ” means a title company selected by Borrower and reasonably acceptable to Lender.

“ Title Policy ” means the title insurance policies to be provided by Borrower under Section 4.1.11.

“ Total Assets ” shall mean all assets of a Person determined in accordance with GAAP. All real estate assets held for development or sale shall be valued on an undepreciated cost basis. The assets of a Person on the financial statements of a Person shall be adjusted to reflect such Person’s allocable share of such asset, for the relevant period or as of the date of determination, taking into account (a) the relative proportion of each such item derived from assets directly owned by such Person, and (b) such Person’s respective ownership interest in its subsidiaries.

“ Total Project Costs ” shall mean:

(a) For all A&D Improvements to be financed hereunder, the sum of the land costs and the total Hard Costs and Soft Costs for the A&D Improvements pursuant to the applicable A&D Budgets; and

(b) For all Homes to be financed hereunder, the sum of the Hard Costs and Soft Costs for the Homes pursuant to the applicable Home Construction Budgets.

“ Total Liabilities ” shall be defined in accordance with GAAP and shall include all payable and accruals (but shall exclude liabilities related to inventory not owned).

“ Total Liabilities-to-Tangible Net Worth Ratio ” means, with respect to each Person, the ratio of such Person’s (a) Total Liabilities to (b) Tangible Net Worth.

“ Unmatured Event of Default ” means any condition or event that with notice, passage of time, or both would, if not cured within the time periods (if any) permitted pursuant to the Loan Documents, be an Event of Default.

“ Unused Fee ” shall mean that certain fee in the amount of two-tenths of one percent (0.20%) per annum multiplied by the amount equal to the difference between the Commitment Amount and the Average Quarterly Outstanding Loan Balance of the Loan that Borrower shall pay to Lender, if the “ Average Quarterly Outstanding Loan Balance ” (as defined below) of the Loan falls below fifty percent (50%) of the Commitment Amount. The Unused Fee shall be calculated commencing on April 19, 2012 and continuing on a quarterly basis and due and payable quarterly in arrears (i) within ten (10) days following the last day of each June, September, December and March, (ii) on the Maturity Date, and (iii) on the date the Loan Commitment has been terminated. As used herein “ Average Quarterly Outstanding Loan Balance ” shall mean, for each Calendar Quarter (or portion thereof), the outstanding Loan Balance during such Calendar Quarter (or portion thereof) divided by the number of days in that quarter (or portion thereof). If the Unused Fee is being computed for less than a full quarter, the percentages used above will be computed on a daily basis for the number of days for which such fee is being computed.

1.2

General Provisions .

(a) Singular and Plural Terms . Any defined term used in the plural in any Loan Document shall refer to all members of the relevant class and any defined term used in the singular shall refer to any number of the members of the relevant class.

(b) Accounting Principles . Any accounting term used and not specifically defined in any Loan Document shall be construed in conformity with, and all financial data required to be submitted under any Loan Document shall be prepared in conformity with, generally accepted accounting principles applied on a consistent basis.

(c) Exhibits Incorporated . All exhibits to this Agreement, as now existing and as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference.

(d) References . Any reference to any Loan Document or other document shall include such document both as originally executed and as it may from time to time be supplemented, modified or amended. References herein to Articles, Sections and Exhibits shall be construed as references to this Agreement unless a different document is named. References to subparagraphs shall be construed as references to the same section in which the reference appears unless a different section is named.

(e) Other Terms . The term “document” is used in its broadest sense and encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind. The terms “including” and “include” mean “including (include) without limitation.” The term “or” is not exclusive. The requirement that any party “deliver” any item to another party shall be construed to require that the first party “deliver or cause to be delivered” such item to the second party. The term “any,” as a modifier to any noun, shall be construed to mean “any or all” preceding the same noun in the plural. The term “agreement” includes both written and oral agreements. The terms “law” and “laws,” unless otherwise modified, mean, collectively, all federal, state and local laws, rules, regulations, codes and administrative and judicial precedents. The terms “herein,” “hereunder” and other similar compounds of the word “here” refer to the entire document in which the term appears and not to any particular provision or section of the document. The use of the pronoun “its” shall be deemed to also refer to “his,” “hers,” “its,” or “theirs.” This Section 1.2 shall apply to all of the Loan Documents and the Indemnity.

(f) Headings . Section and section headings are included in the Loan Documents for convenience of reference only and are not part of the Loan Documents for any other purpose.

(g) Other Documents . In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, this Agreement shall prevail.

(h) Intention . The provisions of this Article 1 shall not apply in any instance where a different meaning, construction or reference is clearly intended.

(i) Recitals . Borrower has applied to Lender for the Loan for the purpose of developing the Qualified Projects. Lender is willing to make such Loan to Borrower on the terms and subject to the conditions contained in this Agreement and the other Loan Documents.

(j) Amendment and Restatement . This Agreement amends and restates that certain Revolving Line of Credit Loan Agreement (as the same has been amended from time to time, the “ Prior Agreement ”) dated as of April 19, 2011, and any inconsistencies between this Agreement and the Prior Agreement shall be controlled by the terms of this Agreement.

2.	BORROWING BASE .

2.1

Loan Facility .

2.1.1

Commitment .

(a) Amount of Commitment . Subject to the terms and conditions of this Agreement, Lender agrees to make Advances and/or issue Letters of Credit from time to time until the Maturity Date up to the maximum amount of the Borrowing Availability, provided that the aggregate amount of all Loan Allocations and Letters of Credit outstanding and committed at any time and from time to time, shall not exceed the least of (i) the Commitment Amount, or (ii) the Borrowing Availability at such time, or (iii) the Maximum Allowed Advances for all Homes and Lots to be entered into the Loan plus the LOC Total Commitment Amount.

(b) Use of Loan Proceeds . Proceeds of Advances may be used only for the purpose paying and/or reimbursing Permitted Expenses as described in Section 2.4.2 below.

(c) Revolving Line of Credit . Advances shall be on a revolving basis. Advances repaid may be re-borrowed subject to the terms and the conditions herein. Although the outstanding principal of the Note may be zero from time to time, the Loan Documents shall remain in full force and effect until the Commitment terminates and all other Obligations are paid and performed in full.

(d) Suspension or Termination of Commitment . Upon the occurrence of an Unmatured Event of Default or an Event of Default and so long as such Unmatured Event of Default or Event of Default continues, Lender in its absolute and sole discretion, and without notice, may suspend the commitment to make Advances. In addition, upon the occurrence of an Event of Default, Lender in its absolute and sole discretion, and without notice, may terminate the commitment to make Advances. The obligation of Borrower to repay Advances shall be evidenced by the Note.

2.1.2

Purpose of the Loan .

(a) The purpose of this Agreement is to set forth the general terms and conditions for the entry of Qualified Projects into a borrowing base revolving line of credit loan in the total sum of Twenty Million Dollars ($20,000,000.00), which line of credit is being extended to provide funding for the development and construction of future residential home projects by Borrower. This Agreement (i) shall set forth the basic approval requirements for said Projects, (ii) shall set forth the basic terms and conditions for the disbursement of Loan funds for said Projects, and (iii) establishes a revolving line of credit under which Advances may be made, repaid and made again, subject to the aggregate loan limits and time limits set forth herein.

(b) The Loan is being made for the purpose of (i) providing financing for Future Projects, and (ii) providing a Letter of Credit facility for the issuance of Letters of Credit for future residential projects to be owned and developed by Borrower. Each new Qualified Project submitted for inclusion in the Loan shall be presented to Lender for approval in compliance with the requirements of Section 2.1.4 below. No new Qualified Project will be approved for inclusion in the Borrowing Base after the Initial Line Maturity Date.

(c) For each Qualified Project which is approved for financing hereunder, (i) a single Deed of Trust shall be executed to secure any and all such credit facilities, and (ii) any and all Project Loans shall be cross-defaulted and cross-collateralized.

2.1.3 Purpose of the Project Loans . Each Advance made for the Qualified Projects included within the Borrowing Base from time to time shall be for the purpose of paying for or reimbursing Borrower for certain costs and expenses incurred in connection with the construction of A&D Improvements, Presold, Spec and/or Model Homes thereon and for other costs and expenses incidental to said Qualified Projects, as more particularly provided in this Agreement. This Loan shall constitute a revolving line of credit.

(a) Revolving Line of Credit . During the Loan Term, Advances for Qualified Projects may be drawn, repaid and drawn again through individual Advances in repetition, subject to the limitations herein, so long as (i) any Advance requested hereunder shall not exceed the Borrowing Availability as of the date said Advance is requested, and (ii) the aggregate Loan Allocations for the Lots and Homes included in the Qualified Projects shall, never exceed the Maximum Aggregate Loan Allocations, and so long as no Event of Default has occurred and is continuing.

(b) Continuation of Revolving Line after Initial Line Maturity Date . After the Initial Line Maturity Date, no new Project will be approved to be a Qualified Project for entry into the Borrowing Base, but Advances for all Qualified Projects included in the Borrowing Base as of the Initial Line Maturity Date may continue to be drawn to complete all Improvements remaining to be constructed as part of said Qualified Projects, subject to the limitations herein.

(c) Evidence of Loan Advances . Amounts outstanding under the Loan shall be evidenced by the Note and shall be secured by the Deed of Trust. Loan Advances for each Qualified Project shall be charged and funded under the Note. In the event of any inconsistency between the Note and this Agreement, the provisions of this Agreement shall prevail.

(d) Reduction of Borrowing Availability for Non-Compliance with Maximum Aggregate Loan Allocations . Notwithstanding any other provision of this Agreement to the contrary, in the event that the aggregate Loan Allocations for the Lots and Homes included in the Qualified Projects exceeds any Maximum Aggregate Loan Allocation, then the Borrowing Availability shall be reduced in the amount by which said Loan Allocations exceeds any Maximum Aggregate Loan Allocation.

2.1.4 Approval of Qualified Projects . Subject to the terms and conditions of this Agreement, Lender agrees to include Qualified Projects into the Borrowing Base, as said Projects are approved by Lender in its discretion during the Loan Term. Lender shall have no obligation to approve of any Qualified Project unless and until:

(a) Tract Map(s) . Borrower has provided Lender with an approved Tentative Map or recorded Final Map for said Project to be financed. Provided, however, that notwithstanding any provision of this Agreement to the contrary, Lender may agree to enter a Qualified Project into the Borrowing Base prior to the recordation of the Final Map, but Lender shall have no obligation to disburse any Loan funds for any Hard Costs for any Home Improvements to be constructed as part of said Qualified Project unless and until the Final Map for the Qualified Project is recorded with the Official Records of the County. In the event a Qualified Project Loan is entered into the Borrowing Base prior to the recordation of the Final Map for said Qualified Project, Lender shall require, among other things, that an ALTA survey must be delivered to Lender for review and approval and/or Title Company shall agree in writing to issue the required Title Policy with all requested survey endorsements.

(b) Project Loan Information . Borrower shall have submitted for Lender’s review and approval in its sole and absolute discretion:

(i) An executed Project Loan Request; and

(ii) To the extent said information is available for the A&D Improvements and/or Home Improvements to be constructed as part of the Qualified Project as of the date of entry into the Borrowing Base —

(A) Copies of the Plans and Specifications, Architect’s Agreement, Construction Contract, Engineering Contract, and all other agreements, entitlements, CC&Rs, preliminary title report, permits, licenses and approvals concerning said Project submitted for approval;

(B) All cost breakdowns for the Improvements to be constructed as part of the Qualified Project as of the date of entry into the Borrowing Base;

(C) Project sources and uses of funds, Project economics and feasibility, market data and other similar information concerning said Qualified Project as reasonably requested by Lender;

(iii) Any and all of the applicable information concerning the Project set forth in Exhibit “C” attached hereto; and

(iv) All other information reasonably requested by Lender.

(c) Additional Project Requirements . Lender shall have no obligation to enter any Future Project into the Borrowing Base if (i) there is a continuing Unmatured Event of Default or Event of Default, and/or (ii) if the entry of said Future Project into the Borrowing Base would violate any of the Maximum Aggregate Loan Allocation limitations. In the event Borrower seeks approval of the entry of a Future Project into the Borrowing Base under terms and conditions different from those approval terms set forth herein, then Lender shall review and approve or disapprove of such Future Project pursuant to Lender’s underwriting guidelines in effect at the time of such application for approval.

(d) Existing Projects . The parties hereto acknowledge and agree that all Existing Project shall be and remain in the Borrower Base, subject to the terms and conditions from forth herein from and after the Amendment Closing Date. In connection with amended and restated this Agreement and certain other of the Loan Documents, Borrower shall deliver the following fully executed original documents: (i) an Amendment to Deed of Trust of even date herewith relating to the existing Deed of Trust for each Existing Project; (ii) an Amended and Restated Subordination Agreement for the Existing Project known as “Tamarind”; (iii) a Reaffirmation and Amendment of Subordination Agreement for the Existing Project known as “Candera”; and (iv) such other related documents evidencing, relating to and securing the obligations hereunder as reasonably required by Lender.

2.1.5 Interest Payments . Interest on the unpaid outstanding principal amount of the Loan shall accrue at the Interest Rate(s) specified in the Note.

(a) Payment . Interest at the Interest Rate shall accrue on the outstanding and unpaid sum of Advances disbursed under the Loan, including without limitation all unreimbursed Letter of Credit Advances, commencing on the date of each such Advance under the Loan, until repaid. Interest accruing under the Note shall be due and payable on each Loan Payment Date, commencing on the First Payment Date, until repayment in full, together with all other sums owed to Lender pursuant to any Loan Document.

(b) Rate After Default . Upon and after the occurrence of an Event of Default hereunder or under any of the Loan Documents, at the option of Lender, the outstanding Loan Balance shall bear interest, payable on demand, at a rate per annum equal to the Default Interest Rate. The application of the Default Interest Rate shall not be interpreted or deemed to extend any cure period set forth in this Agreement or otherwise to limit any of Lender’s remedies under this Agreement or any of the other Loan Documents.

(c) Computation of Interest . Interest shall be calculated on a 360-day year for all Advances, but, in any case, shall be computed for the actual number of days in the period for which interest is charged, which period shall consist of 365 days on an annual basis. If any payment of interest under the Note would otherwise be due on a day which is not a Business Day, the payment instead shall be due on the next succeeding Business Day and such extension of time shall be included in computing the interest due in respect of said payment.

(d) No Deductions . All payments of principal or interest under the Note shall be made without deduction of any present and future taxes, levies, deductions, charges or withholding, which amounts shall be paid by Borrower. Borrower will pay the amounts necessary such that the gross amount of the principal and interest received by Lender is not less than that required by the Note.

(e) Order of Application . Any payments received by Lender will be applied as set forth herein and in the Note.

(f) Interest Reserve; Other Amounts . Borrower hereby authorizes Lender to disburse the proceeds of the Loan to pay interest accrued on the Loan and other expenses set forth in the A&D Budget and the applicable Home Construction Budgets, notwithstanding that Borrower may not have requested a disbursement of such amount. The authorization hereby granted shall be irrevocable and at Lender’s discretion, and no further direction or authorization from Borrower shall be necessary for Lender to make such disbursements. Nothing contained herein shall be deemed to obligate Lender to make such disbursements to pay interest beyond the portions of any Project Loan specifically allocated to the payment of interest under an approved Budget.

(g) Full Recourse; Payments . The Loan shall be full recourse against Borrower. All amounts payable by Borrower on or with respect to the Loan, or pursuant to the terms of any other Loan Documents, shall be paid in lawful money of the United States of America to Lender at Central Note Department, P.O. Box 518, Lawndale, California 90260–0518, in same day funds, not later than 11:00 a.m. (Pacific time) on the date due.

2.1.6

Principal Payments .

(a) Bulk Sale of Lots . In the event that Borrower shall desire to enter into a bulk sale of any Lots (each, a “ Bulk Lot Sale ”) Borrower shall cause to be delivered through any sale escrow to Lender any deposits (collectively “ Sale Deposits ”) to be received by Borrower in connection with any such Bulk Lot Sale for any Lots in a Qualified Project (each, a “ Bulk Lot Sale ”) pursuant to a Purchase Contract for such bulk sale. All Sale Deposits shall be applied by Lender upon receipt for the payment of the Obligations as provided in this Agreement.

(b) Sale and Release of Lots and Homes . Immediately upon the sale and closing of Lots and Homes, Borrower shall pay to Lender any and all Release Prices payable under Section 3.2 below, which Release Prices shall be applied by Lender to repay sums due and owing under the Note.

(c) Required Principal Payments During the Reduction Period . During the Reduction Period, commencing with the first Loan Payment Date occurring on or after the end of the first Calendar Quarter following the Initial Line Maturity Date and continuing at the end of each Calendar Quarter thereafter, Borrower shall make any Required Principal Payment necessary to reduce the outstanding Loan Balance to a sum not in excess of the then-applicable Reduced Commitment Amount.

(d) Voluntary Loan Prepayment . Borrower shall have the right to prepay the Loan, in whole or in part, at any time, without premium or penalty, provided that Borrower must pay, together with any prepayment, all accrued but unpaid interest upon the principal so prepaid. Prior to the Initial Line Maturity Date, no prepayment of the Loan shall reduce the Commitment Amount, unless Borrower relinquishes in writing its right to obtain an Advance of all or any of the amount so prepaid;

during the Reduction Period, principal payment(s) may be required as provided herein to reduce the Loan Balance to the applicable Reduced Commitment Amount.

(e) Payments of Principal and Interest to Balance the Loan . Principal and interest shall be payable in accordance with the terms of the Note; provided, however, that in addition to payments required pursuant to the terms of the Note, if for any reason at any time the outstanding principal amount of Advances under the Loan exceeds the Available Commitment, Borrower shall make a payment to Lender in an amount equal to such excess principal amount within the earlier of (a) one (1) Business Day after notice from Lender, (3) five (5) days after delivery of a Borrowing Base Certificate and/or other financial reports of Borrower reflecting that such a payment is due, and (c) five (5) days after Lender notifies Borrower (which notice may be oral, to be followed promptly by written notice setting forth the Lender’s calculations) of Lender’s determination of the Borrowing Base and Borrowing Availability pursuant to Section 2.2.3. Any funds paid hereunder shall be applied by Lender to the outstanding Loan Balance.

2.1.7

Loan Term .

(a) Upon the Initial Line Maturity Date, Lender and Borrower shall initiate a twelve (12) month period (“ Reduction Period ”) to reduce the Commitment Amount under the terms and conditions set forth herein.

(b) During the Reduction Period, (i) no new Qualified Projects shall be entered into the Borrowing Base, and (ii) Advances under existing Project Loans shall continue to be made for the construction of Improvements for the subject Projects, subject to the limitations set forth herein.

2.1.8

Terms of Project Advances .

(a) Lots entered into the Borrowing Base shall be removed from the Borrowing Base on the applicable Lot Advance Maturity Date.

(b) Homes entered into the Borrowing Base shall be removed from the Borrowing Base on the applicable Home Advance Maturity Date; provided, however, that the Home Advance Maturity Date for Model Homes in a Project may be extended for a six-month period if Borrower has satisfied the Model Extension Conditions.

2.2

Available Commitment; Borrowing Base .

2.2.1 Available Commitment . The Available Commitment shall be determined in accordance with this Section 2.2 and shall be the lesser of (a) the applicable Commitment Amount or Reduced Commitment Amount, as in effect from time to time, or (b) the Borrowing Base.

(i) The Available Commitment for all Qualified Projects shall be the difference between the amount set forth in 2.2.1 above less the amounts of all Letters of Credit issued under Section 2.3 below.

(ii) The Available Commitment for all Letters of Credit to be issued hereunder shall be no greater than the LOC Total Commitment Amount of Two Million Dollars ($2,000,000.00).

2.2.2 Amount of Borrowing Base and Borrowing Availability . Subject to the provisions of Section 2.2.3 below, the Borrowing Base and Borrowing Availability shall be determined by Lender based on each Borrowing Base Certificate delivered pursuant to Section 6.4.6.

2.2.3

Determination of Borrowing Availability .

(a) General Determination . The Borrowing Availability shall be determined by Lender based upon:

(i) Each Borrowing Base Certificate most recently submitted by Borrower from time to time (adjusted as determined by Lender from time to time to reflect portions of the Project sold, property released from the Deed of Trust, and other adjustments and limitations pursuant to this Agreement);

(ii) Lender’s inspections made pursuant to Sections 4.3.4 and 6.10 (as such inspections may result in any adjustment to reflect any variance between (A) the Borrowing Base Certificate and (B) the result of such inspections or other information available to Lender); and

(iii) Such other information as Lender may reasonably require in order to verify such amounts.

Each Borrowing Base Certificate shall accurately reflect the valuation of the Property included in the Borrowing Base as of the last day of the Calendar Month immediately preceding the Calendar Month in which such certificate is due, shall accurately recite the amounts of the Letters of Credit issued to date, and shall accurately calculate the Borrowing Availability as of the date of said certificate. Without limiting the foregoing, each Borrowing Base Certificate shall exclude the Loan Allocations for any and all Lots and Homes that have been released from the Deed of Trust, and each Borrowing Base Certificate shall reflect any reductions in the Loan Balance.

(b) Right to Exclude/Adjust . Lender, in its discretion, may exclude Lots or Homes from the Borrowing Base, adjust the Appraised Value of Lots or Homes, and/or adjust the applicable classification of property included in the Borrowing Base if:

(i) A portion of the Project is subject to unrepaired material damage or destruction which Borrower has not undertaken to repair;

(ii) [intentionally omitted];

(iii) Lender determines, based on the information provided by Borrower pursuant to Section 6.4, that reclassification of property included in the Borrowing Base is appropriate due to loss or change of zoning or other Approvals and Permits, Borrower’s failure to satisfy applicable conditions for inclusion in the designated classification, or the occurrence of a Material Adverse Change;

(iv) Lender determines that Spec Homes are to be removed from the Borrowing Base under Section 2.2.3(d) in order to remargin the Loan (provided, however, that Lender shall only be permitted to make such determination in the event that Borrower has failed to comply with the provisions of Section 2.2.3(d)(i) to remargin the Loan).

The exclusion of any Property from the Borrowing Base shall not require Lender to release such property from the Deed of Trust, and Lender shall be obligated to release Collateral only pursuant to the provisions of Section 3.2. Lender shall notify Borrower of any exclusion or adjustment in the Borrowing Base in writing with the Lender’s calculations.

(c) Specific Limitations . Lender has no commitment to Advance Loan funds for any Project that would violate:

(i) Any applicable Maximum Aggregate Loan Allocation(s), including without limitation (1) the Geographic Concentration Limitations, (2) the Lot Concentration Limitation to fund the development of Lots Under Development and/or Developed Lots, (3) the Spec Home

Concentration Limitation for Spec Homes constructed hereunder, and/or (4) the Home Concentration Limitation for all Homes constructed hereunder;

(ii) The Loan Allocations applicable to the Lots and Homes to be financed hereunder; and/or

(iii) The Borrowing Availability.

(d) Loan Remargining Due to Conversion of Homes .

(i) In the event any Home ceases to constitute a Presold Home for any reason, then such Home shall automatically become a Spec Home for purposes of the limitation upon the number of Spec Homes set forth herein and for purposes of calculating the Maximum Allowed Advance and/or the Home Maturity Date for such Home. After the conversion of any Presold Home to a Spec Home, (A) if the Spec Home limitations set forth in Section 4.5 below have been violated, then Lender shall have no obligation to make any Advances for any new Spec Homes to be included in the Borrowing Base and Borrower shall remove Spec Homes from the Borrowing Base so as to be in compliance with said Spec Home limitations, and (B) if the aggregate sum of the Advances and the Reserved Allocation for the Spec Homes in the Borrowing Base exceeds the Maximum Allowed Advances for said Spec Homes, then the Borrowing Availability shall be reduced by such excess amount or, if the Borrowing Availability has a negative balance, Borrower shall make any payment required under Section 2.4.5 below.

(ii) In the event a Spec Home or Model Home satisfies the requirements to become a Presold Home, then such Home shall automatically become a Presold Home for purposes of the limitation upon the number of Spec Homes set forth herein and for purposes of calculating the Maximum Allowed Advance and/or the Home Maturity Date for such Home.

(e) Failure to Deliver Borrowing Base Certificate . If Borrower fails to deliver a Borrowing Base Certificate as and when required, then in addition to Lender’s other rights and remedies, Lender may determine the amount of the Borrowing Base based upon information available to Lender and such determination by Lender shall be final and conclusive, absent manifest error.

2.3 Letter of Credit Advances . Borrower shall be entitled to receive Letter of Credit Advances upon Borrower’s compliance with the terms, conditions and procedures set forth in this Section 2.3.

2.3.1 Issuance of Letter of Credit . Subject to the terms and conditions of this Agreement and the Letter of Credit Request, and subject to the policies, procedures, and requirements of Lender in effect from time to time for the issuance of any letter of credit (including without limitation payment of the Letter of Credit Fee), Lender agrees to issue on or before the Maturity Date a Letter of Credit upon request by and for the account of the Borrower, provided that Borrower has delivered to Lender:

(a) A completed and executed Letter of Credit Request, together with the required application and/or amendment documents in the forms attached hereto as Exhibit “B” , and

(b) Payment of the required Letter of Credit Fee;

and provided further that (i) the Letter of Credit shall not be required to be issued for a term of more than twelve (12) Calendar Months (but in no event later than the applicable Maturity Date), (ii) the Letter of Credit shall not be required to be issued for an amount in excess of the LOC Maximum Commitment Amount, (iii) the amount of the Letter of Credit, together with any and all existing Letters of Credit previously issued hereunder, shall not in the aggregate exceed the LOC Total Commitment Amount, and (iv) in any event, the date that is the last date for payment of a draft drawn or drawn and accepted under the Letter of Credit shall be before the Maturity Date.

2.3.2 Issuance Procedure . To obtain a Letter of Credit, Borrower shall complete, execute and deliver to Lender a Letter of Credit Request, along with the required application and/or amendment documents in

the forms attached hereto as Exhibit “B” . Upon receipt of a completed and executed Letter of Credit Request and such other documents as required herein, Lender will process the application in accordance with the policies, procedures, and requirements of Lender then in effect (including without limitation the policies, procedures and requirements applicable to the form of the Letter of Credit). If the application meets the requirements of Lender and is within the policies of Lender then in effect, Lender will issue the requested Letter of Credit.

2.3.3 Purpose of Letter of Credit; General Letter of Credit Terms and Conditions .

2.3.3.1 The Letter of Credit shall be issued to provide a good faith deposit in connection with any Project, support for unfunded Project costs or any other purpose approved by Lender in connection with the development and marketing of a Project. Upon occurrence of an Event of Default and so long such Event of Default continues, Lender, in its sole and absolute discretion and without notice, may refuse to renew or extend the commitment to issue the Letter of Credit, and shall exercise any and all remedies provided for in the Loan Documents.

2.3.3.2 The Letter of Credit shall be drawn under the conditions as set forth in the forms of Letter of Credit application and/or amendment attached hereto as Exhibit “B” .

2.3.4 Reimbursement of Lender for Payment of Drafts Drawn or Drawn and Accepted Under the Letter of Credit . The obligation of Borrower to reimburse Lender for payment by Lender of Letter of Credit Advances under the Letter of Credit shall be as provided in the Letter of Credit Request and in this Agreement. Lender will notify Borrower of payment by Lender of a Letter of Credit Advance under the Letter of Credit and of the respective Reimbursement Obligations and will give Borrower two (2) Business Days notice that the Reimbursement Obligations pursuant to the Letter of Credit Request shall be due on or before the applicable Maturity Date. Borrower shall also pay to Lender interest at the Interest Rate on the Reimbursement Obligations from and including the date Lender pays the Letter of Credit Advance at the Interest Rate until the Reimbursement Obligations and such interest are paid in full; provided, however, that if Borrower fails to immediately pay the Reimbursement Obligations and accrued interest thereon after notification by Lender to Borrower of payment of the Letter of Credit Advance, interest thereafter will accrue at the Default Interest Rate. Such interest shall be computed on the basis of a 360-day year and accrue on a daily basis for the actual number of days elapsed. A Letter of Credit Advance shall be made to re-pay Lender for any funds disbursed in connection with a draft drawn under any Letter of Credit, at which time said advance shall be used to calculate the Borrowing Availability or, if said advance shall result in the Borrowing Availability having a negative balance, then Borrower shall make any payment required under Section 2.4.5 below.

2.3.5 Reimbursement Obligations . Borrower’s obligations under Section 2.3 to reimburse Lender with respect to a drawing under a Letter of Credit (such obligations are collectively referred to as the “ Reimbursement Obligations ”) are absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim, or defense to payment which Borrower may have or have had against Lender or any beneficiary of the Letter of Credit, including any defense based upon the occurrence of any Event of Default, any draft, demand, certificate or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient, the failure of any payment by Lender to conform to the terms of said Letter of Credit (if, in Lender’s good faith opinion, such payment is determined to be appropriate) or any non-application or misapplication of the Letter of Credit or the proceeds of such payment, or the legality, validity, form, regularity or enforceability of the Letter of Credit; provided, however, that nothing herein will adversely affect the right of Borrower to commence a proceeding against Lender for any wrongful payment under the Letter of Credit made by Lender as the result of acts or omissions constituting gross negligence or willful misconduct on the part of Lender.

2.3.6 Nature of Reimbursement Obligations . Borrower assumes all risks of the acts, omissions, or misuse of any Letter of Credit by any Person to whom a Letter of Credit is issued. Lender (except to the extent of its own gross negligence or willful misconduct) will not be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of the Letter of Credit or any document submitted by any party in connection with the issuance of any Letter of Credit, even if such document should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part, which may prove to be invalid

or ineffective for any reason; (c) failure of any Person to comply fully with the conditions required in order to demand payment under the Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required by or from any Person in order to make a disbursement under the Letter of Credit or the proceeds thereof. None of the foregoing will affect, impair or prevent the vesting of any of the rights or powers granted to Lender. In furtherance and extension and not in limitation or derogation of any of the foregoing, any act taken or omitted to be taken by Lender in good faith will be binding on Borrower and will not put Lender under any resulting liability to Borrower.

2.4 Loan Advances; Project Monitoring .

2.4.1 Method for Advances . Subject to the limitations set forth in Section 4.6 below, Advances in a sum not in excess at any time of the Borrowing Availability shall be made by Lender to the Funding Disbursement Account for the payment or reimbursement of Permitted Expenses at the written request within three (3) Business Days following Lender’s receipt of a completed Draw Request from Borrower (which may be delivered by telecopy or facsimile) by the Person or Persons designated from time to time on Lender’s form of Authorization Form; provided, however, that Lender shall have acknowledged receipt of any changes in the Person or Persons designated by Borrower, and such Person or Persons shall have executed a new Authorization Form. Such Person or Persons are hereby authorized by Borrower to request Advances and to direct the transfer of the proceeds of Advances to the Funding Disbursement Account until written notice of the revocation of such authority is received from Borrower by Lender and Lender has had a reasonable time to act upon such notice. Lender shall have no duty to monitor for Borrower or any other Person or to report to Borrower or such other Person the use of proceeds of Advances.

2.4.2 Use of Advances . All Advances shall be used to pay or reimburse the Permitted Expenses incurred by Borrower in connection with the development, marketing and operation of the Project and the other normal business activities of Borrower.

2.4.3 Draw Requests . Concurrently with a Draw Request for any Advance of Loan proceeds (other than Advances that, pursuant to this Agreement, may be made without a Draw Request), Borrower shall furnish to Lender a Draw Request together with such other forms and Schedules Of values as may from time to time be approved or required by Lender, duly signed and sworn to by Borrower, with all blanks appropriately filled in.

(a) Right of Inspection . Throughout the course of construction of any Improvements under each Qualified Project on at least a monthly basis during the Loan Term (subject to the qualifications below), Lender shall have the right to employ, at Borrower’s sole cost and expense, an inspector or inspectors who shall review as agent for Lender all construction activities undertaken in regard to the Project; provided, however, that Lender shall require at least one (1) inspection report satisfactory to Lender and in compliance with the requirements of this subsection for each two (2) Draw Requests submitted by Borrower, but in no event not less than one (1) such report on a monthly basis. If required by Lender in its discretion, a certificate or indication from such inspector or inspectors that construction substantially complies with the Plans and Specifications shall be a further condition precedent to Lender’s approval of a Project, or any Lots or Homes included within a Project, for inclusion within the calculation of the Borrowing Base and the Borrowing Availability.

(b) Method of Advances . The proceeds of each Advance disbursed under this Agreement shall be evidenced by the Note and shall be secured by a Deed of Trust, and all such proceeds shall be disbursed into the Funding Disbursement Account.

2.4.4 Limitations on Borrower’s Rights to Advances . Borrower shall be entitled to disbursements of Loan proceeds only in accordance with the terms and conditions of this Agreement (unless waived or modified by Lender); and, in addition, Borrower certifies in connection with any Advances requested hereunder that Loan:

(a) The representations and warranties of Borrower contained in all of the Loan Documents shall be correct in all respects on and as of the date of the disbursement as though made on and

as of that date, and no Event of Default shall have occurred and be continuing as of the date of the disbursement;

(b) The requested Loan proceeds shall be applied by Borrower only to defray costs actually incurred by Borrower in connection with the payment or reimbursement of Permitted Expenses; and

(c) Notwithstanding any limitations on Advances set forth in this Agreement or otherwise, Borrower shall pay all costs and expenses arising in connection with each Qualified Project.

2.4.5 Excess Loan Balance Repayment . In the event the Borrowing Availability has a negative balance, there shall be due and payable from Borrower to Lender, and Borrower shall repay to Lender an amount equal to said negative balance within the earlier of (a) one (1) Business Day after notice from Lender, or (b) five (5) days after delivery of a Borrowing Base Certificate and/or other financial reports of Borrower reflecting that such a payment is due.

2.4.6 Appraisals and Evaluations . If reasonably required by Lender, or if required by law, Lender shall have the right to order Appraisals, appraisal reviews and/or evaluations of the Land and/or Improvements for any Qualified Project included in the Borrowing Base, from an appraiser selected by Lender, which Appraisal(s) shall comply with all federal and state standards for appraisals and otherwise shall be satisfactory to Lender in all respects. Notwithstanding the foregoing, Lender shall not order appraisals of any Project more than one (1) time per year unless (i) Lender believes that a Material Adverse Change has occurred with respect to the Project or any portion thereof, or (ii) Borrower requests in writing that Lender order an appraisal of the Project, or (iii) Lender is required to reappraise the Project in connection with regulatory requirements. Borrower agrees to pay the cost and expense for all appraisals, appraisal reviews and/or evaluations thereof ordered by Lender pursuant to this Section.

2.4.7 Borrower’s Accounts . Borrower has established (or, as required herein, shall establish) and shall maintain during the term of this Loan the Funding Disbursement Account for the purposes set forth below:

(a) Use of Funding Disbursement Account . As provided herein, Advances shall be made directly by Lender to the Funding Disbursement Account. Borrower shall pay or be reimbursed only Permitted Expenses with the Advances deposited into the Funding Disbursement Account. Borrower shall have authority to sign documents and checks in connection with the transfer of funds out of the Funding Disbursement Account for all of Borrower’s business purposes. Although Lender shall have no security interest in the Funding Disbursement Account or the funds deposited therein, Borrower warrants and represents that during the Loan Term, all Advances deposited into the Funding Disbursement Account shall be applied only for the payment or reimbursement of Permitted Expenses for Qualified Projects.

2.4.8 Project Cost Savings and Excess Costs . Each Draw Request submitted by Borrower shall be deemed a certification by Borrower of the following matters:

2.4.8.1 Excess Project Costs. In the event the actual cost (“ Actual Line Item Cost ”) of any matter covered by any given line item in any Budget exceeds the amount allocated to such line item in said Budget (“ Approved Line Item Cost ”), Borrower either has (a) paid or incurred the amount of the Actual Line Item Cost in excess of the Approved Line Item Cost (“ Excess Cost ”), or (b) the financial ability to pay such Excess Costs with its own funds, including without limitation the transfer of a portion of any Contingency line item amount provided for in the Budget and/or any “Cost Savings” (as defined in Section 2.4.8.3 below) to such line item in an amount equal to such Excess Cost.

2.4.8.2 Offsite Materials . In connection with any Project materials that are stored or housed at a location other than the Property for the applicable Project (“ Offsite Materials ”):

(a) Borrower has paid for the Offsite Materials or will cause payment to be made promptly upon receipt of the next Advance;

(b) If the Offsite Materials are stored at the facilities of the supplier of the Offsite Materials (“ Offsite Supplier ”), the Offsite Materials have been segregated from other materials in the Offsite Supplier’s storage facility and have been marked with the name of Borrower. If reasonably requested by Lender, Borrower shall provide Lender with a written statement from the Offsite Supplier, which statement shall include the Offsite Supplier’s acknowledgment of (i) the right of Lender to enter the Offsite Supplier’s storage facility at reasonable times for the purpose of inspecting or removing the Offsite Materials and (ii) Lender’s security interest in the Offsite Materials. If the Offsite Materials are stored in a place other than the facilities of the Offsite Supplier, if reasonably requested by Lender, Borrower shall provide Lender with a written statement from the bailee or other custodian acknowledging (i) the right of Lender to enter the site where the Offsite Materials are stored at reasonable times for the purpose of inspecting or removing the Offsite Materials and (ii) Lender’s security interest in the Offsite Materials;

(c) Borrower has obtained certificates of insurance showing the Offsite Materials to be insured as required by the Agreement and showing Lender as loss payee; and

(d) Borrower has paid all personal property taxes applicable to the Offsite Materials. Lender shall have the right to inspect and approve the Offsite Materials.

2.4.8.3 Cost Savings . For purposes of Section 2.4.8.1 above, “ Cost Savings ” shall mean any remaining undisbursed amounts shown in any Budget as allocated to any line item, or any funds allocated to said line item that exceed the amount of the subcontract for said line item either upon completion of and disbursement for all matters covered by said line item in such Budget, or upon the execution by Borrower and an approved subcontractor of a subcontract for the performance of work or furnishing of materials for said line item in an amount that is less than the Approved Line Item Cost for said item.

2.5 Fees . As additional consideration for the Commitment, Borrower agrees to pay to Lender the following fees, which shall be earned by Lender on the date due under the Loan Documents and shall be non-refundable to Borrower:

2.5.1 Commitment Fee . Until the Loan is paid in full, the Commitment Fee shall be payable annually in advance, as provided herein.

2.5.2 Borrowing Base Fees . The Borrowing Base Fees shall be due and payable by Borrower in connection with the inclusion of each Qualified Project into the Loan. The Borrowing Base Fees shall be payable as a condition to the inclusion of each Qualified Project into the Loan.

2.5.3 Letter of Credit Fee . A Letter of Credit Fee shall be due and payable by Borrower in connection with the issuance of each Letter of Credit hereunder. The Letter of Credit Fee shall be payable as a condition to the issuance of each Letter of Credit and on each twelve-month anniversary of the issuance date of said Letter of Credit, if said Letter of Credit is to be extended beyond a twelve-month term.

2.5.4 Unused Fee . Until the Loan is paid in full, the Unused Fee shall be payable quarterly in arrears, as provided herein.

2.5.5 Other Fees . Costs, expenses, and reasonable fees for Lender’s counsel as provided in the Loan Documents, payable on or before the date hereof, together with all title insurance premiums, appraisal costs, documentation fees, environmental study costs and other costs and expenses to which Lender is entitled to reimbursement pursuant to the Loan Documents.

3.	THE COLLATERAL .

3.1 Security . Payment of the Note, all indebtedness and liabilities of Borrower to Lender, and performance of all Obligations, due or to become due, under this Agreement and the other Loan Documents, shall be secured by the following (collectively “ Security Documents ”):

(a) Deeds of Trust;

(b) Construction Assignments;

(c) Financing Statements; and

(d) Such other assignments and security interests as may be required or granted pursuant to the terms of the Loan Documents, including, without limitation, assignments of construction contracts, assignments of plans and specifications, assignments of permits, licenses and approvals, assignments of declarant’s rights under covenants, conditions and restrictions, assignments of purchase and sale agreements, and any assignments concerning any environmental indemnities in favor of Borrower.

3.2 Releases of Collateral . In addition to releases in connection with boundary line adjustments and the granting of easements and licenses as more particularly described in Section 6.3.3(c), Lender agrees to release portions of the Project from the lien of any Deed of Trust in connection with sales of portions of the Project secured by said Deed of Trust pursuant to a Purchase Contract for cash, upon the satisfaction of the following conditions prior to the release:

3.2.1 General Requirements for Releases . In connection with any release:

(a) Unless otherwise approved by Lender in its absolute and sole discretion, at the time of such release no Event of Default shall have occurred and be continuing.

(b) Such release shall be in connection with a sale of a Lot or Home in the Project (or in the case of a Dedication, a transfer or donation of a portion of the Project) to a Non-Related Party.

(c) Unless the portion of the Land to be released is an entire parcel with respect to which Lender has previously approved the parcel map or plat or is a lot or lots within a subdivision with respect to which Lender has previously approved a final map or plat, Borrower or Title Company shall have delivered to Lender (i) a legal description of the portion of the Land to be released, (ii) a map or plat of the portion of the Land to be released, and (iii) copies of all easements for ingress, egress or otherwise to be granted or retained in connection with such release.

(d) Unless the portion of the Land to be released is an entire parcel with respect to which Lender has previously approved the parcel map or plat or is a lot or lots within a subdivision with respect to which Lender has previously approved a final map or plat, prior to such release, (i) Lender shall have approved such release, which approval will not be unreasonably withheld, (ii) the remaining unreleased portion of the Land will, after giving effect to such release, have adequate access, in the reasonable opinion of Lender, and (iii) the value of the unreleased portion of the Land will, after giving effect to such release, not otherwise be materially impaired in the reasonable opinion of Lender.

(e) Borrower shall provide Lender with such endorsements to the Title Policy as Lender may reasonably request in connection with each release.

(f) Borrower shall pay all of Lender’s reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees, arising in connection with each release.

(g) Each release shall be made by Lender by delivery of the release documents to a title company or other escrow agent satisfactory to Lender upon such conditions as shall assure Lender that

all conditions precedent to such release have been satisfied and that the applicable transaction will be completed.

3.2.2 Sales of Lots or Homes Pursuant to a Purchase Contract . In connection with sales pursuant to a Purchase Contract for cash:

(a) Borrower shall satisfy each of the conditions set forth in Section 3.2.1.

(b) If requested by Lender, Borrower shall deliver to Lender a true and correct copy of any Purchase Contract, which shall (i) be substantially on Borrower’s standard forms as previously submitted to and approved by Lender or (ii) otherwise be in form and content reasonably satisfactory to Lender.

(c) Borrower shall not have made any material changes in the Purchase Contract delivered to Lender pursuant to this Section 3.2.2, unless such changes have been approved by Lender, and, with respect to any Bulk Lot Sale, the Non-Related Party under said Purchase Contract shall be acceptable to Lender in its sole discretion.

(d) The sale shall be made in the ordinary course of the development and marketing of the Project, and shall be accompanied by such rights of first refusal, development covenants, conditions and restrictions, deeds of trust, and other documents, consistent with Borrower’s past practices, as shall be necessary to assure that development of the Project occurs in accordance with Borrower’s development plans and existing Approvals and Permits.

(e) For any Bulk Lot Sale, Lender shall have received and approved in its reasonable discretion financial statements and other information reasonably required by Lender showing the Non-Related Party’s ability to complete the purchase under the Purchase Contract.

(f) Borrower shall have paid the applicable Release Price and all other fees and costs in connection with the release, which Release Price shall be applied to repay sums due and owing under the Note.

3.2.3 Dedications . In connection with any Dedication:

(a) Borrower shall satisfy each of the conditions set forth in Section 3.2.1.

(b) At least ten (10) days prior to a release, Borrower shall have delivered to Lender all the terms, conditions and details of such release, including, without limitation, the purpose of such release, evidence of the conformity of such release to the overall development plan for the Project and all Approvals and Permits required in connection therewith, all of which shall be in form and content reasonably satisfactory to Lender.

4.	CONDITIONS PRECEDENT .

4.1 Conditions Precedent to Effectiveness of this Agreement and to the Effectiveness of the Commitment . This Agreement and the Commitment became effective upon satisfaction by Borrower of the following conditions precedent on or before the Initial Closing Date:

4.1.1 Representations and Warranties Accurate . The representations and warranties by Borrower in the Loan Documents are correct on and as of the date hereof and as of the recordation of the Deeds of Trust for the each Future Project to be included in the Borrowing Base in all material respects.

4.1.2 Defaults . No Event of Default or Unmatured Event of Default shall have occurred and be continuing.

4.1.3 Documents . Lender shall have received the following agreements, documents, and instruments, each duly executed by the parties thereto:

(a) Loan Documents . The Loan Documents, which shall include all agreements documents, and instruments specified by Lender in form and content acceptable to Lender in its discretion.

(b) Limited Liability Company . Certified copies of (i) authorizations of Borrower’s members authorizing Borrower to execute, deliver, and perform the Loan Documents and to grant to Lender the Liens and Encumbrances on the Collateral in the Loan Documents and certifying the names and signatures of the managing member(s) of Borrower authorized to execute the Loan Documents and, in the case of Borrower, to request Advances on behalf of each Borrower, (ii) the articles of organization and operating agreement of Borrower and all amendments thereto, and (iii) a certificate of good standing as a limited liability company from the jurisdiction of formation or organization and for each jurisdiction in which the nature of Borrower’s business and operations require qualification as a foreign limited liability company.

(c) Insurance Policies . A certificate of insurance for all insurance required under the Loan Documents, and certificates of insurance with respect to professional liability coverage to the extent maintained by engineers, architects, and environmental contractors.

(d) Opinion Letter . A favorable opinion from a law firm representing Borrower covering such matters as Lender may require.

(e) Financial Statements . Borrower’s most recent financial statements reviewed by independent, certified public accountants acceptable to Lender, including without limitation a balance sheet, cash flow statement, reconciliation of net worth, and profit and loss statement for Borrower.

4.1.4 Plat and/or Survey . Borrower shall have delivered to Lender, and Lender shall have approved, all surveys, maps and plats in existence with respect to the Existing Projects and individual parcels thereof. Each such map, plat or survey must contain a legal description of the subject Existing Project (or applicable portion thereof), must describe and show all boundaries of and lot lines within said Existing Project (or applicable portion thereof) and all streets and other dedications and contain such other information and certifications as Lender may request.

4.1.5 Restrictive Covenants . Borrower shall have provided Lender with, and Lender shall have approved, all covenants, conditions, restrictions, easements and other rights that exist or are contemplated with respect to the Existing Projects.

4.1.6 Soils Test . Borrower shall have provided to Lender, and Lender shall have approved, a soils/hydrology test reports of the Existing Projects prepared by licensed engineers satisfactory to Lender showing the location of, and containing boring logs from, all borings, together with recommendations for the design of foundations.

4.1.7 Environmental Assessment . Borrower shall have delivered to Lender and Lender shall have approved a report of an environmental assessments of the Existing Projects, by environmental engineers acceptable to Lender containing such information, results, and certifications as Lender may require. If Lender determines, in its sole discretion, based on such reports or other information available to Lender that any further review should be obtained, Borrower shall also provide such follow up testing, reports, and other actions as may be required by Lender. The contents of the environmental assessment report and any follow up must be satisfactory to Lender. If such reports are addressed to Borrower, Borrower shall cause a reliance letter, in form and substance satisfactory to Lender, to be provided to Lender.

4.1.8 Environmental Indemnity . Borrower shall have delivered to Lender, Lender’s form of Environmental Indemnity for each Existing Project, fully completed and duly executed by Borrower.

4.1.9 Preliminary Title Report . Borrower shall have provided Lender and Lender shall have approved, a preliminary title report for each Existing Project, prepared by the Title Company, together with a legible copy of each “ Schedule B ” item.

4.1.10 Flood Report . Borrower shall have provided to Lender evidence satisfactory to Lender as to whether (a) each Existing Project, or any portion thereof, is located in an area designated by the Department of Housing and Urban Development as having special flood or mudslide hazards, and (b) the community in which said Existing Project is located is participating in the National Flood Insurance Program.

4.1.11 Deed of Trust/Title Policy . For each Existing Project, Borrower shall have provided to Lender (a) an amendment to the Deed of Trust, subject only to Permitted Exceptions, duly executed by Borrower, acknowledged, delivered and recorded; and (b) American Land Title Association loan policies of title insurance (with such endorsements as Lender may require) for each Deed of Trust (collectively “ Title Policy ”). The Title Policy shall provide coverage (including without limitations mechanics’ lien coverage) satisfactory to Lender and insure the Deed of Trust as a first lien on the Project, subject only to Permitted Exceptions.

4.1.12 Completion of Filings and Recordings . For each Existing Project, Lender shall have received evidence of the completion of all recordings and filings to establish or maintain the perfection and priority of the Liens and Encumbrances on the Collateral granted in the Loan Documents and required by Lender to be in effect prior to the effectiveness of this Agreement and the Commitment.

4.1.13 Payment of Costs, Expenses, and Fees . For each Existing Project, all costs, expenses, and fees to be paid by Borrower under the Loan Documents on or before the effectiveness of this Agreement, the effectiveness of the Commitment, or the making of Advances shall have been paid in full (or shall be paid in full concurrently with the making of the initial Project Advance), including without limitation applicable fees set forth herein.

4.1.14 Appraisal . For each Existing Project, Lender shall have received and approved an Appraisal for the subject Land. Lender shall have no obligation to make any Advance against any parcels unless and until Lender shall have received and approved said Appraisals for said parcels against which Advances are requested.

4.1.15 Other Items or Actions by Borrower . Lender shall have received such other agreements, documents, and instruments, and Borrower shall have performed such other actions as Lender may reasonably require.

4.2 Amendment Closing Date . As noted in Sections 1.2(j)2.1.4(d) above, this Agreement is executed in connection with an amendment and restatement of the Loan to increase the maximum Commitment Amount from the original sum of Ten Million Dollars ($10,000,000.00) to the increased sum of Twenty Million Dollars ($20,000,000.00). In addition, to the requirements set forth above in Section 2.1.4(d), Borrower shall also deliver to Lender the new Note and shall comply with all other requirements set forth in the Loan Documents required by Lender to increase the Commitment Amount as set forth herein. In addition, and not by way of limitation, Borrower shall have provided Lender with any updated, amended and/or additional documents as may be reasonably required by Lender pursuant Section 4.1 above in connection with the increase in the Commitment Amount on or before the Amendment Closing Date. In connection with the closing of this increase in the Commitment Amount, Borrower hereby reaffirms all of the representations and warranties, as applicable, as of the Amendment Closing Date.

4.3 Conditions Precedent to Admission of Land as Lots Under Development . Borrower may, from time to time, request Lender to include a portion of the Land as Lots Under Development (including without limitation, any custom lots) for purposes of the Borrowing Base. In connection with each such request, the following conditions precedent shall have been satisfied at the sole cost and expense of Borrower. Upon the satisfaction of such conditions precedent, as determined by Lender, such Land shall be included in the Borrowing Base as Lots Under Development.

4.3.1 Request . Borrower shall have submitted to Lender a written request to include portion of the Land in the Borrowing Base as Lots Under Development. Such request and all other documents and instruments described in this Section 4.3 shall be submitted with the Borrowing Base Certificate in which Borrower intends to include such portion of the Land in the Borrowing Base as Lots Under Development. Each such request shall be deemed a renewal of all representations and warranties of Borrower set forth in the Loan Documents.

4.3.2 Defaults . No Event of Default or Unmatured Event of Default shall have occurred and be continuing on and as of the date that each portion of the Land is included as Lots Under Development.

4.3.3 Documents and Information . Borrower shall have provided to Lender, and Lender shall have approved, all documents and information required pursuant to Section 4.2 with respect to the applicable portion of the Land.

4.3.4 Inspection . Development of the applicable portion of the Land shall have commenced. Development will be deemed to have commenced when (i) construction of one or more of the following scopes of work has begun on the applicable portion of the Land — grading, paving, water, sewer or concrete, and (ii) Borrower has expended material amounts for Hard Costs with respect to such work.

4.3.5 Map . Borrower shall have delivered to Lender and Lender shall have approved a Final Map or Tentative Map, as applicable, together with evidence reasonably satisfactory to Lender that any such Tentative Map has not expired and is not due to expire during the development of such portion of the Land. Each such map must contain a legal description of the Land, must describe and show all boundaries of and lot lines within such Land and all streets and other dedications, and must contain such other information and certifications as Lender may request.

4.3.6 Utilities . If requested by Lender, Borrower shall have delivered to Lender, evidence, which may be in the form of “will serve” letters from local utility companies or local authorities, that: (a) telephone service, electric power, storm sewer, sanitary sewer (if applicable) and water facilities will be available to the Lots Under Development; (b) such utilities will be adequate to serve the Lots Under Development; and (c) upon completion of the Improvements, no conditions will exist to affect Borrower’s right to connect into and have adequate use of such utilities except for the payment of a normal connection charges or tap charges and except for the payment of subsequent charges for such services to the utility supplier.

4.3.7 Lot Limitations . The total number of Lots Under Development and Developed Lots to be included in the Borrowing Base as of the date of any request made hereunder shall not be in excess of the Lot Concentration Limitation.

4.3.8 Other . Borrower shall have provided such other documents and information reasonably requested by Lender.

4.4 Conditions Precedent to Admission of Land as Developed Lots . Borrower may, from time to time, request Lender to include a portion of the Land as Developed Lots for purposes of the Borrowing Base. In connection with each such request, the following conditions precedent shall have been satisfied at the sole cost and expense of Borrower. Upon the satisfaction of such conditions precedent, as determined by Lender, such Land shall be included in the Borrowing Base as Developed Lots.

4.4.1 Request . Borrower shall have submitted to Lender a written request that a portion of the Land be included in the Borrowing Base as Developed Lots. Such request and all other documents and instruments described in this Section 4.4 shall be submitted with the Borrowing Base Certificate in which Borrower intends to include such portion of the Land in the Borrowing Base as Developed Lots. Each such request shall be deemed a renewal of all representations and warranties of Borrower set forth in the Loan Documents.

4.4.2 Defaults . No Event of Default or Unmatured Event of Default shall have occurred and be continuing on and as of the date that each portion of the Land is included as Developed Lots.

4.4.3 Documents and Information . Borrower shall have provided to Lender, and Lender shall have approved, all documents and Information required pursuant to Sections 4.2 and 4.3, with respect to the applicable portion of the Land.

4.4.4 Lot Limitations . The total number of Lots Under Development and Developed Lots to be included in the Borrowing Base as of the date of any request made hereunder shall not be in excess of the Lot Concentration Limitation.

4.4.5 Other . Borrower shall have provided such other documents and information reasonably requested by Lender.

4.5 Conditions Precedent to Admission of Land as Presold, Spec and/or Model Homes . Borrower may, from time to time, request Lender to include a portion of the Land as Presold, Spec and/or Model Homes for purposes of the Borrowing Base. In connection with each such request, the following conditions precedent shall have been satisfied at the sole cost and expense of Borrower. Upon the satisfaction of such conditions precedent, as determined by Lender, such Land shall be included in the Borrowing Base as Presold, Spec and/or Model Homes.

4.5.1 Request . Borrower shall have submitted to Lender a written request that a portion of the Land be included in the Borrowing Base as Presold, Spec and/or Model Homes. Such request and all other documents and instruments described in this Section 4.5 shall be submitted with the Borrowing Base Certificate in which Borrower intends to include such portion of the Land in the Borrowing Base as Presold, Spec and/or Model Homes. Each such request shall be deemed a renewal of all representations and warranties of Borrower set forth in the Loan Documents.

4.5.2 Defaults . No Event of Default or Unmatured Event of Default shall have occurred and be continuing on and as of the date that each portion of the Land is included as Developed Lots.

4.5.3 Documents and Information . Borrower shall have provided to Lender, and Lender shall have approved, all documents and Information required pursuant to Sections 4.2, 4.3 and 4.4, with respect to the applicable portion of the Land.

4.5.4 Home Construction Information . Borrower shall not be entitled to include any portion of the Land in a Borrowing Base Certificate as Presold, Spec and/or Model Homes unless and until each of the following conditions precedent have been satisfied (or waived or modified by Lender in its discretion):

(a) Borrower shall have submitted to Lender, and Lender shall have approved, Plans and Specifications for each type of Home for each Project, which Plans and Specifications shall be (i) prepared by Architect and/or Engineer acceptable to Lender, and (ii) otherwise satisfactory to Lender;

(b) Homes may be entered into the Borrowing Base upon confirmation of trenching by Lender;

(c) At Borrower’s sole cost and expense, Lender shall have obtained Base Appraisals with respect to each type of Home, which Base Appraisals shall be (i) prepared by an appraiser acceptable to Lender, and (ii) otherwise satisfactory to Lender. Each Base Appraisal for each Home in a Project shall be updated or evaluated once annually at Lender’s discretion (or more frequently if required by regulatory guidelines), at the sole cost and expense of Borrower, and all FNMA appraisals or other appraisals for said Homes accepted by Lender that do not have a specific expiration date shall be updated once annually at Lender’s request; provided, however, that Lender may require that any such appraisal be updated more frequently than annually if (i) Lender believes that a material adverse change has occurred with ‘respect to the Project or any portion thereof, or (ii) Borrower requests in writing that Lender order an appraisal of the Project, or (iii) Lender is required to reappraise the Project in connection with regulatory requirements. Based on such revised appraisals and/or evaluations and any other information provided to Lender, Lender shall be entitled to revise the Home Construction Budget and Maximum Allowed Advances applicable to any Home in said Project;

(d) Borrower shall have submitted to Lender all other information requested by Lender to formulate a Home Construction Budget for each type of Home (which may include without limitation construction contracts and other verifications of costs), and Lender shall have formulated such Home Construction Budget;

(e) If requested by Lender, Borrower shall have submitted or made available to Lender evidence of (i) building permits for the construction of the Homes, (ii) all necessary permits, licenses and approvals for the construction of said Homes, including without limitation the requisite consumer disclosure reports and approvals required in connection with the sale of said Homes, and (iii) architectural control committee homeowners’ association and other approvals required under the CC&Rs;

(f) Prior to entering into any Purchase Contracts for the sale of any Homes, Borrower shall have delivered to Lender the requisite consumer disclosure reports and approvals prior to the sale of any Homes, in form and substance satisfactory to Lender;

(g) For all Presold Homes, Lender shall have received evidence in the form of Borrower’s most recent project reports (in such form as reasonably requested by Lender) of the following:

(i) A duly executed Purchase Contract, escrow instructions or deposit receipt without contingencies (other than the sale of an existing residency contingency);

(ii) A prequalification letter or mortgage commitment from an institutional mortgage lender or such other information or verification as Lender may require concerning the ability of the prospective buyer to obtain financing or otherwise acquire the Home; and

(iii) A cash earnest money deposit or down payment of at least Five Thousand Dollars ($5,000.00) (which deposit requirement shall be increased to twenty percent (20%) of the purchase price for said Home if the prospective buyer failed to satisfy the requirement in subsection (ii) above, unless said buyer demonstrates availability of funds for an all-cash purchase offer, in which case the deposit shall not be required to be increased to twenty percent (20%) of the purchase price).

(h) For all Spec Homes, Borrower shall not be entitled to include in the Borrowing Base at any one time in violation of the Spec Home Concentration Limitation.

(i) For all Presold Homes, Borrower shall not be entitled to include in the Borrowing Base at any one time in violation of the Home Concentration Limitation.

(j) For all Model Homes, the Lots to be used for the construction of any Model Homes, the Model Homes and any parking areas used for model complex parking shall remain as Collateral for the Loan and shall not be eligible for release from the applicable Deed of Trust until all production Homes of each Model Home’s respective plan type have been sold for each applicable Project; provided, however, that Lender in its sole discretion may permit Borrower to sell a Model Home, as long as (1) said Model Home is leased back to Borrower under terms and conditions acceptable to Lender, and (2) said lease of the Model Home is assigned or otherwise encumbered as collateral for the applicable Loan, and (3) said lease and said assignment or encumbrance shall be in full force and effect until all production Units of said Model Home’s respective plan type have been sold for the applicable Project.

4.5.5 Other . Borrower shall have provided such other documents and information reasonably requested by Lender.

4.6 Additional Conditions Precedent to All Advances . Lender shall be obligated to make an Advance only if Borrower shall have delivered to Lender a Draw Request for such Advance. Borrower may not submit more than two (2) Draw Requests per each Calendar Month. Lender shall not be required to make the

requested Advance before three (3) Business Days after receipt of the completed Draw Request (together with any required inspection report as provided in Section 2.4.3(a) above). Notwithstanding the foregoing, Lender may make Advances, without further authorization or Draw Requests from Borrower, to pay interest prior to delinquency to the extent of the Available Commitment; provided, however, that from and after the occurrence and during the continuation of an Unmatured Event of Default or an Event of Default, such Advances to pay interest may be made in the sole and absolute discretion of Lender.

4.7 Waiver of Conditions Precedent . Borrower hereby authorizes Lender, and Lender reserves the right in its absolute and sole discretion, to verify any documents and information submitted to Lender in connection with this Agreement. Lender may elect, in its absolute and sole discretion, to waive any of the foregoing conditions precedent. Any such waiver shall be limited to the conditions precedent therein and the requirements therein. Delay or failure by Lender to insist on satisfaction of any condition precedent shall not be a waiver of such condition precedent or any other condition precedent. The making of an Advance by Lender shall not be deemed a waiver by Lender of the occurrence of an Event of Default or an Unmatured Event of Default.

5.	BORROWER’S REPRESENTATIONS AND WARRANTIES .

5.1 Closing Representations and Warranties . Borrower represents and warrants to Lender as of the date of this Agreement:

5.1.1 Limited Liability Company Existence and Authorization . Borrower is a limited liability company, validly existing under the laws of Delaware and duly qualified to transact business in California and has the requisite power and authority to execute, deliver, and perform the Loan Documents. The execution, delivery, and performance by Borrower of the Loan Documents have been duly authorized by all requisite corporate action by or on behalf of Borrower and will not conflict with, or result in a violation of or a default under, the Organizational Documents of Borrower.

5.1.2 No Approvals, etc . No approval, authorization, bond, consent, certificate, franchise, license, permit, registration, qualification, or other action or grant by or filing with any Person is required in connection with the execution, delivery, or performance by Borrower of the Loan Documents.

5.1.3 No Conflicts . The execution, delivery, and performance by Borrower of the Loan Documents will not conflict with, or result in a violation of or a default under: (i) any applicable law, ordinance, regulation, or rule (federal, state, or local); (ii) any judgment, order, or decree of any arbitrator, other private adjudicator, or Governmental Authority to which Borrower is a party or by which Borrower or any of the assets or property of Borrower is bound; (iii) any of the Approvals and Permits; and/or (iv) any agreement, document, or instrument to which Borrower is a party or by which Borrower or any of the assets or property of Borrower is bound.

5.1.4 Execution and Delivery and Binding Nature of Loan Documents . The Loan Documents have been duly executed and delivered by or on behalf of Borrower. The Loan Documents are legal, valid, and binding obligations of Borrower, enforceable in all material respects in accordance with their terms against Borrower, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization, or similar laws and by equitable principles of general application.

5.1.5 Legal Proceedings; Hearings, Inquiries, and Investigations . Except as previously disclosed to and approved by Lender, (i) no legal proceeding is pending or, to best knowledge of Borrower, threatened before any arbitrator, other private adjudicator, or Governmental Authority to which Borrower is a party or by which Borrower or any assets or property of Borrower may be bound or affected that if resolved adversely to Borrower could result in a Material Adverse Change, and (ii) no hearing, inquiry, or investigation relating to Borrower or any assets or property of Borrower is pending or, to the best knowledge of Borrower, threatened by any Governmental Authority that if resolved adversely to Borrower could result in a Material Adverse Change.

5.1.6 No Event of Default . No Event of Default or Unmatured Event of Default has occurred and is continuing.

5.1.7 Approvals and Permits; Assets and Property . Except as disclosed to Lender in writing prior to the date hereof, to the best knowledge of Borrower, (i) Borrower has all Approvals and Permits necessary for the development currently taking place at each Qualified Project and (ii) there are no facts or circumstances known to Borrower that would materially impair the ability of Borrower to obtain Approvals and Permits necessary for the future development of each Qualified Project or to otherwise continue the contemplated development of said Qualified Project. In the event that the foregoing representation and warranty shall cease to be true in all material respects with respect to a Qualified Project or portion thereof, such Qualified Project (or portion thereof, as the case may be) shall cease to be part of the Borrowing Base until such time as such representation and warranty shall become true in all material respects.

5.1.8 ERISA . Borrower is in compliance with ERISA. No Reportable Event or Prohibited Transaction (as defined in ERISA) or termination of any plan has occurred and no notice of termination has been filed with respect to any plan established or maintained by Borrower and subject to ERISA. Borrower has not incurred any material funding deficiency within the meaning of ERISA or any material liability to the Pension Benefit Guaranty Corporation in connection with any such plan established or maintained by Borrower.

5.1.9 Compliance with Law . Borrower has not received any notice of any material violations of any applicable laws, rules, or regulations of any Governmental Authority with respect to any Qualified Project or the development of said Qualified Project and Borrower is not aware of any facts or circumstances which would constitute or cause any such violation. If the foregoing representation and warranty shall cease to be true with respect to a Qualified Project (or portion thereof), such Qualified Project (or such portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until such time as such violation or facts or circumstances shall no longer exist.

5.1.10 Full Disclosure . All information in the loan application, financial statement, certificate, or other document and all information prepared and delivered by Borrower to Lender in obtaining the Commitment is correct and complete in all material respects, and there are no omissions therefrom that result in such information being incomplete, incorrect, or misleading in any material adverse respect as of the date thereof. To the best knowledge of Borrower, all information in any loan application, financial statement, certificate or other document prepared and delivered to Lender on behalf of Borrower by Persons other than Borrower or its Affiliates, and all other information prepared and delivered to Lender on behalf of Borrower or by Persons other than Borrower or its Affiliates in obtaining the Commitment is correct and complete in all material respects, and there are no omissions therefrom that result in any such information being incomplete, incorrect, or misleading in any material adverse respect as of the date thereof. There has been no Material Adverse Change as to Borrower or any Project since the date of such information. All financial statements heretofore delivered to Lender by Borrower were prepared in accordance with GAAP and accurately represent the financial conditions and results of operation of the subjects thereof as of the dates thereof and for the period covered thereby.

5.1.11 Use of Proceeds; Margin Stock . The proceeds of the Advances will be used by Borrower solely for the purposes specified in this Agreement. None of such proceeds will be used for the purpose of purchasing or carrying any “margin stock” as defined in Regulation U or G of the Board of Governors of the Federal Reserve System (12 C. F. R. Part 221 and 207), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a “purpose credit” within the meaning of such Regulation U or G. Borrower is not engaged in the business of extending credit for the purpose of purchasing, or carrying margin stock. Neither Borrower nor any Person acting on behalf of Borrower has taken or will take any action which might cause any Loan Documents to violate Regulation U or G or any other regulations of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934, or any rule or regulation thereunder, in each case as now in effect or as the same may hereafter be in effect. Borrower and Borrower’s subsidiaries own no “margin stock”.

5.1.12 Governmental Regulation . Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as any of the preceding have been amended), or any other law which regulates the incurring by Borrower of indebtedness, including but not limited to laws relating to common or contract carriers or the sale of electricity, gas, steam, water, or other public utility services.

5.1.13 Material Agreements; No Material Defaults . Borrower shall execute an assignment or assignments in favor of Lender of all of Borrower’s rights, title and interests in and to any and all material contracts, leases, permits, development agreements, covenants, restrictions, option agreements, purchase and sale agreements, instruments and other agreements requested by Lender for review relating to each of the Projects to be included as Qualified Projects under the Borrower Base (collectively “ Material Agreements ”) as required by Lender in its discretion. No event has occurred which, immediately or upon the expiration of applicable cure or grace periods, would constitute a default which in Lender’s reasonable opinion would have a Material Adverse Change in Borrower or any Project with respect to (i) the terms of any instrument evidencing or relating to any debt of Borrower related to any Qualified Project, (ii) any such contract, lease, permit, development agreement, covenant, restriction, option agreement, purchase and sale agreement, instruments and other agreement relating to the Qualified Projects, (iii) any statute, ordinance, law, judgment, order, writ, injunction, decree, or rule or regulation of any Governmental Authority or any determination or award of any arbitrator to which any Qualified Project may be bound, or (iv) any other instrument, agreement or document by which any Qualified Project is bound. If the foregoing representation and warranty shall cease to be true with respect to a Qualified Project or a portion thereof, such Qualified Project (or such portion thereof, as the case may be) shall cease to be part of the Borrowing Base until such time as such representation and warranty is once again true.

5.1.14 Title to Property . Borrower has good, sufficient and legal title to all properties and assets reflected in its most recent balance sheet delivered to Lender, except for assets disposed of in the ordinary course of business since the date of such balance sheet. The Property is free and clear of Liens and Encumbrances, except for Permitted Exceptions. Borrower is the sole owner of, and has good and marketable title to, the fee interest in each Qualified Project and all other real property described in the Deed of Trust encumbering the property included in said Qualified Project, free from any Liens and Encumbrances, excepting only Permitted Exceptions. If the foregoing representation and warranty shall cease to be true in all material respects with respect to a Qualified Project or a portion thereof, such Qualified Project (or such portion thereof, as the case may be) shall cease to be part of the Borrowing Base until such time as such representation and warranty is once again true in all material respects.

5.1.15 Payment of Taxes . All tax returns and reports of Borrower required to be filed by Borrower have been timely filed, and all taxes, assessments, fees and other governmental charges upon Borrower and upon its Projects which are due and payable have been paid prior to delinquency. Borrower knows of no proposed tax assessment against Borrower or any Qualified Project that would be material to the condition (financial or otherwise) of Borrower or said Qualified Project, and Borrower has not contracted with any Governmental Authority in connection with any such taxes. If the foregoing representation and warranty shall cease to be true with respect to a Qualified Project or a portion thereof, such Qualified Project (or such portion thereof, as the case may be) shall cease to be part of the Borrowing Base until such time as such representation and warranty is once again true.

5.1.16 No Condemnation . No condemnation proceedings or moratorium is pending, or to the best of Borrower’s knowledge, threatened against any Qualified Project or any portion thereof which would impair the use, occupancy, or full operation of said Qualified Project in any manner whatsoever. If the foregoing representation and warranty shall cease to be true with respect to a Qualified Project or a portion thereof, such Qualified Project (or such portion thereof, as the case may be) shall cease to be part of the Borrowing Base until such time as such representation and warranty is once again true in all material respects.

5.1.17 Borrowing Base . The classification of each item of property included in the Borrowing Base is true and correct. Notwithstanding anything contained in this Agreement, no portion of any Land may be included in the Borrowing Base other than as Lots Under Development or Developed Lots pursuant to the provisions of this Agreement.

Notwithstanding the foregoing, Lender agrees that before a Qualified Project or a portion thereof shall cease to be part of the Borrowing Base as a result of Borrower failing to comply with any of the representations and warranties set forth in this Article 5, Borrower shall have an opportunity to cure such matter within the applicable notice and cure periods set forth in Section 8.1.2 below.

5.2 Representations and Warranties Upon Requests for Advances . Each Draw Request shall be a representation and warranty by Borrower to Lender that the representations and warranties in Section 5 are correct and complete in all material respects as of the date the requested Advance except as otherwise disclosed by Borrower to Lender in writing prior to the date of such Draw Request.

5.3 Representations and Warranties Upon Delivery of Financial Statements, Documents, and Other Information . Each delivery by Borrower to Lender of financial statements, other documents, or information after the date of this Agreement (including, without limitation, documents and information delivered in obtaining an Advance) shall be a representation and warranty that such financial statements, other documents, and information are correct and complete (in accordance with GAAP) in all material respects, that there are no material omissions therefrom that result in such financial statements, other documents, or information being materially incomplete, incorrect, or misleading in any material respect as of the date thereof, and that such financial statements accurately present the financial condition and results of operations of Borrower as at the dates thereof in all material respects and for the periods covered thereby.

5.4 USA Patriot Act Notification . Borrower agrees to provide evidence of the identity of Borrower that Lender may request from time to time to permit Lender to verify the identity of Borrower or to otherwise comply with applicable governmental laws and regulations, including without limitation Section 326 of the USA Patriot Act of 2001, 31 U.S.C. 5318.

6. BORROWER AFFIRMATIVE COVENANTS . Until the Commitment terminates in full and the Obligations are paid and performed in full, Borrower agrees that, unless Lender otherwise agrees in writing in Lender’s absolute and sole discretion:

6.1 Limited Liability Company Existence . Borrower shall continue to be a limited liability company, validly existing under the laws of the State of Delaware and duly qualified to transact business in the State of California.

6.2 Books and Records; Access By Lender . Borrower shall maintain a standard, modern system of accounting (including without limitation a single, complete, and accurate set of books and records of its assets, business, financial condition, operations, property, prospects, and results of operations) in accordance with GAAP. Borrower shall also maintain complete and accurate records regarding the acquisition, development and construction of the Project, including, without limitation, all construction contracts, architectural contracts, engineering contracts, field and inspection reports, applications for payment, estimates and analyses regarding construction costs, names and addresses of all contractors and subcontractors performing work or providing materials or supplies with respect to the development and construction of the Project, invoices and bills of sale for all costs and expenses incurred by contractors and subcontractors in connection with the development and construction of the Project, payment, performance and other surety bonds (if applicable), releases and waivers of lien for all such work performed and materials supplied, evidence of completion of all inspections required by any Governmental Authority, certificates of substantial completion, notices of completion, surveys, as-built plans, Approvals and Permits, Purchase Contracts, escrow instructions, records regarding all sales of all or portions of the Project, and all other documents and instruments relating to the acquisition, development, construction and/or sale of the Project or portions thereof. During business hours Borrower shall give representatives of Lender access to all assets, property, books, records, and documents of Borrower and will permit such representatives to inspect such assets and property and to audit, copy, examine, and make excerpts from such books, records, and documents. Upon request by Lender, Borrower shall also provide Lender with copies of the reports, documents, agreements, and other instruments described in this Section 6.2.

6.3 Special Covenants Relating to Collateral .

6.3.1 Defense of Title . Borrower shall defend the Collateral, the title and interest therein of Borrower represented and warranted in the Deed of Trust, and the legality, validity, binding nature, and enforceability of each Lien and Encumbrance contained in the Deed of Trust and the first priority of the Deed of Trust against all matters, including, without limitation: (a) any attachment, levy, or other seizure by legal process or otherwise of any or all Collateral; (b) except for Permitted Exceptions, any Lien or Encumbrance or claim thereof on any or all Collateral; (c) any attempt to foreclose, conduct a trustee’s sale, or otherwise realize upon any or all

Collateral under any Lien or Encumbrance, regardless of whether a Permitted Exception and regardless of whether junior or senior to the Deed of Trust; and (d) any claim questioning the legality, validity, binding nature, enforceability, or priority of the Deed of Trust. Borrower shall notify Lender promptly in writing of any of the foregoing and will provide such information with respect thereto as Lender may from time to time request. During the period of time that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then said Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply.

6.3.2 Further Assurances . Borrower shall promptly execute, acknowledge, and deliver such additional agreements, documents, and instruments and do or cause to be done such other acts as Lender may reasonably request from time to time to better assure, preserve, protect, and perfect the interest of Lender in the Collateral and the rights and remedies of Lender under the Loan Documents. Without limiting the foregoing, to the extent that Lender determines from time to time that additional deeds of trust, amendments to deeds of trust, financing statements, subordinations, and other documents are required in order to perfect all Liens and Encumbrances in favor of Lender, and cause all Collateral encumbered by any of the deeds of trust to be subject only to Permitted Exceptions, Borrower shall execute and deliver such documents, instruments and other agreements as Lender may reasonably request.

6.3.3 Plats, Annexations and Approvals . For each Qualified Project to be included in the Borrowing Base:

(a) Each plat or map (whether tentative or final) with respect to any portion of any Qualified Project shall comply with all Requirements and shall be satisfactory in form and substance to Lender. Prior to evaluation by Lender of the plat or map for approval, Borrower shall deliver to Lender such certifications, maps, surveys, and other documents and information as Lender requires. Prior to the recordation of any plat or map by Borrower, Borrower shall deliver to Lender such title insurance endorsements insuring the continued priority of the Deed of Trust after recording of the plat or map as Lender may require. Borrower agrees to take such steps as Lender may require in (i) either re-recording the Deed of Trust or amending the Deed of Trust to reflect the new plat legal description, and (ii) obtaining an endorsement to the Title Policy to amend the legal description therein.

(b) Borrower shall obtain and, upon request, provide Lender with, evidence of: (i) appropriate zoning for the use and occupancy of each Qualified Project; (ii) all necessary Approvals and Permits of Governmental Authorities and other third parties necessary to permit the development and sale of each Qualified Project, including without limitation all applicable public reports, architectural committee approvals and other approvals required pursuant to any applicable restrictive covenants; (iii) all Approvals and Permits necessary to commence, carry out and complete construction; and (iv) evidence of payment of all fees and other required amounts for such Approvals and Permits.

(c) At Lender’s request, Borrower shall provide Lender with true and correct copies of all documents and instruments relating to proposed easements, boundary line adjustments, covenants, conditions and restrictions and other similar matters affecting title to each Qualified Project in connection with the development thereof, together with all surveys, plats, contracts, and other information requested by Lender in connection therewith. Such easements, boundary line adjustments, covenants, conditions and restrictions and other matters shall not be entered into by Borrower unless consented to in writing by Lender, which consent shall not be unreasonably withheld by Lender so long as they are entered into in the ordinary course of developing each Qualified Project. If such consent is granted by Lender, Lender will also enter into such subordinations and releases as may be appropriate in connection with such easements, boundary line adjustments, and covenants, conditions and restrictions, provided that such subordinations are in form reasonably satisfactory to Lender and, in connection with any such releases, Borrower has satisfied the conditions precedent set forth in Section 3.2.1 above.

In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such noncompliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then said Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply.

6.3.4 Utilities . Borrower shall provide or cause to be provided all telephone service, electric power, storm sewer, sanitary sewer and water facilities for each Qualified Project, and such utilities will be adequate to serve said Project. No condition will exist to affect Borrower’s right to connect into and have adequate use of such utilities, except for the payment of normal connection charges or tap charges and except for the payment of subsequent charges for such services to the utility supplier. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then said Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply.

6.3.5 Plans and Specifications . Borrower shall be the sole owner of all Plans and Specifications for the Improvements for each Qualified Project or, to the extent that Borrower is not the sole owner of such Plans and Specifications, Borrower shall have the unconditional right to use such Plans and Specifications in connection with the construction of the Improvements for said Qualified Project. Lender will not be restricted in any way in use of such Plans and Specifications from and after an Event of Default in connection with the construction of the Improvements and the exercise of Lender’s other rights and remedies, and Borrower shall obtain all consents and authorizations necessary for the use of such Plans and Specifications to Lender. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then said Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply.

6.3.6 Compliance with Permitted Exceptions . Borrower shall keep and maintain in full force and effect all restrictive covenants, development agreements, easements and other agreements with Governmental Authorities and other Persons that are necessary or desirable for the use, occupancy, and sale of each Qualified Project. Borrower shall not default in any material respect under any such covenants, development agreements, easements and other agreements and will diligently enforce its rights thereunder. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such noncompliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then said Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply.

6.3.7 Project Development . For each Qualified Project:

(a) Borrower shall at all times maintain and operate the Project and use its best efforts to market each Qualified Project. Regardless of whether Advances are available, Borrower shall pay all costs and expenses arising in connection with the management, operation, development and sale of said Qualified Project. The Improvements for each Qualified Project shall be constructed and developed in

substantial conformity with the Plans and Specifications therefor, and in strict conformity with all applicable laws, rules and regulations of all Governmental Authorities with jurisdiction over said Qualified Project and shall be contained wholly within the lot lines of the Land included within the Qualified Project and will not encroach on any other real estate, easements, building lines or setback requirements. Within fifteen (15) days after Borrower receives notice or knowledge thereof, Borrower shall proceed with diligence to correct any material departure from applicable plans and specifications and any departure from applicable laws, rules and regulations of any Governmental Authority with jurisdiction over said Qualified Project. The making of Advances shall not constitute a waiver of Lender’s right to require compliance with this covenant with respect to any such defect or departure from plans and specifications or applicable laws, rules and regulations.

(b) With respect to those portions of each Qualified Project which are to be open space” or otherwise constitute streets and other common areas to be dedicated and transferred to homeowners’ associations or other Governmental Authorities with jurisdiction over said Qualified Project, and are not otherwise included within the portions of the Land to be developed by Borrower, Borrower shall take such actions as may be necessary to cause such dedications to be made promptly and in accordance with applicable covenants, conditions and restrictions and laws, rules and regulations. Lender may, at its sole option, notify Borrower that such transfers and dedications are required by Lender, in which case Borrower shall cause such transfers and dedications to occur within thirty (30) days.

6.3.8 Title Policy Endorsements . If required by Lender from time to time in connection with the approvals to be granted by Lender pursuant to the Loan Documents, Borrower shall provide such continuation endorsements, date down endorsements, survey endorsements and other endorsements to each Title Policy for each Qualified Project, in form and substance satisfactory to Lender, as Lender determines necessary to insure the priority of each said Deed of Trust as a valid first lien on the applicable Collateral, subject only to Permitted Exceptions. Borrower agrees to furnish to the Title Company such surveys and other documents and information as Lender or the Title Company may require for the Title Company to issue such endorsements. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then said Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply., then said Project shall cease to be a Qualified Project hereunder.

6.3.9 Improvement Districts . For any Qualified Project, without obtaining the prior written consent of Lender, Borrower shall not consent to, or vote in favor of, the inclusion of all or any part of the Collateral in any improvement district, any “ Mello Roos ” district (for Qualified Projects in California), special assessment district or similar district. Borrower shall give immediate notice to Lender of any notification or advice that Borrower may receive from any municipality or other third party of any intent or proposal to include all or any part of the Collateral in an improvement, assessment or other district. Upon prior written notice to Borrower, Lender shall have the right to file a written objection to the inclusion of all or any part of the Collateral in an improvement, assessment or other district, either in its own name or in the name of Borrower, and to appear at, and participate in, any hearing with respect to the formation of any such district. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety

(90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then said Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply.

6.3.10 Appraisals . Lender shall have the right to order Appraisals of each Qualified Project and all other Collateral from time to time in Lender’s discretion. Each Appraisal is subject to review and approval by Lender. With respect to each Appraisal that Lender orders, whether as a result of applicable laws, rules, and regulations of any Governmental Authority or as a result of Lender’s general policies and procedures applicable to loans secured by real estate or for any other reason, Borrower agrees upon demand by Lender to pay to Lender the cost and expense incurred by Lender for such Appraisals and a fee prescribed by Lender for review of each Appraisal by Lender, subject to the limitations set forth in Section 2.4.6 above.

6.4 Information and Statements . Borrower shall furnish or cause to be furnished to Lender in connection with each and every Loan made hereunder:


Reporting Party	Required Statement	To be Received by:

1. Borrower	Annual Financial Statement (audited by an independent certified public accountant and certified by the party submitting the statement)	Within 90 days of each fiscal year end

2. Borrower	Quarterly Financial Statement (certified by the party submitting the statement)	Within 60 days of the end of each quarterly period

3. Borrower	Annual Business Plan	Within 60 days of the end of each fiscal year end

4. Borrower	Monthly Borrowing Base Certificate and Monthly Sales Report	Within 25 days of each Calendar Month end (for the Borrowing Base Certificate); and within 20 days of each Calendar Month end (for the Monthly Sales Report)

5. Borrower	Annual and Quarterly Compliance Certificates	To be provided with the annual and quarterly financial statements within the time periods described above

6.4.1 Monthly Sales Reports . As soon as available and in any event within the time period set forth in the chart above, Borrower shall deliver to Lender a report of all Home and Lots sales and closings during the previous Calendar Month and on a cumulative basis since inception for each Project financed hereunder, which report shall be prepared and delivered by Borrower, shall be in form and substance satisfactory to Lender, shall be certified as true and correct on behalf of Borrower by the chief financial officer of Borrower and, upon request of Lender, shall be supported by settlement statements relating to each Lot or Home sale.

6.4.2 Quarterly Financial Statements . As soon as available and in any event within the time period set forth in the chart above, copies of the balance sheet of Borrower as of the end of such quarter (including full detail of all assets and Borrowing Base availability computations), statements of income and retained earnings and a statement of cash flow of Borrower for such month, prepared in accordance with GAAP, and signed and certified as true and correct on behalf of Borrower by the chief financial officer of Borrower.

6.4.3 Annual Financial Statements . As soon as available and in any event within the time period set forth in the chart above, annual consolidated, unqualified financial statements of Borrower, including copies of the balance sheet of Borrower, internally-generated consolidating financial statements, and statements of income and retained earnings and a statement of cash flow of Borrower for such fiscal year, in each case setting

forth in comparative form the figures for the preceding fiscal year of Borrower, all in reasonable detail and prepared in accordance with GAAP, audited by independent certified public accountants satisfactory to Lender and accompanied by an unqualified opinion of such auditors. Such audit shall also cover and include the information contained in the Borrowing Base Certificates delivered pursuant to Section 6.4.6. In the event that the annual financial statements provided to Lender hereunder are not accompanied by an unqualified opinion of such auditors, then Borrower shall provide such management letters as required by Lender in its discretion.

6.4.4 Annual Business Plan . As soon as available and in any event within the time period set forth in the chart above, Borrower shall provide Lender with a projection for the next twenty-four (24) Calendar Months of cash flow and Project Revenues for Borrower and all Projects financed hereunder.

6.4.5 Compliance Certificates . Together with each of the financial statements required pursuant to Sections 6.4.1-6.4.4, a statement in form and substance satisfactory to Lender, certified by the chief financial officer of Borrower that Borrower is in compliance with all covenants, terms, and conditions applicable to Borrower under or pursuant to the Loan Documents and any other Debt owing by Borrower to any Person, and disclosing any noncompliance therewith and describing the status of Borrower’s actions to correct such noncompliance, if applicable.

6.4.6 Monthly Borrowing Base Certificate . By the twenty-fifth (25th) day of each Calendar Month, a current Borrowing Base Certificate reflecting the Property included the Borrowing Base as of the last day of the immediately preceding Calendar Month.

6.4.7 Other Items and Information . Such other information concerning Borrower, the Project, and the assets, business, financial condition, operations, property, prospects, and results of operations of Borrower, as well as the financial statements and other information for prospective purchasers for a Bulk Lot Sale, as Lender reasonably requests from time to time. In this regard, promptly upon request of Lender, Borrower shall deliver to Lender counterparts and/or conditional assignments as security of any and all construction contracts, receipted invoices, bills of sale, statements, conveyances, and other agreements, documents, and instruments of any nature relating to the Project or under which Borrower claims title to any materials or supplies used or to be used in the Project. Also, in this regard, promptly upon request of Lender, Borrower shall deliver to Lender a complete list of all contractors, subcontractors, material suppliers, other vendors, artisans, and laborers performing work or services or providing materials or supplies for the Project.

6.5 Law; Judgments; Material Agreements; Approvals and Permits . Borrower shall comply with all laws, ordinances, regulations, and rules (federal, state, and local) and all judgments, orders, and decrees of any arbitrator, other private adjudicator, or Governmental Authority relating to Borrower, the Projects, or the other assets, business, operations, or property of Borrower (but only if such non-compliance in connection with Borrower’s other assets, business, operations or property results in a Material Adverse Change). Borrower shall comply with all material agreements, documents, and instruments to which Borrower is a party and which concern the Projects. Borrower shall not cancel or terminate any such agreements, documents or instruments if to do so could result in a Material Adverse Change. Borrower shall comply with all Requirements for the Projects (including, without limitation, as applicable, requirements of the Federal Housing Administration and the Veterans Administration) and all conditions and requirements of all Approvals and Permits for the Projects. Borrower shall obtain and maintain in effect from time to time all Approvals and Permits required for the development and marketing of the Project and the business activities and operations then being conducted by Borrower. Borrower shall immediately provide Lender with written notice and explanation of any litigation involving Borrower in which the amount in dispute exceeds One Million Dollars ($1,000,000.00). In the event of any dispute that, in the good faith opinion of Lender, could result in a Material Adverse Change or the fulfillment of any condition precedent or covenant herein, Lender may agree to make Advances for the account of Borrower without prejudice to Borrower’s rights, if any, to recover such funds from the party to whom paid. Such agreement or agreements may take any form that Lender in its reasonable discretion deems proper, including, without limitation, agreements to indemnify a title insurer against possible assertion of lien claims and agreements to pay disputed amounts to contractors in the event Borrower is unable or unwilling to pay the same. All sums paid or agreed to be paid pursuant to such agreement shall be for the account of Borrower and shall be charged as an Advance.

6.6 Taxes and Other Debt . Borrower shall pay and discharge (a) before delinquency all taxes, assessments, and governmental charges or levies imposed upon it, upon its income or profits, or upon any Projects, and (b) when due all lawful claims (including, without limitation, claims for labor, materials, and supplies), which, if unpaid, might become a Lien or Encumbrance upon any Project.

6.7 Assets and Property . Borrower shall maintain, keep, and preserve all of its assets and property (tangible and intangible) for the Projects necessary or useful in the proper conduct of its business and operations in good working order and condition, ordinary wear and tear excepted. Borrower shall promptly obtain and maintain, from time to time at its own expense, all Approvals and Permits as may be required to enable it to comply with its obligations hereunder and under the other Loan Documents.

6.8 Insurance . Borrower shall obtain and maintain the following insurance and pay all premiums related thereto as and when they become due in connection with each and every Project financed hereunder:

6.8.1 Property . Insurance of all Collateral against damage or loss by fire, lightning, and other perils, on an all risks basis, such coverage to be in an amount not less than the full insurable value of such Collateral on a replacement cost basis. Such policy will be written on an all risks basis,’ with no coinsurance requirement, and will contain a provision granting the insured permission to complete and/or occupy the Project.

6.8.2 Liability . Commercial general liability insurance protecting Borrower and Lender against loss or losses from liability imposed by law or assumed in any agreement, document, or instrument and arising from bodily injury, death, or property damage with a limit of liability of not less than One Million Dollars ($1,000,000.00) per occurrence and Two Million Dollars ($2,000,000.00) general aggregate. Also, “umbrella” excess liability insurance in an amount not less than Ten Million Dollars ($10,000,000.00) or such greater amount as Lender may reasonably require. Such policies must be written on an occurrence basis so as to provide blanket contractual liability, broad form property damage coverage, and coverage for products and completed operations. If required by Lender, Borrower shall also obtain and maintain business motor vehicle liability insurance protecting Borrower and Lender against loss or losses from liability relating to motor vehicles owned, non-owned, or hired and used by Borrower or its agents and employees, with a limit of liability of not less than One Million Dollars ($1,000,000.00) (combined single limit for personal injury (including bodily injury and death) and property damage). Borrower acknowledges that Borrower has been advised by Lender of, and agrees that the requirements of this Section 6.8.2 are in compliance with, the following legal limitation regarding hazard insurance coverage for the Project pursuant to Civil Code Section 2955.5:

“No lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real property, to provide hazard insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property.”

6.8.3 Flood . A policy or policies of flood insurance in the maximum amount of flood insurance available with respect to the Project under the Flood Disaster Protection Act of 1973, as amended. This requirement will be waived with respect to portions of the Project upon presentation of evidence satisfactory to Lender that no such portion of the Project in question is or will be located within an area identified by the U.S. Department of Housing and Urban Development as having special flood hazards.

6.8.4 Worker’s Compensation . Worker’s compensation insurance disability benefits insurance and such other forms of insurance as required by law covering loss resulting from injury, sickness, disability, or death of employees of Borrower.

6.8.5 Contractors . During the construction of the Improvements, any and all contractors and subcontractors will be required to carry liability insurance of the type and providing the minimum limits set forth below:

(a) Worker’s Compensation . Worker’s compensation insurance, disability benefits insurance and each other form of insurance which such contractor is required by law to provide,

covering loss resulting from injury, sickness, disability or death of employees of the contractor who are located on or assigned to the construction of the Improvements.

(b) Liability . Comprehensive general liability insurance coverage for:

Property and Operations

Products and Completed Operations

Contractual Liability

Personal Injury Liability

Broad Form Property Damage (including completed operations)

Explosion Hazard

Collapse Hazard

Underground Property Damage Hazard

Such policy will have a limit of liability of not less than One Million Dollars ($1,000,000.00) (combined single limit for personal injury, including bodily injury or death, and property damage).

6.8.6 Additional Insurance . Such other policies of insurance as Lender may reasonably request in writing, provided, Lender agrees that it will not require earthquake insurance. All policies for required insurance will be in form and substance satisfactory to Lender in its absolute and sole discretion. All required insurance will be procured and maintained in financially sound and generally recognized responsible insurance companies selected by Borrower and approved by Lender. Deductibles under insurance policies required pursuant to Section 6.8 will not exceed the amounts approved from time to time by Lender. Such companies must be authorized to write such insurance in the states in which the Collateral is located. Each company issuing the policies shall be rated “A-” (or A minus) or better by A.M. Best Co., in Best’s Key Guide, or such other rating as may be acceptable to Lender. All property policies evidencing required insurance will name Lender, as first mortgagee and loss payee. All liability policies evidencing required insurance will name Lender as additional insured. The policies will not be cancelable as to the interests of Lender due to the acts of Borrower. The policies will provide for at least thirty (30) days prior written notice of the cancellation or modification thereof to be given to Lender. A certified copy of each insurance policy or, if acceptable to Lender-in its absolute and sole discretion, certificates of insurance evidencing that such insurance is in full force and effect, will be delivered to Lender, together with proof of the payment of the premiums thereof. Prior to the expiration of each such policy, Borrower shall furnish Lender evidence that such policy has been renewed or replaced in the form of the original or a certified copy of the renewal or replacement policy or, if acceptable to Lender in its absolute and sole discretion, a certificate reciting that there is in full force and effect, with a term covering at least the next succeeding calendar year, insurance of the types and in the amounts required in Section 6.8.

6.9 Commencement and Completion . Borrower shall cause construction of the Improvements to be prosecuted and completed in good faith, with due diligence, and without delay, subject to any Force Majeure Events; provided, however, that in all events all Improvements shall be constructed and completed prior to the applicable Lot Advance Maturity Date or applicable Home Advance Maturity Date for the subject Lot or Home for which said Improvements are being constructed. Upon demand by Lender, Borrower shall correct any defect in the Improvements or any material departure from any applicable Requirements or, to the extent not theretofore approved in writing by Lender, the applicable plans and specifications. Borrower understands and agrees that the inspection of the Improvements on behalf of Lender, the review by Lender or others acting on behalf of Lender of Draw Requests and related documents and information, the making of Advances by Lender, and any other actions by Lender will be for the sole benefit of Lender and will not be a waiver of the right to require compliance with this Section 6.9. In the event that construction of any Improvements for any Qualified Project is abandoned or halted prior to completion for any period of fifteen (15) consecutive days for any cause not a Force Majeure Event (or for any period up to, in the aggregate, ninety (90) consecutive days as a result of one or more Force Majeure Events) or otherwise beyond the reasonable control of Borrower, Contractor or any subcontractor, or not completed by the applicable maturity date, then said Qualified Project shall cease to be part of the Borrowing Base until a cure thereof shall have occurred.

6.10 Rights of Inspection; Agency .

6.10.1 Generally . Lender and its respective agents, employees, and representatives will have the right, at the sole cost and expense of Borrower, at any time and from time to time to enter upon the Collateral in order to inspect the Collateral and all aspects thereof, including, without limitation, in order to determine if Collateral is property classified for Borrowing Base purposes. All inspections by Lender are for the sole purpose of protecting the security of Lender and are not to be construed as a representation by Lender that there has been compliance with applicable plans and specifications, the applicable Requirements, or that the Project is free of defects in materials or workmanship. Borrower may make or cause to be made such other independent inspections as Borrower may desire for its own protection. Based on such inspections, Lender may adjust the Borrowing Base and other calculations pursuant to this Agreement.

6.10.2 Inspector(s) . Without limiting the rights of Lender pursuant to Section 6.10, Lender may employ outside inspectors to perform some or all of the inspections described in Section 6.10 and may also elect to have Lender’s own employees perform some or all of such inspection duties and review the reports of outside inspectors.

6.11 Verification of Costs . Lender will have the right at any time and from time to time to review and verify all Hard Costs and Soft Costs incurred by Borrower.

6.12 Use of Proceeds . Borrower shall use proceeds of Advances only for the purposes described herein.

6.13 Costs and Expenses of Borrower’s Performance of Covenants and Satisfaction of Conditions . Borrower shall perform all of its obligations and satisfy all conditions under the Loan Documents at its sole cost and expense.

6.14 Notification . Borrower shall promptly disclose to Lender the occurrence of: (a) any Material Adverse Change; (b) any change in the Requirements of any Governmental Authority that would materially and adversely affect Borrower’s ability to develop any Project; (c) any action or proceeding which is instituted by or against Borrower or any Project in any Federal or state court or before any Governmental Authority, federal, state or local, foreign or domestic, or any such actions or proceedings are threatened against Borrower or any Project which, in any such case, if adversely determined, would cause a Material Adverse Change; and (d) the occurrence of any Event of Default or Unmatured Event of Default.

6.15 Financial Covenants . Financial covenants described in this Section 6.15, together with all other financial covenants and restrictions set forth in this Agreement shall be monitored quarterly by Lender upon receipt of the financial statements to be provided hereunder.


Covenant Party	Covenant Type	Covenant Requirement
Borrower	Maximum Total Liabilities-to-Tangible Net Worth Ratio	Not in excess of 1.5:1.0

Borrower	Minimum Tangible Net Worth	Not less than the sum of $15,000,000.00 plus 50% of all annual Net Income hereafter realized plus 50% of additional future Capital Contributions

Borrower	Minimum Liquidity	Not less than the greater of (i) $5,000,000.00 or (ii) 10% of Total Liabilities

6.15.1 No Other Debt . Except as approved by Lender, there shall be no third party Debt on the Property or in any Qualified Project, other than trade debt. Lender shall have the right, but not the obligation, to declare a default under the Loan if there are any material uncured monetary or non-monetary defaults on any and all trade debt obligations (including without limitation any other loans by Lender) of Borrower, which in Lender’s reasonable judgment will materially impair the ability of Borrower to perform under the terms of this Agreement, the Note or the Security Documents.

6.15.2 No Other Loan Defaults . Borrower shall not be in default under any “ Other Loan .” For purposes of this Section 6.15.2, an “ Other Loan ” shall mean any loan by Lender, or any affiliate or subsidiary of Lender, that is made to Borrower. It is the expressed intent of Borrower to cross-default this Loan with any Other Loan, such that (a) any Event of Default under this Loan shall constitute a default under each and every Other Loan, and (b) any default under each and every Other Loan shall constitute an Event of Default under this Loan.

6.16 Books and Records; Names; Place of Business and Chief Executive Office . Borrower shall give Lender thirty (30) days prior written notice of any change in the location of its books and records or its sole place of business or chief executive office.

6.17 Proceeds of Purchase Contracts .

6.17.1 After Event of Default or Unmatured Event of Default . From and after the occurrence and during the continuation of an Event of Default or Unmatured Event of Default, all payments of Net Sales Proceeds under Purchase Contracts shall be paid directly to Lender to be applied by Lender to the payment of the Obligations in such order as Lender may determine in its sole and absolute discretion. Absent the occurrence and continuation of an Event of Default or Unmatured Event of Default, such amounts required to be paid to Lender shall be applied (i) first to pay amounts due pursuant to Section 3.2.2, and (ii) then the balance shall be deposited with Lender.

6.17.2 Payments to Lender . If Borrower collects or receives any amounts payable to Lender pursuant to this Section 6.17, Borrower shall forthwith, upon receipt, transmit and deliver to Lender in the form received all cash, checks, drafts, chattel paper, and other instruments or writings for the payment of money (endorsed, where required, so that such items may be collected by Lender). Any such proceeds which may be so received by Borrower will not be commingled with any other of Borrower’s funds or property, but will be held separate and apart from Borrower’s own funds or property and upon express trust for Lender until delivery is made to Lender.

7. BORROWER NEGATIVE COVENANTS . Until the Commitment terminates in full and the Obligations are paid and performed in full, Borrower agrees that, unless Lender otherwise agrees in writing in Lender’s absolute and sole discretion:

7.1 Corporate Restrictions . Borrower will not issue any capital stock in Borrower or grant any option, right of first refusal, warrant, or other right to purchase any capital stock in Borrower. Borrower will not be dissolved or liquidated. Borrower will not amend, modify, restate, supplement, or terminate any of its Organizational Documents, Borrower will not consolidate or merge with any corporation, any other limited partnership, any limited liability company, or any other Person.

7.2 Name, Fiscal Year, Accounting Method, and Lines of Business . Borrower will not change its name, fiscal year, or method of accounting. Borrower will not directly engage in any business other than the lines of business in which Borrower is engaged on the date of this Agreement, discontinue any existing lines of business that are material to the business or operations of Borrower, or substantially alter its method of doing business.

7.3 Change in Ownership . Borrower will not suffer to occur or exist, whether occurring voluntarily or involuntarily, any change in, or Lien or Encumbrance with respect to any membership interests in Borrower, as long as the foregoing shall in no way restrict (i) any transfer of membership interests between the current members of Borrower or their affiliates (provided that no such transfer shall result in any change in the management of Borrower), or (ii) any transfer of any membership interests in Borrower resulting from the death or disability of an

individual member; provided, however, that any change that would result in less than two of the following persons acting as executive officers of Borrower – Douglas F. Bauer, Thomas J. Mitchell and/or Michael D. Grubbs – shall not be permitted without the prior consent of Lender at its sole discretion).

7.4 Loans . Borrower will not directly or indirectly in relation to any Qualified Projects (i) make any loan or advance to any other Person other than purchase money loans made in the ordinary course of business and advances made in the ordinary course of constructing the infrastructure for said Project to Persons engaged in such construction, purchase or otherwise acquire any capital stock or any securities of any other Person, any limited liability company interest or partnership interest in any other person, or any warrants or other options or rights to acquire any capital stock or securities of any other person or any limited liability company interest or partnership interest in any other Person, (ii) make any Capital Contribution to any other Person, (iii) otherwise invest in or acquire any interest in any other Person or establish any subsidiaries, (iv) guarantee or otherwise become obligated in respect of any indebtedness of any other Person, or (v) subordinate any claim against or obligation of any other Person to Borrower to any other indebtedness of such Person. The restrictions set forth in this Section 7.4 apply only to Qualified Projects, and shall not apply to any other projects in which Borrower may be directly or indirectly involved.

7.5 Liens and Encumbrances . Except for (i) Permitted Exceptions, (ii) Liens and Encumbrances securing this Loan, and (iii) involuntary Liens and Encumbrances being contested in good faith and through appropriate proceedings, and otherwise in accordance with the applicable conditions of the Loan Documents, Borrower shall not grant or suffer to exist any Lien or Encumbrance upon any Property.

7.6 Indebtedness . Borrower shall not assume, create, incur, or permit to exist any Debt for any Property, except (i) the Obligations, and (ii) trade obligations and normal accruals in the ordinary course of business not yet due and payable. Borrower shall not assume, create, incur, or permit to exist any contingent liabilities, including, without limitation, contingent reimbursement obligations under letters of credit other than the Letters of Credit; provided, however, that Borrower may incur and permit to exist contingent liabilities resulting from the issuance of payment and performance bonds related to construction of the Improvements.

7.7 Acquisition of Assets . Borrower shall not acquire by purchase, lease or otherwise all or substantially all the assets of any other person, if to do so would materially affect its business or operations.

8. EVENTS OF DEFAULT AND REMEDIES .

8.1 Events of Default . The occurrence of any one (1) or more of the following shall constitute an Event of Default under this Agreement:

8.1.1 Failure by Borrower to pay any monetary amount when due under any Loan Document and the expiration of ten (10) days after written notice of such failure by Lender to Borrower.

8.1.2 Failure by Borrower to perform obligation not involving the payment of money, or to comply with any other term or condition applicable to Borrower under any Loan Document, and the expiration of thirty (30) days after written notice of such failure by Lender to Borrower, provided that if Borrower cannot reasonably cure such failure within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such failure provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure.

8.1.3 Any representation or warranty by Borrower in any Loan Document is materially false, incorrect, or misleading as of the date made, provided, if Borrower did not knowingly make such misrepresentation, Borrower shall have the opportunity to cure such matter within the applicable notice and cure periods set forth in Section 8.1.2 above.

8.1.4 Borrower (i) is unable or admits in writing its inability to pay its monetary obligations as they become due, (ii) makes a general assignment for the benefit of creditors, or (iii) applies for, consents to or

acquiesces in the appointment of a trustee, receiver or other custodian for itself or its property or any part thereof, or in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for Borrower, or the property of Borrower or any part thereof, and such appointment is not discharged within sixty (60) days.

8.1.5 Commencement of any case under the Bankruptcy Code, Title 11 of the United States Code or commencement of any other bankruptcy arrangement, reorganization, receivership, custodianship or similar proceeding under any federal, state or foreign law by or against Borrower, and such case in not discharged within sixty (60) days of filing.

8.1.6 Borrower fails to pay when due (after the expiration of any applicable notice and cure period) any monetary obligation (other than the Loan) for the Property or the Project, whether such obligation be direct or contingent, to any person in excess of Five Hundred Thousand Dollars ($500,000.00), provided that Borrower may in good faith contest any such monetary obligation by appropriate administrative or judicial proceedings as long as (i) said contesting party has, in Lender’s judgment, a reasonable basis for such contest, (ii) said contesting party pays when due any portion of such monetary obligation that said party does not contest, (iii) said contesting party’s contest will not result in or pose any risk of the seizure, sale or imposition of a lien upon the Property or the Project or any portion thereof, or said contesting party has posted appropriate lien release bonds as permitted by applicable law in order to cause any such lien to be released from the Property or the Project, (iv) said contesting party delivers to Lender such bond or other security as Lender may require in connection with such contest, (v) said contesting party at all times prosecutes such contest with due diligence, and (vi) said contesting party pays, promptly following a determination of the amount of such monetary obligation due and owing by Borrower. In the event that said contesting party does not make, promptly following a determination of the amount of such monetary obligation due and owing by said contesting party, any payment required to be made pursuant to clause (vi) of the preceding sentence, an Event of Default shall have occurred and Lender may draw or realize upon any bond or other security delivered to Lender in connection with the contest by Borrower, in order to make such payments.

8.1.7 Any litigation or proceeding that, in Lender’s reasonable judgment if determined adversely to Borrower, would constitute a Material Adverse Change on Borrower or any Project, is commenced before any Governmental Authority against or affecting Borrower, or the Project, and such litigation or proceeding is not defended diligently and in good faith by Borrower or is not discharged within sixty (60) days of filing.

8.1.8 A final judgment or decree for monetary damages or a monetary fine or penalty (not subject to appeal or as to which the time for appeal has expired) for any Project is entered against Borrower by any Governmental Authority, which together with the aggregate amount of all other such judgments, decrees, fines and penalties against Borrower that remain unpaid or that have not been discharged or stayed, exceeds One Million Dollars ($1,000,000.00) or would otherwise in Lender’s reasonable judgment constitute a Material Adverse Change on Borrower or any Project, and such judgment, decree, fine or penalty is not paid, discharged or stayed within thirty (30) days after the entry thereof.

8.1.9 Commencement of any action or proceeding which seeks as one of its remedies the dissolution of Borrower, and such action is not discharged within sixty (60) days of filing.

8.1.10 All or any part of Borrower’s interest in any Project is attached, levied upon or otherwise seized by legal process, and such attachment, levy or seizure is not quashed, stayed or released within thirty (30) days of the date thereof.

8.1.11 The occurrence of any prohibited transfer under Section 2.9 of any Deed of Trust, unless prior to such transfer the holder of the Note has delivered to Borrower the written consent of such holder to such transfer.

8.1.12 The occurrence of any Event of Default, as such term is defined in any other Loan Document.

8.1.13 If Borrower, at any time, ceases to manage the Projects financed hereunder.

8.1.14 Any Governmental Authority with jurisdiction over the Property or any Project orders or requires that construction of any Improvements be stopped, in whole or in part, or any required approval, license or permit is withdrawn or suspended, and the order, requirement, withdrawal or suspension remains in effect for a period of thirty (30) days, then the Qualified Project or Property to which the order, requirement, withdrawal or suspension relates shall not be a part of the Borrowing Base until such order, requirement, withdrawal or suspension is no longer in effect.

8.1.15 Failure to deposit with Lender in cash or cash equivalents, as required herein, the amount necessary to put the Loan “ in balance ” (as required pursuant to Sections 2.1.6(c), 2.2.3(d), 2.3.4 and 2.4.5 above) within ten (10) days after Lender’s notice to Borrower that the Loan is not “ in balance ,” or any other failure to deposit the amount(s) necessary and required herein within ten (10) days after the date such amounts are required to be deposited.

8.2 Rights and Remedies of Lender .

8.2.1 Notwithstanding any provision to the contrary herein or any of the other Loan Documents, during the continuance of any Event of Default under this Agreement, or during the continuance of an Event of Default under any of the other Loan Documents: (i) Lender’s obligation to make further disbursements of the Loan shall abate; and (ii) if the Event of Default shall not be cured within the applicable notice and cure periods, then Lender shall, at its option, have the remedies provided in -the Loan Document breached by Borrower, including, without limitation, the option to declare all outstanding indebtedness to be immediately due and payable without presentment, demand, protest or notice of any kind, and the following remedies: Lender’s obligation to make further disbursements to Borrower shall terminate; Lender may, at its option, apply any of Borrower’s funds in its possession to the outstanding indebtedness under the Note whether or not such indebtedness is then due; Lender may exercise all rights and remedies available to it under any or all of the Loan Documents; and Lender shall have the right to cause an independent contractor selected by Lender to enter into possession of the Property and to perform any and all work and labor necessary for the completion of the Project substantially in accordance with the Plans and Specifications and to perform Borrower’s obligations under this Agreement. All sums expended by Lender for such purposes shall be deemed to have been disbursed to and borrowed by Borrower and shall be secured by the Deed of Trust on the Property.

(a) Subject to the provisions of Sections 8.2.1(b) and 8.2.1(c) below, Lender and Borrower acknowledge and agree that in each instance in which a Project ceases to be a Qualified Project so as to be included in the Borrowing Base, either due to (i) the failure of or non-compliance with any representations and warranties under Sections 5.1.7, 5.1.9, 5.1.13-5.1.16, or (ii) the failure of or non-compliance with any affirmative covenants under Sections 6.3.1, 6.3.3-6.3.9, 6.9 or (iii) the failure to cure a default under Section 8.1.14, then such removal of said Project from the Borrowing Base shall not in and of itself constitute an Event of Default under this Agreement.

(b) Notwithstanding any other provision of this Agreement to the contrary, if any adjustment in the Borrowing Base shall arise from a Project ceasing to be a Qualified Project for the purpose of inclusion in the Borrowing Base and Borrower shall fail or refuse to timely make any principal payment required as a result of said adjustment, then such failure and/or refusal to timely make said payment shall constitute an Event of Default under this Agreement.

(c) Notwithstanding any other provision of this Agreement to the contrary, any failure or non-compliance by Borrower with any representation, warranty, covenant (including without limitation the financial covenants set forth in Section 6.15 above), duty, obligation, promise or agreement set forth herein shall constitute an Event of Default under this Agreement unless such failure or non-compliance is (i) cured as provided herein, or (ii) expressly waived in writing by Lender, or (iii) subject to the express provisions of Section 8.2.1(a) above.

8.2.2 Borrower hereby constitutes and appoints Lender, or an independent contractor selected by Lender, as its true and lawful attorney-in-fact with full power of substitution, for the purposes of completion of

each and every Project and performance of Borrower’s obligations under this Agreement in the name of Borrower, and hereby empowers said attorney-in-fact to do any or all of the following upon the occurrence and during the continuance of an Event of Default (it being understood and agreed that said power of attorney shall be deemed to be a power coupled with an interest which cannot be revoked until repayment of the Loan):

(a) To use any of the funds of Borrower, including any Borrowing Availability under the Loan, as applicable, and any funds which may be held by Lender for Borrower, for the purpose of effecting completion of the Improvements in the manner called for by the Plans and Specifications;

(b) To make such additions, changes and corrections in the Plans and Specifications as shall be necessary or desirable to complete the Improvements in substantially the manner contemplated by the Plans and Specifications;

(c)

To employ any contractors, subcontractors, agents, architects and inspectors required for said purposes;

(d)

To employ attorneys to defend against attempts to interfere with the exercise of power granted hereby;

(e) To pay, settle or compromise all existing bills and claims which are or may be liens against the Property, the Improvements or the Project or may be necessary or desirable for the completion of the Improvements or clearance of objections to or encumbrances on title;

(f) To execute all applications and certificates in the name of Borrower which may be required by any other construction contract;

(g) To prosecute and defend all actions or proceedings in connection with the Project, and to take such action, require such performance and do any and every other act as is deemed necessary with respect to the completion of the Improvements which Borrower might do on its own behalf; and

(h) To let new or additional contracts (to the extent not prohibited by existing contracts) to employ watchmen and erect security fences to protect the Project from injury, and to take such action and require such performance as Lender deems necessary under any of the bonds or insurance policies to be furnished hereunder, to make settlements and compromises with the sureties or insurers thereunder, and in connection therewith to execute instruments of release and satisfaction.

9. BANK’S OBLIGATIONS TO BORROWER ONLY AND DISCLAIMER BY BANK . No Person, other than Borrower and Lender, shall have any rights hereunder or be a third-party beneficiary hereof. Lender is not a joint venturer or a partner with Borrower. Prior to an Event of Default and thereafter until Lender elects in writing to assume specific obligations of Borrower, Lender shall not be obligated to any Person providing labor, materials, or other services for the Project and payment of funds from Advances directly to any such Persons shall not give or be a recognition of any third-party beneficiary status.

10. NO BROKERS . Except as disclosed by Borrower to Lender in writing prior to the date of this Agreement, Borrower and Lender represent and warrant to the other that it knows of no broker’s or finder’s fee due in respect of the transaction described in this Agreement and that it has not used the services of a broker or a finder in connection with this transaction.

11. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT . This Agreement is subject to certain terms and provisions in the Note, to which reference is made for a statement of such terms and provisions.

12. COUNTERPART EXECUTION . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. Signature

pages may be detached from the counterparts and attached to a single copy of this Agreement to physically form one document.

13. MISCELLANEOUS .

13.1 Assignment .

(a) Borrower shall not assign this Agreement or any interest it may have in the monies due hereunder, without the prior written consent of Lender, which consent may be granted or withheld in Lender’s sole and absolute discretion. Notwithstanding the foregoing, in the event of any such assignment, Lender may nevertheless at its option continue to make disbursements under this Agreement to Borrower or to those who succeed to Borrower’s title, and all sums shall be deemed to be disbursements under this Agreement, and not to be modifications hereof, and shall be secured by the Deed of Trust.

(b) Subject to the provisions of Section 13.18 below, Lender may at any time assign this Agreement, the Note, the Deed of Trust and other Loan Documents, and upon such assignment Lender shall have no further obligation or liability of any nature in connection herewith. Upon such assignment, the provisions of this Agreement shall continue to apply to the Loan and such assignee shall be substituted in the place and stead of Lender hereunder with all rights, obligations and remedies of Lender herein provided, including without limitation the right to so further assign this Agreement, the Note, the Deed of Trust and other Loan Documents.

13.2 Notices . All notices, requests, demands and consents to be made hereunder to the parties hereto shall be in writing and shall be delivered by hand or sent by registered mail or certified mail, postage prepaid, return receipt requested, through the United States Postal Service to the addresses shown below or such other address which the parties may provide to one another in accordance herewith. Such notices, requests, demands and consents, if sent by mail, shall be deemed given two (2) Business Days after deposit in the United States mail, and if delivered by hand, shall be deemed given when delivered.


		If to Borrower:		TRI POINTE HOMES, LLC
				19520 Jamboree Road, Suite 200
				Irvine, California 92612
				Attn: Douglas F. Bauer

		With a copy to:		Allen Matkins Leck Gamble Mallory & Natsis LLP
				1900 Main Street, 5 ^th Floor
				Irvine, California 92614
				Attn: Richard E. Stinehart, Esq.

		If to Lender:		CALIFORNIA BANK & TRUST
				1900 Main Street, Suite 200
				Irvine, California 92614
				Attn: Jake Lehmkuhl

		And a copy to:		BRYAN CAVE LLP
				3161 Michelson Drive, Suite 1500
				Irvine, California 92612
				Attn: Ren R Hayhurst, Esq.

13.3 Authority to File Notices . Upon the occurrence of any Event of Default, Borrower irrevocably appoints Lender as its attorney-in-fact, with full power of substitution, to file or record, at the Borrower’s cost and expense and in Borrower’s name, any notices of completion, notices of cessation of labor, or any other notices that Lender considers necessary or desirable to protect its security.

13.4 Inconsistencies with the Loan Documents . In the event of any inconsistencies between the terms of this Agreement and any terms of any of the Loan Documents, the terms of this Agreement shall govern and prevail.

13.5 No Waiver . No disbursement of proceeds of the Loan shall constitute a waiver of any conditions to Lender’s obligation to make further disbursements nor, in the event Borrower is unable to satisfy any such conditions, shall any such waiver have the effect of precluding Lender from thereafter declaring such inability to constitute an Event of Default under this Agreement.

13.6 Lender Approval of Instruments and Parties . All proceedings taken in accordance with transactions provided for herein, and all surveys, appraisals and documents required or contemplated by this Agreement and the persons responsible for the execution and preparation thereof, shall be satisfactory to and subject to approval by Lender. Lender’s counsel shall be provided with copies of all documents which they may reasonably request in connection with the Agreement.

13.7 Lender Determination of Facts . Lender shall at all times be free to establish independently, to its satisfaction, the existence or nonexistence of any fact or facts, the existence or nonexistence of which is a condition of this Agreement.

13.8 Incorporation of Preamble: Recitals and Exhibits . The preamble, recitals and exhibits hereto are hereby incorporated into this Agreement.

13.9 Third-Party Consultants . Lender may hire such third-party consultants as it deems necessary, the costs of which shall be paid by Borrower, to provide the following services: (a) review final Plans and Specifications and final construction cost breakdown and the construction schedule; (b) conduct compliance inspections with respect to the progress of construction of the Project and approve each element of a request for disbursement relating to construction costs, and (c) perform such other services as may, from time to time, be required by Lender. This obligation on the part of Borrower shall survive the closing of the Loan and the repayment thereof. Borrower hereby authorizes Lender, in its discretion, to pay such expenses, charges, costs and fees at any time by a disbursement of the Loan, and to the extent the applicable Loan Budget category is insufficient, such expenses, charges, costs and fees shall be paid by Borrower from its own funds.

13.10 Payment of Expenses . Borrower shall pay all taxes and assessments and all expenses, charges, costs and fees provided for in this Agreement or relating to the Loan or construction of the Improvements, including, without limitation, any fees incurred for recording or filing any of the Loan Documents, title insurance premiums and charges, tax service contract fees, fees of any consultants, Lender’s processing and closing fees, reasonable fees and expenses of Lender’s counsel, printing, photostatting and duplicating expenses, air freight charges, escrow fees, costs of surveys, premiums of hazard insurance policies and surety bonds and fees for any appraisal, appraisal review, market or feasibility study required by Lender. Borrower hereby authorizes Lender to disburse the proceeds of the Loan to pay such expenses, charges, costs and fees notwithstanding that Borrower may not have requested a disbursement of such amount, provided that Borrower acknowledges that Lender has no obligation to disburse amounts listed under “ Borrower’s Equity ” on the A&D Budget or the Home Construction Budget. Such disbursement shall be added to the outstanding Loan Balance. The authorization hereby granted shall be irrevocable, and no further direction or authorization from Borrower shall be necessary for Lender to make such disbursements. However, the provision of this Section 13.10 shall not prevent Borrower from paying such expense, charges, costs and fees from its own funds. All such expenses, charges, costs and fees shall be Borrower’s obligation regardless of whether or not Borrower has requested and met the conditions for a disbursement of the Loan. The obligations on the part of Borrower under this Section 13.10 shall survive the closing of the Loan and the repayment thereof.

13.11 Disclaimer by Lender . Lender shall not be liable to any contractor, subcontractor, supplier, laborer, architect, engineer or any other party for services performed or materials supplied in connection with the Project. Lender shall not be liable for any debts or claims accruing in favor of any such parties against Borrower or others or against the Property or the Project. Borrower is not and shall not be an agent of Lender for any purpose. Lender is not a joint venture partner with Borrower in any manner whatsoever. Prior to default by Borrower under this Agreement and the exercise of remedies granted herein, Lender shall not be deemed to be in privity of contract

with any contractor or provider of services to the Project, nor shall any payment of funds directly to a contractor, subcontractor or provider of services be deemed to create any third party beneficiary status or recognition of same by Lender. Approvals granted by Lender for any matters covered under this Agreement shall be narrowly construed to cover only the parties and facts identified in any written approval or, if not in writing, such approvals shall be solely for the benefit of Borrower.

13.12 Indemnification . To the fullest extent permitted by law, Borrower agrees to protect, indemnify, defend and hold harmless Lender, and its directors, officers, agents and employees, from and against any and all liability, expense or damage of any kind or nature and from any suits, claims or demands, including reasonable legal fees and expenses on account of any matter or thing or action or failure to act by Lender, whether in suit or not, arising out of this Agreement or in connection herewith, other than such claims and liabilities as arise solely from the gross negligence or intentional misconduct of Lender. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Lender believes is covered by this indemnity, Lender shall give Borrower notice of the matter and an opportunity to defend it, at Borrower’s sole cost and expense, with legal counsel satisfactory to Lender. Lender may also require Borrower to so defend the matter. The obligations on the part of Borrower under this Section 13.12 shall survive the closing of the Loan and the repayment thereof.

13.13 Titles and Headings . The titles and headings of sections of this Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

13.14 Brokers . Borrower and Lender represent to each other that neither of them knows of any brokerage commissions or finders’ fee due or claimed with respect to the transaction contemplated hereby. Borrower and Lender shall indemnify and hold harmless the other party from and against any and all loss, damage, liability and expense, including costs and reasonable attorneys’ fees, which such other party may incur or sustain by reason of or in connection with any misrepresentation by the indemnifying party with respect to the foregoing.

13.15 Change, Discharge, Termination or Waiver . No provision of this Agreement may be changed, discharged, terminated or waived except in writing signed by the party against whom enforcement of the chance, discharge, termination or waiver is sought. No failure on the part of Lender to exercise and no delay by Lender in exercising any right or remedy under the Loan Documents or under the law shall operate as a waiver thereof.

13.16 Choice of Law . This Agreement and the transaction contemplated hereunder shall be governed by and construed in accordance with the laws of the State of California, without giving effect to conflict of laws principles.

13.17 Disbursements in Excess of Loan Amount . In the event the total disbursements by Lender exceed the amount of the Loan, the total of all disbursements shall be secured by the Deed of Trust. All other sums expended by Lender pursuant to this Agreement or any other Loan Documents shall be deemed to have been paid to Borrower and shall be secured by, among other things, the Deed of Trust.

13.18 Participations . Lender may at any time sell, assign, grant participations in, or otherwise transfer to any other person, firm or corporation (each a “ Participant ”) all or part of the indebtedness of Borrower outstanding under this Agreement or the Note. Borrower hereby acknowledges and agrees that any such disposition will give rise to each Participant becoming a co-lender and an equitable owner of an undivided fractional interest in the Loan and the Loan Documents, with California Bank & Trust, a California banking corporation (“ CB&T ”), acting as the sole administrative agent for all said Participants as co-lenders; provided, however, that after any such disposition, as between Borrower and Lender under the Loan Documents, CB&T has the sole authority to bind the co-lenders under said Loan Documents, and Borrower shall have the right and the duty to continue to deal solely with CB&T concerning any part of the Loan in the same manner as if CB&T were the sole owner thereof and as if no sale of any participation interest had occurred. Subject to the foregoing, Borrower agrees and consents CB&T’s sale or transfer, whether now or later, of one (1) or more participation interests in the Loan to one (1) or more Participants, whether related or unrelated to Lender, with all references in the Loan Documents to Lender (together with all participants, successors and assigns) to include all said Participants as co-lenders hereunder. Lender may provide, without any limitation whatsoever, to any one (1) or more

Participants, or potential Participant, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters as may be disclosed to said Participants or potential Participants. Borrower additionally waives any and all notices of sale of participation interests, as well as all notice of any repurchase of a participation interest. Borrower also agrees that any Participant will be considered as the absolute owner of such participation interest in the Loan and will have all the rights granted under the intercreditor agreement and/or other agreements between Lender and Participant governing the sale of such participation interest. Subject to the foregoing, Borrower further waives all rights of offset or counterclaim (excluding any rights or counterclaims arising from the gross negligence or willful misconduct of or breach of this Agreement by CB&T) that it may have now or later against Lender or against any Participant and unconditionally agrees that either Lender or such Participant, as provided in said intercreditor agreement, may enforce Borrower’s obligations under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. In no event shall any sale, assignment or participation in the Loan result in any delay or change in the requirements for the disbursement of Loan funds to Borrower or alter any of Borrower’s or Lender’s obligations under the Loan.

13.19 Time Is of the Essence . Time is of the essence of this Agreement.

13.20 Attorneys’ Fees . Borrower shall promptly pay to Lender from Borrower’s own funds or from the proceeds of the Loan, upon demand, with interest thereon from the date of demand at the Default Interest Rate, reasonable attorneys’ fees, expert witness fees and all costs and other expenses paid or reasonably incurred by Lender in enforcing or exercising its rights or remedies created by, connected with or provided for in this Agreement or any of the other Loan Documents, and payment thereof shall be secured by the Deed of Trust. If at any time Borrower fails, refuses or neglects to do any of the things herein provided to be done by Borrower, Lender shall have the right, but not the obligation, to do the same but at the expense and for the account of Borrower. The amount of any moneys so expended or obligations so incurred by Lender, together with interest thereon at the Default Interest Rate, shall be repaid to Lender forthwith upon written demand therefor and payment thereof shall be secured by the Deed of Trust.

13.21 Signs . Throughout the term of the Loan, Lender shall have the right to erect one or more signs on the Project indicating its provision of financing for the Project, and Lender shall also have the right to publicize its financing of the Project as Lender may deem appropriate.

13.22 Subordination to Certain Easements, Dedications and Restrictions . Lender agrees to subordinate the lien and charge of the Deed of Trust to any easements for any public utility purposes, drainage purposes or roadway purposes, or to any roadway park or common area dedication, as specifically approved by Lender and as required by the applicable governmental authorities as a condition to its approval of the Final Map. In addition, Lender agrees to subordinate the lien and charge of the Deed of Trust to any CC&Rs which Borrower determines to be necessary or desirable in connection with the Project and which CC&Rs are approved by Lender. In addition, Lender shall cause the lien of the Deed of Trust to be partially reconveyed for any portion of the Property approved by Lender which is required to be dedicated for roadway, park and common area purposes. Lender agrees, without receipt of further consideration but at the sole cost and expense of Borrower, to execute and acknowledge any and all documents which are reasonably acceptable to Lender and which are reasonably necessary for the processing and recording of the Final Map or are reasonably necessary to effectuate the purposes of this Section 13.22.

13.23 Waiver of Right to Trial by Jury . BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER ARISING OUT OF OR IN ANY RELATED TO THE LOAN OR THE LOAN DOCUMENTS. THIS PROVISION AND THE WAIVER SET FORTH HEREIN ARE MATERIAL INDUCEMENTS TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN AND IN THE LOAN DOCUMENTS.

14. EXHIBITS . The following Exhibits are attached to this Agreement and incorporated herein by this reference:

Exhibit “A”

Form of Borrowing Base Certificate

Exhibit “B”

Form of Letter of Credit Application and Amendment

Exhibit “C”

Required Project Information

Exhibit “D”

Home Construction Draw Reference Chart

Exhibit “E”

List of Existing Projects

15. ADDITIONAL ADVANCES . Borrower agrees that any and all amounts advanced by Lender to protect the Collateral or for any other purpose under the Loan Documents shall be considered Advances pursuant to this Agreement, and Borrower acknowledges that such advances may be made by Lender in its sole and absolute discretion and without any request or authorization of Borrower. Any such advances shall be immediately due and payable and shall bear interest at the Default Interest Rate until paid. Borrower acknowledges and agrees that such Advances may exceed the amount of Advances otherwise available, and Borrower nonetheless agrees to pay such Advances as provided herein and agrees that such Advances shall be secured by all Collateral.

[The balance of this page is intentionally left blank]

[Signature page follows.]

DATED as of the date first above stated.


BORROWER:

TRI POINTE HOMES, LLC, a Delaware limited liability company

By:		/s/ Douglas F. Bauer
Name:		Douglas F. Bauer
Title:		Chief Executive Officer and Secretary

By:		/s/ Thomas J. Mitchell
Name:		Thomas. J. Mitchell
Title:		President and Chief Operating Officer

By:		/s/ Michael D. Grubbs
Name:		Michael D. Grubbs
Title:		Chief Financial Officer

LENDER:

CALIFORNIA BANK & TRUST, a California banking corporation

By:		/s/ Frank W. Henry
Name:		Frank W. Henry
Title:		Executive Vice President

EXHIBIT “A”

BORROWING CASE CERTIFICATE FORMAT

Submission Date:


Category:	Project Name/Date of Entry into Base	Appraised Value Multiplied by Advance Rate	Budgeted Project Costs Multiplied by Advance Rate	Maximum Allowed Advance (Lesser of Value or Cost Amount)	Amount Permitted in Borrowing Base (Draw Percentage Amount Multiplied by Maximum Allowed Advance)
I. Lots Under Development		50% X Value	50% X Costs
II. Developed Lots		50% X Value	50% X Costs
X. Total Lot Inventory
I. Spec Homes		65% X Value	70% X Costs
II. Model Homes		75% X Value	75% X Costs
III. Presold Homes		70% X Value	75% X Costs
Y. Total Home Inventory
A. Total Borrowing Base (Items X + Y)
B. Less Outstanding Advances
C. Less Outstanding Letters of Credit
D. Less Adjustments under Section 2.1.3(d)
BORROWING AVAILABILITY (deficiency) (A-B-C-D)

EXHIBIT “A” – Page 1

CERTIFICATION OF BORROWER

Borrower hereby certifies as follows with respect to the information contained in this Borrowing Base Certificate:

1. All Lot and Home inventory is located in Qualified Projects.

2. All Lot and Home inventory is owned by Borrower free of any liens or encumbrances, other than liens and encumbrances in favor of Lender as security for the Loan, or outstanding liens that have been bonded over, or outstanding liens that are subject to signed released delivered to Borrower.

3. Borrower has received lien waivers for all major scopes of construction work in process with respect to the subject Property.

4. As to any Lots Under Development, construction of the A&D Improvements has begun or is scheduled to begin within ninety (90) days of inclusion in the Borrowing Base as Lots Under Development.

5. As to any Developed Lots, construction of the A&D Improvements has been completed as of the date of inclusion in the Borrowing Base as Developed Lots.

6. As to any Homes, construction of the Home Improvements has begun or is scheduled to begin within ninety (90) days of inclusion in the Borrowing Base as Homes.

7. As to any Presold Homes, said Homes were in compliance with all requirements for a Presold Home as of the date of inclusion in the Borrowing Base as Presold Homes and remain in compliance as of the date hereof.

8. Attached hereto are the following request(s) for entry into the Borrowing Base of new [ ] Lots Under Development, [ ] Developed Lots, [ ] Model Homes, [ ] Spec Homes and/or [ ] Presold Homes.

The undersigned hereby certifies to Lender that the foregoing information on this Borrowing Base Certificate as of the Calendar Month ending , 20 , is true and correct and was provided from financial information prepared according to GAAP. All capitalized terms not defined herein shall have the meanings given to such terms in that certain Amended and Restated Revolving Line of Credit Loan Agreement dated as of May 29, 2012 (“ Loan Agreement ”) by and between CALIFORNIA BANK & TRUST, a California banking corporation (“ Lender ”) and TRI POINTE HOMES, LLC, a Delaware limited liability company (“ Borrower ”).

[The balance of this page is intentionally left blank.]

[Signature page follows.]

EXHIBIT “A” – Page 2


TRI POINTE HOMES, LLC, a Delaware limited liability company

By:
Name:		Douglas F. Bauer
Title:		Chief Executive Officer and Secretary

By:
Name:		Thomas J. Mitchell
Title:		President and Chief Operating Officer

By:
Name:		Michael D. Grubbs
Title:		Chief Financial Officer

EXHIBIT “A” – Page 3

EXHIBIT “B”

Forms of Letter of Credit Application and Amendment

Please see attached.

EXHIBIT “B” – Page 1


C ALIFORNIA B ANK & T RUST International Banking Group 550 South Hope Street, 3 ^rd Floor Los Angeles, CA 90071 213-593-2131 Fax: 213-593-2144 - IBGops@calbt.com	A PPLICATION AND A GREEMENT FOR S TANDBY L ETTER OF C REDIT	D ATE :
	ADVISING/BENEFICIARY’S BANK and Address (If unknown leave blank)

APPLICANT Name and Address	BENEFICIARY Name and Address

Tel Fax	Tel Fax

Email	Email

AMOUNT & CURRENCY:	EXPIRATION DATE:

PLEASE ISSUE CREDIT BY: ¨ SWIFT ¨ Airmail ¨ Courier	PARTIAL DRAWINGS ¨ ALLOWED ¨ NOT ALLOWED

REQUESTED WORDING: (Any attachments hereto must indicate attachment and each attachment must be signed and dated by applicant.) Reset & Clear Form

BANKING CHARGES, OTHER THAN ISSUING BANK’S ARE FOR THE ACCOUNT OF: ¨ APPLICANT ¨ BENEFICIARY You are hereby authorized to debit our account # for all transactions related to this Letter of Credit. The actual wording of any Letter of Credit issued by California Bank & Trust must be agreed to by California Bank & Trust in its sole discretion. The opening of this Standby Letter of Credit is subject to the terms and conditions set forth in the California Bank & Trust Standby Letter of Credit Agreement appearing on pages 2, 3, and 4 of this application to which we agree.



Company Name	Customer Signature	Name & Title	Date

BANK USE ONLY BELOW THIS LINE

Date:

Office Name:

Office Number:

Customer Signature Verified By:

Manager’s Signature

APPROVAL UNDER

[ ] Manager Authority

[ ] CP Approval

Page 1 of 7

STANDBY LETTER OF CREDIT AGREEMENT

To: California Bank & Trust

In consideration of your opening at our request a Stand-by Letter of Credit (“Credit”), the requested terms of which appear on page 1 hereof, we hereby agree (the “Agreement”) with you as follows:

We shall pay you upon demand in immediately available funds and in United States currency all moneys paid by you or your correspondents or for which you or your correspondents become liable under or pursuant to said Credit, including under drafts paid by you or your correspondents, together with interest, conclusion and all customary charges thereon; and we agree to provide such funds at least one business day before same is due provided, however, that if any amounts paid or payable under or in respect of said Credit are in any currency other than United States currency, the amount payable or provided by us to you or chargeable by you hereunder may be, at your election, either in such other currency or the equivalent in United States currency computed at the rate you would at the time sell such other currency for United States currency. Past due amounts of any kind shall be payable with interest at the rate of three (3%) percent above your prime rate. The “prime rate” shall mean the rate of interest established by you from time to time as your prime rate, which may not necessarily be the lowest rate charged by you to your borrowers. You are authorized to charge any or all of our deposit accounts for all required payments and reimbursements under this Agreement.

We understand that the commissions, fees and charges payable by us to you in connection with said Credit are established by you with regard in part to your costs in issuing and maintaining the Credit. If, prior to the expiry date of said Credit, any applicable law, rule or regulation is adopted or amended, or there is a change in the interpretation or administration of any existing applicable law, rule or regulation, which has the effect of increasing the taxes, duties, charges or other costs paid or incurred by you in connection with said Credit (including without limitation, deposit insurance assessments, reserve requirement costs, and the implied costs of additional capital), we shall pay you upon demand in United States currency the amount of any such increase or increases. We will comply with all foreign laws, rules and regulations now or hereafter applicable to the transaction underlying the Credit or relevant to the execution, delivery and performance by us of this Agreement.

3.	[Intentionally omitted.]

In the event of default in respect of any payment due under this Agreement, or in the event of the death, insolvency, dissolution or termination of the existence of any of us, or should any bankruptcy or similar proceeding be filed by or against any of us, the amount of said Credit, as well as any and all other amounts then or to become payable to you hereunder (“Other Amounts”), together with interest thereon, shall, to the extent not theretofore paid to you, become immediately due and payable; and if at the time of any such event said Credit is still in effect and not completely drawn against or Other Amounts are not paid, we shall, upon demand, pay to you, for application to drawings under said Credit or payment of such Other Amounts, the entire amount which has not been drawn or paid. Any amount so paid shall be repaid to us without interest when it is finally determined by you that we have fully discharged our obligations hereunder.

You and your correspondents shall be entitled to make payments under said Credit if the documents presented thereunder appear on their face to be in accordance with the terms and conditions of said Credit; and neither you nor your correspondents shall be liable or responsible for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the authority of any persons signing the documents, or for the good faith or acts or omissions, solvency, performance or standing of the beneficiary or any other person whomsoever, including performance of the underlying contract or other transaction between us and the beneficiary. Furthermore, you and your correspondents shall not have any liability or responsibility for the consequences arising out of delay or loss in transit of any messages, drafts or documents, or for any delay, interruption, mutilation or other error arising in the transmission of any telecommunication, or for errors in translation or interpretation of any message or documents relating to said Credit. You and your correspondents shall not be liable for any failure to pay or accept any draft under the Credit resulting from any law or restriction exercised by any domestic or foreign government, any court order, or any other cause beyond your control. Any and all claims by us for improper payment, dishonor or other actions or inaction by you shall be made by written notice within sixty (60) days of the contested action or inaction or such claim is waived. Any and all proceedings to recover from you or your

Page 2 of 7

correspondents must be made within one (1) year from the date of said notice or said claim shall be deemed waived.

We shall pay upon demand in United States currency all expenses, including reasonable attorney’s fees (including any such fees incurred in bankruptcy or similar proceedings), incurred by you or your correspondents in connection with or related to the Credit, or the preservation or enforcement of any right granted hereunder. In addition, we shall indemnify you and your correspondents against any and all liabilities, losses, damages, settlements and expenses, including reasonable attorneys’ fees (including any such fees incurred in bankruptcy or similar proceeding), which you or your correspondents may incur in connection with any claim or controversy with the beneficiary or any other third party relating to said Credit except for such matters constituting your own gross negligence or willful misconduct; and, in the event any suit or other proceeding is brought against you or your correspondents regarding such dispute, you or your correspondent named in such suit or proceeding may elect either to defend such suit or proceeding at our expense or to require that we assume the defense thereof employing counsel acceptable to you or such correspondent. Attorney’s fees shall include the reasonable cost of in-house counsel.

In the event of any extension of the maturity or time for presentation of drafts, acceptance of documents, or any other modification of the terms of said Credit, at the request of any of us with or without notification to the others, or in the event of any increase in the amount of said Credit at our request, this Agreement shall be binding upon us with regard to said Credit so increased or otherwise modified, to drafts, documents and property covered thereby, and to any action by you or any of your correspondents in accordance with such extension, increase or other modification.

You may, in your discretion, arrange for the direct or indirect participation by other financial institutions in the issuance of said Credit or provide for the assignment or transfer to and assumption by other financial institutions of all or some portion of your liability under said Credit; and you may assign or transfer this Agreement or all or any portion of your rights hereunder, and any instruments(s) evidencing all or any portion of your liability under said Credit, [Intentionally omitted] and you shall thereafter be forever relieved and fully discharged from all liability or responsibility with respect thereto, but you shall retain all rights and powers hereby given with respect to any and all instrument(s), rights or property not so assigned or transferred.

9.	If the Application and Agreement for Stand-by Letter of Credit is signed by one party, terms in the plural shall be read in the singular, as appropriate. If signed by two or more parties, this Agreement shall be the joint and several agreement of such parties.

10.

You shall not be liable for any failure by your correspondents to pay or accept any draft under the Credit resulting from any law or restriction exercised by any domestic or foreign government or from any other cause beyond your control or your correspondents’, and we agree to indemnify and hold you harmless from any claim, loss, liability or expense arising by reason of any such failure to pay.

11.

This Agreement is to continue in force and be applicable to all transactions, notwithstanding any change in the individuals composing any firm, parties to, or concerned in this contract, whether such change shall arise from the acquisition of one or more new partners or from the death or secession of any partner or partners.

12.

If any other person signs this Agreement as Applicant’s Bank (including any bank which procures issuance of the Letter of Credit on our behalf as Applicant’s Bank), that person shall be jointly and severally liable for all obligations and shall otherwise be treated as the Applicant under this Agreement, including with respect to all warranties hereunder. Without limiting the foregoing, each Applicant shall be bound by any notice from you to any other Applicant. Each Applicant shall be bound by any authorization or waiver from any Applicant to you that supports the extension, increase or other amendment of the Letter of Credit, your amendment of this Agreement or your settlement or release of any obligations or your release of any Collateral. Each Applicant shall be bound by any Applicant’s settlement or release of any claims against you arising under this Agreement. Each Applicant shall be bound by any event of default attributable to any Applicant or to any guarantor of any Applicant’s obligations hereunder. Each Applicant signing this Agreement accepts that its obligations are primary. [Intentionally omitted.]

13.

If this application is directed through Applicant’s Bank, the Applicant’s Bank, by its execution of this Agreement: (a) requests and appoints you as its agent to establish in your name or through a correspondent the Credit; (b) authorizes you and/or your correspondent(s) to pay drafts drawn against the Credit as specified in this Agreement and to exercise all rights, powers and privileges conferred by this Agreement without reference to Applicant’s Bank, (c) agrees to make payments to you in amount, time and manner as required of us under this Agreement whether or not Applicant’s Bank has received payment from us;

Page 3 of 7

[Intentionally omitted] and (e) agrees that if it fails to make any payment or provide any security as requested, all its obligations and liabilities to you shall immediately, without notice, become due and payable at your sole option.

14.

Except as otherwise provided herein, any notice from you to us, if mailed, shall be deemed given when mailed postage paid, addressed to us at our address set forth herein or such other address of which you are notified in writing at your designated office. All notices to you shall be sent as indicated below and shall be deemed given when received. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

15.

If the Credit provides for automatic renewal without amendment we shall notify you of our desire not to renew such Credit in writing at least thirty (30) days prior to the last day specified in the Credit by which you must give notice of your intent not to renew the Credit. If we fail to provide timely notice to you as provided for in the preceding sentence, you may renew the Credit in your sole and absolute discretion, and all of our liabilities and obligations as to the Credit and under this Agreement will continue in full force and effect. Any decision whether to renew a Credit will be in your sole and absolute discretion, and notwithstanding any notice from us to you requesting the renewal of the Credit, you may elect not to renew the Credit. If you notify the beneficiary or transferee, if any, that you have elected not to renew the Credit, the Credit may be drawn on, if permitted under the terms of the Credit. In such case, we will reimburse you for all amounts paid or payable by you in respect of the Credit. We will have no claim against you and no defense against payment of your obligations under this Agreement as a result of your renewal or non-renewal of this Credit.

16.

We understand and agree that you shall rely, and are entitled to rely on information from us with respect to the terms and wording of the Credit. We agree that our approval of the Credit format binds us irrevocably, and we hereby waive any and all claims or liabilities we may have with respect to such terms and wording. We further understand and agree that the acceptance of this Agreement and application does not constitute a commitment by you to issue a Credit. This Agreement together with the application and any other loan document provided in connection herewith, constitutes the entire agreement of the parties hereto, and supersedes all prior discussions, negotiations and agreements with respect thereto.

17.

To the extent not inconsistent with this Agreement, this Agreement shall be subject to the UCP or ISP98, as provided in the Credit, and subject to such limitation, shall be governed by the laws of the State of California, United States of America, in all respects, including (without limitations) matters of title, construction, validity, performance and discharge, and shall be binding upon us and our successors, assigns, and legal representatives and shall not be waived, altered, modified or amended as to any of its terms or provisions, except as you may consent thereto in writing. No assignment or other transfer of all or any of our rights hereunder or under said Credit, whether with regard to any property or otherwise, may be made without your prior consent in writing. We agree to submit to the jurisdiction of the state or federal courts located in San Diego, Los Angeles or San Francisco, California, and waive our right to contest the jurisdiction or venue of such courts. We agree to waive our right to assert forum non-convenience against the institution of an action in or removal of an action to any such court.

WE AND YOU WAIVE OUR RIGHTS TO TRIAL BY JURY, AND AGREE THAT ANY COURT PROCEEDING SHALL TAKE PLACE BEFORE A JUDGE OR MAGISTRATE.

18.	In these provisions:

“We”, “Us” means the undersigned party or parties identified and signing this Agreement as Applicant.

“Applicant” means all of the undersigned party or parties.

“You”, “Your” means California Bank & Trust.

“Applicant’s Bank” means the undersigned party or parties identified and signing as such.

“Credit” means the irrevocable standby letter of credit issued by California Bank & Trust at its option pursuant to this Application, as such letter of credit may be modified or amended from time to time.

Page 4 of 7

6.	“UCP” means the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any subsequent revisions thereof approved by the International Chamber of Commerce.

7.	“ISP98” means the International Standby Practices, International Chamber of Commerce Publication No. 590, and any subsequent revisions thereof approved by the International Chamber of Commerce,

*see below

In consideration of your issuing the Credit and for other consideration, the receipt and adequacy of which is hereby acknowledged, we agree to be bound by this Agreement, including but not limited to the payment obligations therein set forth, and including being jointly and severally liable for all indebtedness and obligations of any other Applicant, if any, arising under or pursuant to this Agreement.

Page 5 of 7


APPLICANT		APPLICANT’S BANK (This section must be completed by Applicant’s Bank if application is being submitted through another bank)

NAME	DATE


AUTHORIZED SIGNATURE, TITLE


AUTHORIZED SIGNATURE, TITLE		NAME	DATE


CONTACT NAME		AUTHORIZED SIGNATURE, TITLE


TELEPHONE NUMBER		AUTHORIZED SIGNATURE, TITLE



		All notices to California Bank & Trust shall be sent to:
Co-Applicant Agrees to be bound by the terms and conditions of this Agreement (as Applicant) and Applicant and Co-Applicant agree that each shall be jointly and severally liable for all indebtedness and obligations arising under or pursuant to this Agreement.		International Banking Operations 550 South Hope Street, 3 ^rd Floor Los Angeles, CA 90071

CO-APPLICANT		and confirmed by fax (213) 593-2144 addressed to Operations Manager



NAME	DATE


AUTHORIZED SIGNATURE, TITLE

ADDRESS:



TELEPHONE:

* 19. All amounts due from us to you under this agreement shall be deemed advances under that certain Revolving Letter of Credit Loan Agreement dated as of April 19, 2011 (“Loan Agreement”), as amended, and shall be repaid and collateralized while outstanding as set forth in the Loan Agreement.

Page 6 of 7

C ALIFORNIA B ANK & T RUST

International Banking Group

550 South Hope Street, 3 ^rd Floor

Los Angeles, CA 90071

213-593-2124 Fax: 213-593-2144 - IBGops@calbt.com

A MENDMENT A PPLICATION FOR
S TANDBY L ETTER OF C REDIT

DATE:

APPLICANT Name and Address

BENEFICIARY Name and Address

Tel

Fax

Tel

Fax

Letter of Credit Number

Date of Letter of Credit

Please amend this Letter of Credit as follows:

1) ¨ INCREASE ¨ DECREASE AMOUNT OF LETTER OF CREDIT BY: USD

TO AN AGGREGATE AMOUNT OF: USD

2) LATEST SHIPMENT DATE CHANGED TO:

3) EXPIRATION DATE CHANGED TO:

OTHER:

Reset & Clear Form

AMENDMENT CHARGES FOR ACCOUNT OF ¨ APPLICANT ¨ BENEFICIARY

We understand that this amendment is subject to acceptance by beneficiary. All other terms and conditions of the Letter of Credit remain unchanged.


Applicant Name				Applicant’s Bank Name


Applicant Signature				Date		Authorized Signature				Date


Name & Title				Name & Title

BANK USE ONLY BELOW THIS LINE

Date:

Office Name:

Office Number:

Customer Signature Verified By:

Manager’s Signature

APPROVAL UNDER

[ ] Manager Authority

[ ] CP Approval

Page 1 of 1

EXHIBIT “C”

Required Project Information

Borrower shall not be entitled to any Advances for any Qualified Project hereunder unless and until each of the following conditions precedent have been satisfied to the extent said information is available for the A&D Improvements and/or Home Improvements to be constructed as part of the Qualified Project:

(a) Final Plans . Borrower shall have submitted to Lender, and Lender shall have reviewed and approved, Plans and Specifications for the applicable Project, which Plans and Specifications shall (i) be prepared by Architect and/or Engineer, and (ii) be otherwise satisfactory to Lender.

(b) Appraisals . At Borrower’s sole cost and expense, Lender shall have obtained an Appraisal and/or Base Appraisals with respect to the Property and each type of Improvements for the applicable Project, which Appraisal and/or Base Appraisals shall be (i) prepared by an appraiser acceptable to Lender, and (ii) otherwise satisfactory to Lender. For each Project, Lender shall have received and approved an Appraisal for the applicable Project. Lender shall have no obligation to make any Advance against any parcels unless and until Lender shall have received and approved said Appraisals for said parcels against which Advances are requested.

(c) Independent Cost Analysis . If required by Lender, at Borrower’s sole cost and expense, Lender shall have obtained a report in form and content acceptable to Lender in its discretion from an independent cost engineer validating the cost adequacy of the applicable Project.

(d) Additional Assignments . Borrower shall have executed and delivered to Lender the Deed of Trust, Financing Statement and Construction Assignments securing the Collateral to be included in the subject Project, and Architect, Contractor and/or Engineer for the applicable Project shall have consented to such assignments.

(e) Environmental Reports . Borrower shall have submitted to Lender, for Lender’s approval, for each Project an environmental, toxics and/or soils report(s) satisfactory to Lender, including drainage, boring (if applicable) and compacting data, together with such hydrology and other engineering reports that Lender may reasonably require, all of which shall be by engineers acceptable to Lender and shall indicate that the condition of the Property is suitable for construction of the A&D Improvements and Homes thereon (without extraordinary land preparation) and for the operation and maintenance of the Project. Any recommendations in the approved soils, hydrology and other engineering reports must be complied with and incorporated into the Plans and Specifications. Each environmental assessment (Phase I assessment) of the Property and adjacent property shall be dated no earlier than one hundred eighty (180) days prior to the date hereof, and Borrower shall deliver to Lender any sampling and analysis (Phase II assessment) or special limited assessment that Lender may require after review of the Phase I assessment, together with any other environmental investigations and reports that Lender may reasonably require, all of which shall be by a Lender-approved environmental consulting firm, and none of which shall reveal any existing or potential environmental condition adversely affecting the use or value of the Property. Borrower shall have delivered to Lender and Lender shall have approved a report of an environmental assessments of the applicable Project, by environmental engineers acceptable to Lender containing such information, results, and certifications as Lender may require. If Lender determines, in its sole discretion, based on such reports or other information available to Lender that any further review should be obtained, Borrower shall also provide such follow up testing, reports, and other actions as may be required by Lender. The contents of the environmental assessment report and any follow up must be satisfactory to Lender. If such reports are addressed to Borrower, Borrower shall cause a reliance letter, in form and substance satisfactory to Lender, to be provided to Lender.

(f) Building Permits, Licenses, Etc . If required by Lender, Borrower shall have submitted to Lender evidence for the applicable Project of (i) building permits for the construction of the Homes (ii) all necessary permits, licenses and approvals (including without limitation any required consumer disclosure reports and approvals prior to the sale of any Homes) in connection with the sale of said Homes, and/or (iii) Architectural Control Committee and other approvals, if any, required under any CC&Rs affecting the Property.

EXHIBIT “C” – Page 1

(g) Truth-In-Lending Disclosures . Prior to entering into any Purchase Contract for the sale of any Unit for the applicable Project, Borrower shall have delivered to the purchaser all truth-in-lending and other required consumer disclosures, in compliance with law and in form and substance satisfactory to Lender.

(h) Approved Budgets . The final approved Budget for the applicable Project itemizing the Hard Costs and Soft Costs, including direct and indirect costs, certified to be correct to the best knowledge and belief of Borrower for each type of Improvement to be constructed as part of the Project. Said Budget shall be subject to formal review and approval by Lender at Lender’s sole discretion, and if Lender reasonably determines that the Loan funds allocated for Hard Costs are inadequate to pay for all Hard Costs, then Lender may require Borrower to deposit cash into an account pledged as additional collateral for the Loan the amount of the shortfall. In no event shall the costs of the Project as set forth in any A&D Budget or any Home Construction Budget violate the applicable Maximum Allowed Advance(s).

(i) Environmental Indemnity . Borrower shall have delivered to Lender, a environmental indemnity agreement in form and content required by Lender in its sole discretion for the applicable Project, fully completed and duly executed by Borrower.

(j) Payment of Costs, Expenses, and Fees . For each applicable Project, all costs, expenses, and fees to be paid by Borrower shall have been paid in full, including without limitation applicable fees set forth in the Loan Documents.

(k) Other Items or Actions by Borrower . Lender shall have received such other agreements, documents, and instruments, and Borrower shall have performed such other actions as Lender may reasonably require.

(l) Miscellaneous Conditions . The following additional conditions must be satisfied prior to the Closing Date for each Loan made hereunder:

(1) Financial Statements . Financial statements for Borrower in conformity with the requirements of the Loan Agreement covering the two-year period immediately preceding the Closing Date and showing a financial condition which satisfies the financial covenants set forth in Section 6.15 of the Loan Agreement;

(2) Survey . If required by Lender, particularly if a Qualified Project is to be entered into the Borrowing Base prior to the recording of a Final Map for said Qualified Project, a current survey of the Property by a licensed surveyor acceptable to Lender describing the boundaries of said property and showing all means of ingress and egress, rights-of-way, easements (each of which shall be identified by docket and page or recording number where recorded) and all other customary and relevant information pursuant to ALTA standards and any Title Company requirements. All surveys shall be certified to Lender and the Title Company issuing the Title Policy required by the Loan Agreement;

(3) Title Insurance . The Title Insurance Policy, with such endorsements as Lender may require, issued by the Title Company satisfactory to Lender in the amount of the Loan (with direct access reinsurance in amounts and by companies and in form acceptable to Lender as Lender may require) insuring the lien of the Deed of Trust to be a first and prior lien upon the Property, as security for all Advances pursuant to the terms of this Agreement, subject only to such exceptions as Lender may expressly approve in writing, and insuring against any lien claims that could arise out of the construction of the Homes on the Property. During the course of construction of the Homes, Borrower shall provide Lender with such title insurance endorsements as Lender may require, including CLTA Form 122 Endorsements (or equivalent endorsements acceptable to Lender) for each disbursement, and any other endorsements Lender may require to insure that the Homes shall have been constructed within the boundaries of the Property and in accordance with all applicable laws, covenants, restrictions and/or CC&Rs. Upon completion of the Homes, Borrower shall deliver to Lender such further endorsements to the title insurance policy as Lender may require;

EXHIBIT “C” – Page 2

(4) Zoning . Evidence that the Property is properly zoned for the construction of the A&D Improvements and/or Homes to be constructed as part of the applicable Project;

(5) Construction Materials . Copies of all agreements between Borrower and any architects, engineers, consultants, managers or supervisors, and, if required by Lender, copies of construction subcontracts related to the construction, maintenance, repair, leasing, management and operation of the Project, together with written agreements by such persons or entities that they will perform for Lender the services contracted to Borrower, notwithstanding the occurrence of any Event of Default and any trustee’s sale or foreclosure of the Deed of Trust (provided that such persons or entities continue to receive payments under their respective contracts), and the consent of such persons or entities to the collateral assignment by Borrower to Lender of their respective contracts;

(6) CC&Rs . Copies of any CC&Rs and related documents pertaining to the Property and the Project. Borrower shall have provided Lender with, and Lender shall have approved, all covenants, conditions, restrictions, easements and other rights that exist or are contemplated with respect to each applicable Project;

(7) Taxes . Evidence that all taxes and assessments levied against or affecting the Property have been paid current, together with a tax service contract for the Project in form and content acceptable to Lender in its sole discretion;

(8) Organizational Documents . Copies of Borrower’s Organizational Documents, together with proper authorizations and certificates and such other documents as Lender may require, relating to the existence and good standing of such Persons and the authority of any officer, partner or member, as applicable, executing documents on behalf of such Persons;

(9) Equity . Evidence satisfactory to Lender that Borrower has equity in the Project in an amount sufficient to satisfy the applicable Maximum Allowed Advances for the Project;

(10) Other Insurance . In addition to evidence of all insurance coverages as set forth in Section 6.8 of the Loan Agreement, evidence of such other insurance as Lender may reasonably require herein, including without limitation (i) insurance covering vandalism and malicious mischief, and sprinkler leakage, and (ii) errors and omissions insurance for the contractors, architects, engineers, environmental engineers and the provider of the soils report with limits of liability in amounts reasonably acceptable to Lender, provided, Lender will not require earthquake insurance;

(11) Flood . Evidence whether the Property, or any part thereof, lies within a “special flood hazard area” as designated on maps prepared by the U.S. Department of Housing and Urban Development pursuant to the Flood Disaster Protection Act of 1973, as amended, and, if so designated, a National Flood Insurance Association standard flood insurance policy, plus insurance from a private insurance carrier if required by Lender, for the duration of the Loan in the amount of the full insurable value of the completed Improvements, naming Lender as an additional loss payee;

(12) Utilities . Evidence that all utilities and services to the Property and Improvements, including without limitation water, sewer, gas, electric and telephone, are available, or will be available as required, and will be provided in amounts that are sufficient to service the Improvements for their intended use;

(13) Ingress/Egress . Evidence that there exists adequate legal ingress and egress to the Project;

(14) Job Schedule . A job progress Schedule Showing the planned timing, progress of construction and completion date for the Improvements of the Project;

EXHIBIT “C” – Page 3

(15) Off-Site Improvements . Evidence that each type of off-site improvement for the Property that has been completed shall have been certified and/or accepted by any municipality, utility, county or other governmental entity whose certification or acceptance thereof is required;

(16) List of Contractors. If required by Lender, a list of all subcontractors, suppliers and materialmen employed or retained, or to be employed or retained, in connection with the construction of the Improvements. Such list shall show the name, address and telephone number of each such person, a general statement of the nature of the work to be done, the labor and materials to be supplied, the names of materialmen (if known) and the approximate dollar value of such labor or work with respect to the labor and materials to be supplied;

(17) Soils Test . Borrower shall have provided to Lender, and Lender shall have approved, a soils/hydrology test reports of the applicable Project prepared by licensed engineers satisfactory to Lender showing the location of, and containing boring logs from, all borings, together with recommendations for the design of foundations.

(18) Legal Opinion . If required by Lender, a legal opinion in form and content acceptable to Lender addressing such issues as required by Lender; and

(19) Other Information . Such other information and documents that Lender may reasonably require.

EXHIBIT “C” – Page 4

EXHIBIT “D”

Home Construction Draw Reference Chart



Residential Unit Completion Inspection Report

	Draw	#:
Borrower:	PIR Rpt	#:
Project: (This Report To Be Attached to PIR)	Page	#:	of


Completion Standards			LOT #	% Request	% Actual	Vari- ance		LOT #	% Request	% Actual	Vari- ance		LOT #	% Request	% Actual	Vari- ance
Description	%					0					0					0
Permits / Layout Trenching / Rebar / Footings		5					0					0					0
							0					0					0
							0					0					0
Stem Walls		10					0					0					0
Undergrounds Set / Soil Backfill		15					0					0					0
							0					0					0
ABC Grade / Copper Set / Slab		20					0					0					0
							0					0					0
Deliver Lumber & Trusses		25					0					0					0
							0					0					0
Framing Thru 2nd Floor Sheathing		30					0					0					0
							0					0					0
Framing Thru Roof Sheathing		35					0					0					0
							0					0					0
Plumbing / HVAC / Electric Rough-In		40					0					0					0
							0					0					0
Rough-In Inspections / Roof Dry In / Windows, Sliders Set		45					0					0					0
							0					0					0
							0					0					0
							0					0					0
Stucco Lath or Siding		50					0					0					0
							0					0					0
Roofing Loaded / Insulation / Stock Drywall		55					0					0					0
							0					0					0
							0					0					0
Hang Drywall / Tape Wall		60					0					0					0
							0					0					0
Stucco Finish / Texture Drywall		65					0					0					0
							0					0					0
Deliver Doors & Trim / Exterior Paint		70					0					0					0
							0					0					0
Trim Carpentry / Interior Paint		75					0					0					0
												0					0
Deliver Cabinets / Roofing Set		80					0					0					0
							0					0					0
Install Cabinets / Set Tops		85					0					0					0
							0					0					0
Install Finish Hardware / Plumbing, Electric, HVAC Finish		90					0					0					0
							0					0					0
							0					0					0
							0					0					0
Pre-Clean / Appliances / Sheet Goods		95					0					0					0
							0					0					0
							0					0					0
Floor Covering / Clean & City Final		100					0					0					0
							0					0					0
							0					0					0
							0					0					0
							0					0					0
							0					0					0
							0					0					0


Construction Risk Doc. – Edition 2/14/11			Residential Unit Inspection Report - Revolver

EXHIBIT “D” – Page 1

EXHIBIT “E”

List of Existing Projects

Tamarind Lane

Candera

Los Arboles

Riverwalk

EXHIBIT “E” – Page 1

Exhibit 10.7

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (“ Agreement ”) is made as of , 2013 by and between TRI Pointe Homes, Inc., a Delaware corporation (the “ Company ”), and , a director and/or officer of the Company (the “ Indemnitee ”).

WHEREAS , the Company has concluded that to retain and attract talented and experienced individuals to serve as directors and officers of the Company, it is necessary for the Company to contractually indemnify officers and directors and to assume for itself maximum liability for expenses and damages in connection with claims against such directors and officers in connection with their service to the Company;

WHEREAS , Section 145 of the Delaware General Corporation Law (the “ DGCL ”), under which the Company is organized, empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations or enterprises, and expressly provide that the indemnification provided by the DGCL is not exclusive;

WHEREAS , the Company’s Certificate of Incorporation (the “ Certificate of Incorporation ”) and the Company’s Bylaws (the “ Bylaws ”) authorize the Company to provide indemnification and to advance expenses to the full extent permitted by Delaware law;

WHEREAS , Indemnitee is currently serving as a[n] [director][and][officer] of the Company and the Company wishes Indemnitee to continue his service in such capacity without concern of unwarranted personal liability arising out of or related to such services to the Company;

WHEREAS , the Company wishes to provide Indemnitee with an independent contractual right to indemnification and advancement of expenses in addition to those rights provided by the DGCL, the Certificate of Incorporation and the Bylaws;

NOW, THEREFORE , the Company and Indemnitee, intending to be legally bound, hereby agree as follows:

1. Indemnification in Third Party Proceedings. The Company shall indemnify, defend, and hold harmless Indemnitee from and against, and shall compensate and reimburse Indemnitee for, any Damages (as defined below) that are directly or indirectly suffered or incurred by Indemnitee as a result of, or are directly or indirectly connected with, any threatened, pending or completed action, suit or proceeding (other than an action, suit or proceeding by or in the right of the Company to procure a judgment in its favor), whether civil, criminal, administrative or investigative (a “ Proceeding ”), to which Indemnitee is or was a party, or is threatened to be made a party, by reason of, or arising from, the fact that Indemnitee is or was an officer of the Company or any of its subsidiaries or a member of the boards of directors of the Company or any of its subsidiaries (collectively, the “ Company’s Board ”), by reason of any action or inaction on the part of Indemnitee in his role as an officer of the Company or any of its subsidiaries or member of the Company’s Board, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of

the Company or of another corporation, partnership, joint venture, trust or other enterprise, provided, however, that the Company shall not be obligated to indemnify Indemnitee under this Section 1 unless Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, Indemnitee had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that (i) Indemnitee did not act in good faith, (ii) Indemnitee did not act in a manner which Indemnitee reasonably believed to be in the best interests of the Company, or (iii) with respect to any criminal Proceeding, Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful. Anyone seeking to overcome the presumption that Indemnitee is entitled to indemnification under this Section 1 shall have the burden of proof and the burden of persuasion by clear and convincing evidence. “Damages” shall mean any Expenses (as defined below), judgments, fines or amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with a Proceeding. “Expenses” shall mean any direct and indirect costs and expenses actually and reasonably incurred by Indemnitee or on his behalf in connection with the investigation, defense or appeal of a Proceeding, including any fee (including any legal fee, expert fee, accounting fee or advisory fee), charge, cost (including any cost of investigation) or expense of any nature, but shall not include the amount of any judgments, fines or amounts paid in settlement of any Proceeding.

2. Indemnification in Proceedings by or in the Right of the Company. The Company shall indemnify, defend, and hold harmless Indemnitee from and against, and shall compensate and reimburse Indemnitee for, any Expenses and, to the extent permitted by law, amounts paid in settlement that are directly or indirectly suffered or incurred by Indemnitee as a result of, or are directly or indirectly connected with, any threatened, pending or completed Proceeding by or in the right of the Company to procure a judgment in its favor, to which Indemnitee is or was a party, or is threatened to be made a party, by reason of, or arising from, the fact that Indemnitee is or was an officer of the Company or any of its subsidiaries or a member of the Company’s Board, by reason of any action or inaction on the part of Indemnitee in his role as an officer of the Company or any of its subsidiaries or a member of the Company’s Board or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of the Company or of another corporation, partnership, joint venture, trust or other enterprise, provided, however, that the Company shall not be obligated to indemnify Indemnitee under this Section 2: (1) unless Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; or (2) for any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company by a court of competent jurisdiction due to willful misconduct of a culpable nature in the performance of his duty to the Company, unless and only to the extent that the court in which such Proceeding is or was pending shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for Expenses and then only to the extent that the court shall determine. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that (i) Indemnitee did not act in good faith, or (ii) Indemnitee did not act in a manner which Indemnitee reasonably believed to be in the best interests of the Company.

Anyone seeking to overcome the presumption that Indemnitee is entitled to indemnification under this Section 2 shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

3. Expenses; Indemnification Procedure.

(a) Advancement of Expenses . The Company shall advance all Expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any Proceeding referenced in Sections 1 or 2 hereof (but not amounts actually paid in settlement of any such Proceeding). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined such Expenses were not reasonable or that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Certificate of Incorporation or Bylaws of the Company, the DGCL or otherwise. The advances to be made hereunder shall be paid by the Company to Indemnitee within ten (10) days following delivery of a written statement therefor by Indemnitee to the Company. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. Any advances and undertakings to repay pursuant to this Section 3(a) shall be made without regard to the financial ability of Indemnitee to make repayment and shall be unsecured and interest free.

(b) Witness Expenses . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of, or arising from, the fact that Indemnitee is or was an officer of the Company or a member of the Company’s Board, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all expenses actually and reasonably incurred by him or on his behalf in connection therewith.

(c) Notice/Cooperation by Indemnitee . Indemnitee shall give the Company notice in writing as soon as practicable of the commencement of, or the threat of commencement of, any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the President of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

(d) Procedure . Any indemnification provided for in Sections 1 or 2 shall be made no later than thirty (30) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company’s Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within thirty (30) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 18 of this Agreement, Indemnitee shall also be entitled to be paid for the Expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in connection with any Proceeding in advance of its final disposition) that Indemnitee has not met the standard of conduct which makes it permissible under applicable law for the Company to indemnify Indemnitee for the amount

claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including the Company’s Board, any committee or subgroup of the Company’s Board, independent legal counsel, or the Company’s stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including the Company’s Board, any committee or subgroup of the Company’s Board, independent legal counsel, or the Company’s stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

(e) Settlements . Notwithstanding anything to the contrary contained herein, the Company shall not be required to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Company’s prior written consent. The Company shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s prior written consent. Neither the Company nor Indemnitee shall unreasonably withhold their consent to any proposed settlement.

(f) Selection of Counsel . In the event the Company shall be obligated under Section 3(a) hereof to pay the Expenses of any Proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of Indemnitee in such Proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding; provided , that (i) Indemnitee shall have the right to employ his counsel in any such Proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) counsel to Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then in each case, the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company, except as otherwise expressly provided in this Agreement.

4. Additional Indemnification Rights; Nonexclusivity.

(a) Scope . Notwithstanding any other provisions of this Agreement, the Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Certificate of Incorporation, the Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors, such changes shall be, ipso facto , within the purview of Indemnitee’s rights and the Company’s obligations, under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

(b) Nonexclusivity . The provisions for indemnification and advancement of Expenses provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any agreement, any vote of stockholders or disinterested directors, Delaware law, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office. Indemnitee’s rights provided under this Agreement shall continue after Indemnitee has ceased acting as an officer of the Company or any of its subsidiaries or a member of the Company’s Board.

5. Partial Indemnification and Contribution.

(a) Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines or amounts paid in settlement actually and reasonably incurred by him in the investigation, defense, settlement or appeal of any Proceeding, but is not entitled, however, to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses, judgments, fines or amounts paid in settlement to which Indemnitee is entitled. For purposes of this Section 5(a) and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

(b) Contribution . If the indemnification provided in this Agreement is unavailable in whole or in part and may not be paid to Indemnitee for any reason other than those explicitly set forth herein, then in respect to any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), to the fullest extent permissible under applicable law, the Company, in lieu of indemnifying and holding harmless Indemnitee, shall pay, in the first instance, all Damages and Expenses actually and reasonably incurred by Indemnitee in connection with such Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee.

6. Determination of Right To Indemnification . Any indemnification under this Agreement shall be made by the Company unless a determination is made that indemnification of such Indemnitee is not proper in the circumstances because he has not met the applicable standards of conduct set forth in Section 1 or 2, as applicable, hereof. Any such determination shall be made (i) by a majority vote of the directors who are not parties to the Proceeding in question (“ Disinterested Directors ”), even if less than a quorum, (ii) by a majority vote of a committee of Disinterested Directors designated by majority vote of Disinterested Directors, even if less than a quorum, (iii) by a vote of stockholders who are not at that time parties to the Proceeding in question holding a majority of the outstanding shares of stock of all classes entitled to vote on the matter, voting as a single class, (iv) by independent legal counsel, or (v) by a court of competent jurisdiction.

7. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers or other advisors under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required

in the future to undertake to the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

8. Severability . Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to applicable law (as determined by a court of competent jurisdiction), to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be held to be invalid, illegal or unenforceable for any reason whatsoever, then (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any provisions of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any provisions of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

9. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or to advance Expenses in connection with any of the following:

(a) Excluded Acts . Any actions or omissions or transactions from which an officer or director of a corporation may not be relieved of liability under Delaware law;

(b) Claims Initiated by Indemnitee . Any Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification and/or advancement of Expenses arising under this Agreement, the Certificate of Incorporation, the Bylaws or any other statute or law, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Company’s Board finds it to be appropriate;

(c) Lack of Good Faith . Any Proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such Proceeding was not made in good faith or was frivolous;

(d) Claims Under Section 16(b) . Expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute;

(e) Insurance Payments . Any claims for which payment is actually made to Indemnitee under a valid, enforceable and collectible insurance policy;

(f) Other Payments . To the extent that Indemnitee is indemnified and actually paid or Expenses are advanced otherwise than pursuant to this Agreement;

(g) Personal Advantage . If it is proved by final judgment in a court of law or other final adjudication to have been based upon or attributable to Indemnitee’s in fact having gained any personal profit or advantage to which he was not legally entitled; or

(h) Unlawful Indemnification . If a final decision by a court having jurisdiction in the matter shall determine that such indemnification or advancement of Expenses is not lawful.

10. Remedies of Indemnitee . In the event that (i) the Company makes a determination that Indemnitee is not entitled to indemnification under Section 1 or 2 of this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 3 of this Agreement, or (iii) payment of indemnification is not made pursuant to this Agreement within thirty (30) days after receipt by the Company of a written request therefor, Indemnitee shall be entitled to an adjudication in an appropriate court in the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification and shall be entitled to reimbursement of Expenses incurred in connection therewith in accordance with Section 18.

11. Insurance . To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the Company or any other corporation, partnership, joint venture or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, agent or fiduciary under such policy or policies.

12. Subrogation . In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

13. Effectiveness of Agreement . To the extent that the indemnification permitted under the terms of certain provisions of this Agreement exceeds the scope of the indemnification provided for under Delaware law, such provisions shall not be effective unless and until the indemnification permitted by such provisions comes within the scope of the indemnification provided for under Delaware law. In all other respects, the balance of this Agreement shall be effective as of the date set forth on the first page.

14. Enforcement . The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer of the Company or any of its subsidiaries and/or a member of the Company’s Board, and the Company acknowledges that Indemnitee is relying upon this Agreement as consideration for serving as an officer of the Company or any of its subsidiaries or a member of the Company’s Board.

15. Construction of Certain Phrases .

(a) For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any

constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

(b) For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any ERISA excise taxes or penalties; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries.

16. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

17. Successors and Assigns . This Agreement shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of Indemnitee and Indemnitee’s estate, heirs, legal representatives and assigns. This Agreement will continue in effect whether Indemnitee continues to serve as an officer or director of the Company or any of its subsidiaries or any other enterprise at the Company’s request.

18.1 Attorneys’ Fees . In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, Indemnitee shall be entitled to be paid all court costs and Expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and Expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous.

19. Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by domestic certified or registered mail, properly addressed with postage prepaid, on the third business day after the date postmarked; otherwise a notice shall be deemed duly given when such notice shall be actually received by the addressee. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. The failure to notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.

20. Modification and Waiver . No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such wavier constitute a continuing waiver.

21. Choice of Law . This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

[Signature Page Follows]

IN WITNESS WHEREOF , the parties hereto have executed this Indemnification Agreement as of the date first above written.

AGREED TO AND ACCEPTED


INDEMNITEE:	TRI POINTE HOMES, INC.

By:	By:
		Name:
Address:		Title:

Exhibit 21.1

List of subsidiaries of TRI Pointes Homes, Inc.,

upon completion of the offering

1.	TRI Pointe Communities, Inc., a Delaware corporation

2.	TRI Pointe Contractors, LP, a Delaware limited partnership

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated November 6, 2012, in the Registration Statement (Form S-1 No. 333- ) of TRI Pointe Homes, LLC and related Prospectus of TRI Pointe Homes, Inc. dated December 21, 2012.

/s/ Ernst & Young LLP

Irvine, California

December 21, 2012

Exhibit 23.2

CONSENT OF JOHN BURNS REAL ESTATE CONSULTING, LLC

We hereby consent to the use of our name in the Registration Statement on Form S-1 (together with any amendments or supplements thereto, the “Registration Statement”), to be filed by TRI Pointe Homes, LLC, a Delaware limited liability company (to be converted into a Delaware corporation and renamed TRI Pointe Homes, Inc.) (the “Company”), to the references to the John Burns Real Estate Consulting, LLC market study prepared for the Company wherever appearing in the Registration Statement, including, but not limited to the references to our company under the headings “Summary,” “Market Opportunity,” “Our Business” and “Experts” in the Registration Statement, and, if applicable, the attachment of such market study as an exhibit to the Registration Statement.

Dated: December 21, 2012


JOHN BURNS REAL ESTATE CONSULTING, LLC

By		/s/ Donald Walker
Name:		Donald Walker
Title:		President

Exhibit 99.1

CONSENT OF RICHARD D. BRONSON

Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to be named in the Registration Statement on Form S-1 of TRI Pointe Homes, LLC, a Delaware limited liability company (to be converted into a Delaware corporation and renamed TRI Pointe Homes, Inc.) (the “Company”), and any amendments or supplements thereto, including the prospectus contained therein, as an individual who has agreed to serve as a director of the Company upon completion of the initial public offering of the Company’s common stock, to all references to the undersigned in connection therewith, and to the filing or attachment of this consent as an exhibit to such Registration Statement and any amendment or supplement thereto.

Dated: December 21, 2012

/s/ Richard D. Bronson

Richard D. Bronson

Exhibit 99.2

CONSENT OF WADE H. CABLE

Dated: December 21, 2012

/s/ Wade H. Cable

Wade H. Cable

Exhibit 99.3

CONSENT OF STEVEN J. GILBERT

Dated: December 21, 2012

/s/ Steven J. Gilbert

Steven J. Gilbert

Exhibit 99.4

CONSENT OF THOMAS B. ROGERS

Dated: December 21, 2012

/s/ Thomas B. Rogers

Thomas B. Rogers