Toronto-based Brookfield Homes has agreed to purchase the homebuilding assets of Newport Beach-based Catellus Residential Group for upwards of $100 million, according to sources familiar with the transaction.
With a portfolio that includes more than 1,100 lots throughout Southern California, most of which are in Orange County, Catellus Residential was hotly pursued by some of the biggest names in the homebuilding industry. In the end, the choice came down to Miami-based Lennar Homes, Costa Mesa-based Standard Pacific Corp. or Brookfield, sources said.
Brookfield and Catellus officials declined to comment.
The sale includes only the assets of the Catellus’ merchant housing division, which oversees actual construction and sales of new homes on the company’s land.
Catellus will continue to operate its community development division, whose main task is the entitlement and planning of raw land, which is then sold to other builders for construction.
The merchant housing division was formed with the assets of The Akins Co., which San Francisco-based Catellus Development Corp. acquired for $9.1 million in stock in 1996. One of the main motivations for that purchase, Catellus and industry sources pointed out at the time, was the infusion of an experienced homebuilding management team, mostly in the form of OC homebuilding brothers Carl and Bruce Akins, who became chairman and president, respectively, of the new Catellus division.
But Catellus sought to take advantage of the strong residential boom in California by actually building homes as well as selling finished lots to other builders.
Consolidation A Factor
This year, the company cited consolidation in the homebuilding industry,with bigger players having easier access to cash and realizing economies of scale,as one of the reasons it was to sell the division. At the same time, the company announced that the Akins brothers had decided to leave the company, which they did at the end of March. The merchant housing division currently is headed by Bruce Lehman, who also joined Catellus from the Akins Co.
John Burns, senior managing director with The Meyers Group, a real estate consulting and research company, said that while the existing projects were a major attraction for any buyer,given the highly competitive search for available lots in Orange County,the existing management team at Catellus Residential also was an attractive asset, if they agreed to join the acquiring entity.
“One of the great things about Catellus was their management team, but I’m not sure which of their management team is staying,” Burns said. “With the market being so hot right now there is a shortage of people in our industry, so that would be an additional benefit beyond the land value.”
In Orange County, Catellus has ongoing projects in Talega, San Clemente, Irvine, Aliso Viejo and Huntington Beach. Last year, the company built and sold 350 homes, 175 of which were in Orange County, making it the 14th most-active homebuilder in the county. n
