El Segundo-based Western Pacific Housing, a homebuilder active in Orange County, plans to merge with Hawaii-based Schuler Homes Inc.
Orange County won’t see any effects immediately, but in the long term it will help the firms compete for the diminishing number of lots that become available, said Craig Manchester, president and chief operating officer of Western Pacific, which has a planned project in Coto de Caza that soon will begin sales.
“We’re very active in Orange County,” he said. “We have been and will continue to be. (The merger) is really more of what it has to do with the company and its longevity and the strength of the company as a whole.”
Western Pacific was No. 20 on the Business Journal’s most recent list of OC homebuilders, with 105 local units sold in 1999. Rielly Homes, the Schuler unit active in OC, was No. 24 on the list, with 68 units sold in 1999. It has no active projects in OC at this time.
Under the deal, shareholders of publicly held Schuler,which has roughly 20.1 million shares outstanding,and owners of Western Pacific will receive the same amount of stock in the new company, which will retain the Schuler Homes Inc. name and ticker symbol.
James K. Schuler, president and chief executive of the current Schuler Homes, is set to hold those positions in the new firm and become co-chairman. Western Pacific founder, chairman and chief executive Eugene S. Rosenfeld will become the other co-chairman.
The deal is expected to be completed in December or early next year.
“We looked at this as an opportunity,” Manchester said. “No one was looking at this as a true sale for a price.”
While both firms should emerge with ownership in a bigger and more diverse company, other reasons played a part in their decision to merge. For Western Pacific Housing,like many homebuilders over the past five years or so,a main motivation was access to capital. While a dominant player in its own right, merging with a publicly held entity now gives it greater access to capital at competitive rates.
On the other hand, Schuler, despite being a public company, has had difficulty raising capital because of the predominant view of the homebuilder as too concentrated in Hawaii, according to a source familiar with the company.
“What they’re looking to do is establish the headquarters and a much bigger presence on the mainland, primarily for access to capital so they can grow,” said the source.
While Schuler has made inroads in some areas,it has operations in Arizona, Colorado, California, Oregon and Washington,the merger with Western Pacific will be a major step towards firmly establishing the company’s presence in the western U.S. To help establish its Southern California operations, Schuler had acquired and still operates Rielly Homes, which has three active projects in Southern California but none in Orange County.
The Western Pacific-Schuler combination will create a national homebuilder focused on the western United States that will rank among the country’s 15 largest homebuilders. For the 12 months ended June 30, Honolulu-based Schuler and Western Pacific delivered a total of 4,663 homes, generating more than $1.1 billion in revenues.
As for the effect in Orange County, Manchester said the merged entity will continue to play a major role on the local residential real estate scene.
“We’ve got a big project coming on line in Coto de Caza and we’re looking for other opportunities,” he said. “The main thing this does is give us better financial stability and financial strength.” n
