Bramalea California May Use $25 Million to Buy Land : Real estate: Some of proposed $215-million infusion to Canadian firm would aid local market.
Southern California’s struggling housing industry could get a much-needed jump-start as part of a proposed $215-million investment in Bramalea Inc., a Canadian real estate development company.
Though Bramalea is best known as a commercial and retail developer, a portion of the cash--perhaps $25 million--would be targeted for land acquisitions by the Toronto company’s Bramalea California Inc. housing division, headquartered in Newport Beach.
The cash infusion would be a boon for the region’s residential home-building industry, which had just started showing signs of recovery from four years of recession when the Federal Reserve began jacking up interest rates last year.
The money Bramalea is likely to pump into the local real estate market isn’t enough to rejuvenate the housing industry by itself, said Brea-based analyst Alfred Gobar. “But it is good because it shows a lot of confidence in Southern California” by a major developer, he said.
In addition, the amount of land owned by banks and financially ailing developers has dropped dramatically in recent months, and the land now on the market is largely being sold--at steadily increasing prices--by developers of planned communities, such as Irvine Co., said Buck Panchal, senior consultant with Meyers Group, a Newport Beach-based development industry consulting firm.
Bramalea “could be looking to buy now, before competition drives prices up even more,” he said.
The company, which owns $30 billion in commercial, retail and residential property in the United States and Canada, is in the midst of a restructuring after a 1992 bankruptcy reorganization. It posted a $7.4-million net profit for 1994--its first in several years.
The proposed $215-million cash infusion is from an international investment group headed by Florida investor Steven Green, chairman of the $1-billion-a-year Astrum International Corp. Astrum owns Samsonite and American Tourister luggage, Culligan water treatment and McGregor Sportswear companies.
Although much of the money would be used for corporate operating purposes and the purchase of additional commercial and retail property, $35 million has been set aside to expand Bramalea’s housing operations. Most of that is aimed at the California division, a corporate spokesman in Toronto said Tuesday.
The housing units are critical to Bramalea’s recovery because they account for nearly half of the company’s total revenue of about $535 million a year--31% coming from the California and Texas residential development units alone, said Donald L. Fenton, a Bramalea vice president.
Bramalea intends to step up its activities in Southern California because the market is poised to pick up again, added Jeff Roos, who became the California unit’s senior vice president and head of operations two weeks ago when former division President Leon Swails departed for a new position with Lewis Homes in Upland as head of that company’s Southern California division.
The cash infusion still is contingent on several concessions from Bramalea’s creditors, including a five-year extension of $750 million in loans now scheduled to come due in early 1998. But Bramalea officials say they believe the investment by the Green-led finance group, called International Realty Investors, will happen. “We’ve been negotiating with (International Realty Investors) and with our lenders for several months, and we are at a very advanced stage,” Fenton said.
In addition to California and Texas, Bramalea builds homes in Indiana, Ohio and Ontario, Canada. Its focus in California has been in Orange, Los Angeles, San Bernardino, Riverside and San Diego counties.
The company builds homes ranging from $84,000 starter homes in Moreno Valley to $600,000 city-view luxury homes in the hills above La Jolla.
In Orange County, projects include $210,000 houses in Foothill Ranch and $280,000 houses in Mission Viejo. A new project is to begin construction later this year in Tustin Ranch, with prices tentatively set to start around $425,000.
Bramalea also started an ambitious development of $1-million semi-custom homes in the Irvine Co.’s Newport Coast planned community several years ago, but poor sales in the ensuing recession forced the company to shut down the project until economic conditions improve.
In all, Bramalea California Inc. has 4,500 lots in varying stages of development in Southern California. At current average Southern California land prices, the company could pick up an additional 250 graded and improved lots for $25 million, Panchal estimated.
In 1994, Bramalea California Inc. sold 655 homes at an average price of $245,000, the company said.
