Consolidation of Home Builders Continues With 2 Local Deals
The reshaping of California’s home-building industry intensified Wednesday with the announcement of two huge deals involving some of the Southland’s best-known residential companies.
In one transaction, Orange County’s largest home builder would merge with a company spun off from the empire of Ray Watt, a prominent Santa Monica developer who has built more than 100,000 homes since 1947.
The combination of Irvine-based John Laing Homes and Watt Residential Partners of Encino would create a company that expects to sell 2,000 homes for $400 million this year. The chief executive of the new WL Homes, Laing’s Larry Webb, hopes to take the company public within three years.
In the second deal, Miami-based Lennar Corp. plans to buy three privately held builders: ColRich Communities of San Diego, and Communities Southwest and Polygon Communities, both of Irvine. Lennar will pay $370 million in stock, cash and assumed debt.
The three companies’ 14,000 lots would bolster Lennar’s position in Orange and San Diego counties and give it entree to the Inland Empire, where housing markets are beginning to take off.
“This fills the hole in the doughnut for us,” said Jon Jaffe, who heads Lennar’s regional operations from Irvine.
Lennar is among several large, publicly traded builders expanding in California’s hot housing markets after the long recession that crippled many of the state’s home-grown builders and developers.
Lennar purchased Pacific Greystone Corp. of Los Angeles last year and in 1996 bought the Stevenson Ranch development in Santa Clarita and Coto de Caza in south Orange County.
The company has become California’s second-largest home builder and by Jaffe’s calculations had a greater dollar backlog of residential work than any builder in the state even before Wednesday’s deal was announced.
Laing is a subsidiary of the British construction company John Laing. According to Meyers Group, an Irvine consulting firm, Laing built more homes than anyone else in Orange County last year, an area once dominated by such regional titans as William Lyon, the Baldwin brothers and Kathryn Thompson.
Ray Watt, for decades one of the Southland’s biggest home builders, ran into trouble in the early 1990s. He stumbled with such developments as the proposed Watt City Center complex on the Thomas Cadillac site west of the Harbor Freeway in downtown Los Angeles, and the Jess Ranch retirement community in Apple Valley.
Watt sold some residential assets to Beazer Homes USA in 1993, and in 1994 put other California, Utah, Nevada, Colorado and Hawaii properties into Watt Residential Partners, a joint venture with Whitehall Street Limited Partnership III, an investment group administered by Wall Street powerhouse Goldman, Sachs & Co.
Laing would walk away with about $80 million in cash and the two companies each would own 50% of the new venture, said Wayne Stelmar, Watt’s chief financial officer. WL Homes, which would be based in Irvine, would have six board members, three from each side, including Ray Watt.
