Advertisement

Brookfield Homes to Take Over Catellus Unit

Share
TIMES STAFF WRITER

Raising its profile among West Coast developers, Brookfield Homes of California Inc. said it will take control of the home-building operations of Catellus Development Corp. for $147.5 million in cash.

Brookfield, the Costa Mesa subsidiary of Toronto-based Brookfield Properties Corp., will manage a new limited liability company that will own 900 Catellus lots in 16 projects, primarily in Orange County.

Catellus, one of the largest developers in the West, will retain a $22.5-million interest in the new company, the name of which was not disclosed. The stake will be repaid to the San Francisco company along with profits over two to three years.

Advertisement

Brookfield also is arranging an additional $125 million in financing through a group of lenders led by Bank of America Corp.

The move is a standard shift for developers who change from selling homes to selling land when market conditions are favorable for making a switch, said Matthew Diston of DMG Economics, a Trabuco Canyon real estate consulting firm.

With buildable land in short supply, prices have soared and developers have been willing to pay top dollar in many coastal counties for parcels where homes can be built.

“There’s quicker money to be made in selling finished lots than in sitting on the inventory of built houses,” Diston said.

Catellus said in March it was considering selling its home-building unit and lots because profit margins were getting slim amid increasing industry consolidation.

“They feel they don’t have the critical mass to compete in this market,” said Craig Silvers, an analyst at Sutro & Co.

Advertisement

With the transaction expected to close in the third quarter, Catellus said it will use about $72.5 million of the cash it receives to repay debt.

Catellus also said it appointed Timothy L. Unger as president of Catellus Residential Group, which will now focus on selling land. Unger, former executive vice president of the community development division of Catellus Residential, replaces Bruce Lehman, who has left the company.

Catellus’ shares rose $1.63 to close at $16.63 in Monday trading on the New York Stock Exchange. Brookfield Properties’ shares did not trade on U.S. and Canadian exchanges Monday because of a bank holiday in Canada. The shares were unchanged on Friday in New York at $13.31.

*

Bloomberg News was used in compiling this report.

Advertisement