Lennar to Acquire Pacific Century
Industry giant Lennar Corp. has reached a tentative agreement to acquire privately held Pacific Century Homes of Temecula in a deal that would create one of the Southland’s biggest home builders.
The move would allow Lennar to expand its Southern California base, largely in San Diego and Orange counties, and become a dominant player in Riverside and San Bernardino counties, analysts said. Pacific Century Homes is the largest homebuilder in the Inland Empire, where buyers are flocking for lower-cost housing.
The combined companies, which closed 2,880 homes last year, would become the third-largest homebuilder in Southern California behind D.R. Horton Inc. at 3,260 units and KB Home at 2,986, according to the Meyers Group, a real estate research firm.
“For the Southland’s Big Three, the key issue is land position, and Lennar would be positioning itself for the next two years to take advantage of one of the best markets in the nation,” said Jeff Meyers, who heads Irvine-based Meyers Group.
Miami-based Lennar’s plans were disclosed in a document filed with the Securities and Exchange Commission. Although few details were outlined, a source close to the company said Lennar’s executives are reviewing Pacific Century operations and expect to complete a deal in 30 days.
Jon Jaffe, who heads Lennar’s offices in California, confirmed that he described his company’s intentions in a meeting earlier this week with nearly 300 Pacific Century employees. “We explained to them that we would be moving forward,” Jaffe said Thursday.
But he declined to disclose details of Lennar’s plans. Pacific Century executives did not return phone calls.
An acquisition would complete a stunning rise for Pacific Century and its co-founders, William Lo and Neil Gascon, who launched the company in 1995.
Analysts said Pacific Century used stylish designs and made shrewd land deals in areas that became popular with consumers. The company focused early on first-time buyers, offering homes with 10-foot ceilings for $120,000 and attracting seniors with single-story homes and bedroom suites.
Its strategy, described in a profile in Builder magazine, was mining “small veins in California’s economy with strong home designs that appeal to demographic niches.”
But large builders such as Lennar have been swiftly acquiring smaller builders in recent years. One study by the accounting firm Arthur Andersen predicted that within the next decade, three of four new U.S. homes will be built by the nation’s top 20 builders. That’s a significant change from a couple of years ago, when the biggest companies accounted for less than half of all new homes.
