In a deal that would mean a massive shift of Southern California property, century-old Newhall Land & Farming Co. -- developer of the Valencia master-planned community and one of the state’s largest landowners -- agreed Monday to be acquired for $990 million by a partnership based in Miami.
The proposed sale would transfer vast tracts of land and the controversial Newhall Ranch project to the nation’s third-largest home builder, Lennar Corp., which is joining with another Florida-based real estate firm to buy Newhall Land.
Valencia-based Newhall Land owns 47,000 acres in the state, about 17,000 of which lie just north of Los Angeles in the fast-growing Santa Clarita Valley. The company also has 16,000 acres in Ventura County and 14,000 acres of farmland in the San Joaquin Valley.
The 120-year-old firm is trying to develop a second master-planned community in the region, 12,000-acre Newhall Ranch, which is the largest single housing development ever approved by Los Angeles County.
Executives of Newhall Land, Lennar and its partner, LNR Property Corp., said the prospective buyers don’t plan major changes to the company’s proposals.
But the deal brought an immediate outcry from environmental groups that have long opposed Newhall Ranch and the suburban sprawl of Los Angeles. They said Monday that an out-of-state company would show less sensitivity to concerns about the disappearance of open space and about the quality and amount of water in the Santa Clarita Valley.
Development expert William Fulton, president of Solimar Research Group in Ventura, said that Los Angeles County could face more challenges if a new team of corporate decision makers ends up calling the shots on Newhall Ranch -- a 20,885-home project that has yet to be planned out on a block-by-block level.
“We had every reason to believe that, like the Irvine Co., Newhall would be the developer of Newhall Ranch for 20 years,” Fulton said. “Now here’s a different company coming in and interpreting the terms of the agreement with L.A. County.”
Gary Cusumano, Newhall’s chief executive, said the company agreed to the deal because Lennar is offering a good price, is committed to Newhall Land’s plans for its holdings and expects to retain the company’s 120 employees.
“They’re the cream of the crop,” he said of Lennar and LNR Property, a commercial real estate services concern that Lennar once owned. Noting that Lennar approached Newhall Land with the proposal, Cusumano added: “We’re a public company; we have an obligation to look at opportunities.”
Jon Jaffe, a vice president of Lennar, which builds houses throughout Southern California, said that “as master-planned developers ourselves, we share their vision” for developing the area. “We saw a real strategic fit of acquiring entitled land in this fast-growing marketplace, and we are home builders.”
The Lennar executive said the concerns of environmental groups were unfounded. “We don’t think of ourselves as an out-of-town builder,” Jaffe said.
Lennar, founded in 1954, builds single- and multifamily homes nationwide under the Lennar name and others, including U.S. Home and Greystone Homes in California. The company delivered 27,000 homes nationwide last year -- about 5,500 of them in California. Its sales soared from $593 million in 1993 to $7.3 billion in its fiscal year ended Nov. 30.
Lennar has long been a major acquirer of smaller builders. In April it agreed to buy Coleman Homes in Bakersfield for an undisclosed price.
The proposed Newhall Land deal “is a significant land transaction” but not an unexpected one, said Richard Gollis, a principal at Concord Group, a Newport Beach real estate advisory firm of which Newhall Land and Lennar have been clients.
Indeed, there has been talk for years that Newhall Land might be a takeover target because its large land holdings and agricultural interests weren’t regarded by Wall Street as strong growth vehicles.
For Lennar, the land is a “dirt pipeline of raw material for its home building,” Gollis said. “It continues a tradition of Lennar as a market leader in terms of buying property.”
But the proposed buyout of Newhall Land, which had 2002 revenue of $240 million, could add to the concerns of some residents about the company’s development plans.
A group called Santa Clarita Organization for Planning the Environment, or SCOPE, has challenged a number of Newhall’s developments in court. SCOPE President Lynne Plambeck said her organization also is familiar with Lennar. In fact, the group is in the process of challenging the environmental report for a Lennar project -- a phase of the Stevenson Ranch subdivision just west of the city of Santa Clarita -- in a court case that is on appeal.
Plambeck said she was concerned that Lennar has less of a stake in the community than the locally based Newhall does, calling the proposed sale “a terrible thing.”
“Lennar is a huge outside builder that doesn’t care,” she said. “We’ve always considered Newhall Land & Farming to be gentleman adversaries.”
Because Newhall Land owns a local water purveyor, Valencia Water Co., the California Public Utilities Commission must approve Newhall’s sale.
Less than two decades ago, Newhall Land owned more than 120,000 acres in California, holdings that the company’s founders began accumulating a century ago by purchasing Spanish land grants. The company has been selling off much of its farmland in recent years.
In Valencia, the company still owns about 5,000 acres, and about 7,000 additional houses are either under construction there or going through the approval process.
The deal would not affect Magic Mountain theme park in Valencia. Newhall Land helped build the park but sold the facility and the land in the 1970s, Newhall Land spokeswoman Marlee Lauffer said.
Newhall Land is organized as a publicly held “master limited partnership,” whose investors own “units” that are publicly traded like shares of stock.
Under the proposed transaction, the partnership formed by Lennar and LNR Property would pay $40.50 in cash for each unit. If the deal isn’t completed in nine months, the partnership will have to pay an additional 5% to the unit holders, the companies said.
The announcement was made after financial markets closed. Newhall Land closed Monday at $33.40, up $1.35. Lennar’s shares fell $1.89, to $66.46, and LNR’s shares rose 46 cents to $38.96. All three companies trade on the New York Stock Exchange.
Plambeck said she was unsure whether environmentalists would be able to block the sale at the commission level, but she said she definitely would use the occasion to voice her concerns.
She and others have long protested Newhall Land’s ownership of Valencia Water Co., charging that the water company has taken actions -- including, she said, exaggerating water supplies and underreporting water pollution -- that seem to benefit its parent company more than the ratepayers.
“I think we will be very concerned that Valencia Water Co. will go to this big private company. I think there have already been big conflicts of interest with Newhall-owned Valencia Water Co. that have not worked for the public’s benefit, and this would only get worse with Lennar.”
Times staff writer Tom Petruno contributed to this report.
(BEGIN TEXT OF INFOBOX)
Newhall Land & Farming Co. has agreed to be bought by a partnership that includes home builder Lennar Corp. for $990 million.
* Founded: 1954
* Headquarters: Miami
* Major property and developments: Builds homes in 18 states, including 27,393 new homes in 2002. The spin-off company LNR Property Corp. owns 6.8 million square feet of commercial space and 11,200 apartments.*
Newhall Land & Farming Co.
* Founded: 1883
* Headquarters: Valencia
* Major property and developments: Owns more than 47,000 acres in California; developed Valencia, and its Newhall Ranch proposal would have 20,885 homes on 11,963 acres.
Source: Company reports
Los Angeles Times
*as of February 2003