A giant United Arab Emirates real estate company on Thursday acquired Newport Beach-based John Laing Homes for $1 billion in cash, a deal that creates one of the world’s largest property developers.
The transaction, which has been approved by a federal agency that oversees foreign acquisitions of U.S. firms, is Emaar Properties’ first venture in the United States.
Emaar, which builds luxury housing and commercial developments in Asia and in many parts of the Arab world, has plans to extend its reach. It is building what it describes as the world’s tallest tower and the world’s biggest shopping mall, both in Dubai, where the company is based.
“Partnering with John Laing Homes is consistent with our strategy of expanding our business on a global basis,” Emaar Chairman Mohamed Ali Alabbar said in a statement. “This agreement will provide Emaar with an important gateway into the U.S. real estate market.”
The timing of the deal, coming amid a slowdown in the U.S. housing market, also could signal further consolidation and increased foreign interest in the U.S. home-building sector.
“As one of the country’s most well-respected private builders, it’s not surprising to see John Laing being acquired,” said Patrick Duffy, managing director of industry market research firm Hanley Wood Market Intelligence. “What is surprising is that it’s being acquired by a non-U.S.-based entity, which could portend the trend of globalization affecting the national building industry in a more significant way.”
Other U.S. home builders owned by foreign entities include Technical Olympic Homes USA, which is based in Hollywood, Fla., and is a subsidiary of a Greek company. Barrat American, based in San Diego, was a unit of British builder Barrat Developments until 2004.
Buying Laing gives Emaar a toehold in what is still one of the strongest real estate markets in the world. The privately held Orange County company, which posted $1.6 billion in revenue last year and ranked 20th among U.S. builders, constructs about 3,000 homes annually, primarily in California, and owns or controls 150,000 undeveloped lots.
What’s more, the deal gives Emaar a respected brand name and a strong management team in the U.S. Laing was recognized as “America’s best builder” this year by Builder magazine.
Consolidation in the sector is expected as the market cools and smaller companies find it harder to compete against larger, publicly traded firms. A downturn gives larger companies a chance to beef up market share through acquisitions.
“It certainly bodes well for the long-term real estate market in this country, because you have a foreign company investing in a U.S. based home builder,” Duffy said.
Laing, because of its strong balance sheet and reputation, has long been an attractive acquisition target for larger builders. But until now the company wasn’t pursuing a sale. Chief executive and principal stakeholder Larry Webb said Emaar approached him late last year and persuaded him otherwise.
“We met them and basically it was love at first sight,” Webb said. “We have a very similar culture and similar expectations and goals.”
Once the transaction was in motion, Emaar sought and received approval from the Committee on Foreign Investment in the United States, the body that must endorse foreign acquisitions of U.S. firms. The committee made headlines this year when it quietly approved another Dubai company’s deal involving the ownership of U.S. ports. That deal was later scuttled when members of Congress and others voiced concerns.
“There’s no reason for any politician to make some kind of political hay out of this,” Webb said.
Webb said Emaar intended to provide Laing with capital to expand its existing 11 divisions in California and Colorado and also to give it the go-ahead to expand into new regions in the South and Southwest.
Webb said he and his top managers planned to stay with Emaar and had signed five-year contracts.
“Emaar wants us to continue to run the company the way we always have,” he said.
Foreign ownership is nothing new for Laing. It was formerly a subsidiary of British construction company John Laing PLC.
Begin text of infobox
Business: Real estate development
Headquarters: Dubai, United Arab Emirates
Chairman: Mohamed Ali Alabbar
2005 revenue: $2.3 billion
2005 profit: $1.3 billion
Source: The company
Los Angeles Times