By Alison Rice. Does it really make sense for a commercial real estate firm to own a home building company?

That's the issue Brookfield Properties Corp., the Toronto-based parent company of Brookfield Homes, has been wrestling with for the past year--along with those who watch the company. "It's a question people ask frequently," says Louis Forbes, an analyst with Merrill Lynch in Toronto.

The company acknowledged the quandary in a July conference call, when it outlined the three options it was exploring for Brookfield Homes, which contributes roughly $1 billion to Brookfield Properties' $8 billion in total annual revenue. The options included separating home building from the commercial side, selling some of the home building operations, or retaining the current structure.

But this summer, as investment bank Goldman Sachs did a valuation of Brookfield Homes as part of the company's research, it tested another option: Package the California operations for sale, which last year generated 1,228 home sales and $602 million, according to the company's annual report.

And the big publics--reportedly Lennar, Centex, Pulte, and Toll--were actively interested. But a deal couldn't be found, and the company is now off the so-called auction block.

"None of the divisions are for sale," says Richard Clark, president and CEO of Brookfield Properties. "The division is generating great results and returns for us. It makes more sense to keep it as a going concern than to sell it off as land parcels."