Avatar Holdings, Coral Gables (NASDAQ:AVTR) late Monday said it acquired a portfolio of real estate assets in Arizona and Florida, including Joseph Carl Homes, for approximately $62 million in cash, stock and notes, plus an earn-out of up to $8 million.
The purchase was made from JEN Partners LLC, a New York-based real estate private equity fund.
The assets include Joseph Carl Homes, LLC, the Phoenix-based private home builder and the developer of CantaMia, an active adult community and of single family homes. The deal also includes CantaMia, a 1781-unit community located in the Estrella Mountain Ranch Master Plan Community in Goodyear, Arizona. It also includes Sharpe properties in Florida, comprised of 445 acres located in Orange County with 839 partially developed lots, a multi-family tract, and a two-acre commercial site.
The price consists of $30 million in cash, $20 million in restricted common stock subject to a two-year lock up agreement, and $12 million of notes divided equally into two $6 million notes, one with a 1-year maturity and the second with a 2-year maturity. In addition, the agreement provides for up to $8 million in common stock, subject to the achievement of certain agreed upon metrics related to the CantaMia project by December 31, 2014.
The properties significantly expand Avatar's existing footprint it its two primary markets of Arizona and Florida. It will also bring to the company several real executives, including Joseph Carl Mulac III, fouder of Joseph Carl Homes and a former senior executive with Tousa , Inc, who will join Avatar as evp and president of Avatar Properties Inc. Additionally, as part of the agreement, two managing directors from JEN Partners, Reuben Leibowitz and Allen Anderson, will join the Avatar Board of Directors.
Prior to founding JEN Partners, Leibowitz spent 22 years at Warburg Pincus and was responsible for the firm's real estate effort. Anderson had been chairman and CEO of Meridian Industrial Trust, a NYSE listed REIT until its sale to Pro Logis in 1999. He joined JEN as senior advisor in 2006 and became a managing director of the firm in 2008.
Through this transaction, JEN Partners will become a significant shareholder of Avatar.
Gerald D. Kelfer, Avatar's president and CEO, said, "Cumulatively, this transaction will be transformative for Avatar as it significantly strengthens and expands our footprint, particularly in Arizona, bolsters our management team, and deepens the experience of our board of directors. As I prepare to retire from day-to-day management responsibilities, I do so with the confidence that this transaction is in the best interests of the company and its shareholders."
Kelfer, 65, announced his retirement earlier this month. He will remain vice chairman of Avatar's board.
Jon M. Donnell, who will become Avatar's president and CEO on November 15th, added, "This is an important transaction for Avatar. Many of the properties we have just acquired from JEN are in the sweet spot of our strategy to build premium active adult communities and consistent with our stated goal to capitalize on current market opportunities," added Mr. Donnell. "We are also very pleased that Carl Mulac is joining our company. He brings more than 25 years of experience developing and growing homebuilding operations to Avatar. He will be a solid addition to our senior management team."
Shares of Avatar closed flat at $18.75 in normally light trading Monday.
Learn more about markets featured in this article: Phoenix, AZ.