Avatar Holdings of Coral Gables, Fla., said late Monday that it has 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.
Avatar purchased the assets from JEN Partners, a New York-based real estate private equity fund, which will become a significant shareholder in Avatar.
The portfolio encompasses Joseph Carl Homes, the Phoenix-based private home builder, and its CantaMia development, a 1,781-unit active adult community in Arizona. The deal also covers land acquired from Sharpe Properties: 445 acres in Orange County, Fla., which include 839 partially developed lots, a multifamily tract, and a two-acre commercial site.
"This is an important transaction for Avatar,” said Jon M. Donnell, who will become Avatar Holdings’ president and CEO on Nov. 15 after the recently announced retirement of Gerald Kelfer. “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.”
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 Dec. 31, 2014.
The properties significantly expand Avatar's existing footprint in its two primary markets of Arizona and Florida. It will also bring to the company several real estate executives, including Joseph Carl Mulac III, founder of Joseph Carl Homes and a former TOUSA senior executive, who will join Avatar as executive vice president and president of Avatar Properties. Additionally, two managing directors from JEN Partners, Reuben Leibowitz and Allen Anderson, will join the Avatar’s board as part of the agreement.
"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,” Kelfer said. “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."
Shares of Avatar closed flat at $18.75 in normally light trading Monday.