The combination of Fairfax, Va.-based Brookfield Homes and the North American land development and home building division of Toronto, Ontario-based Brookfield Office Properties (BOP) is not expected to materially change the organizational structure or strategic direction of either company, according to its new chief executive.

This merger, if approved, would form a North American enterprise with $2.5 billion in assets and equity value of $1 billion. That would make it the sixth-largest builder/developer in North America, based on assets, says Alan Norris, who is president and CEO of the combined entity, to be called Brookfield Residential Properties.

Ian Cockwell, who had been CEO of Brookfield Homes, would stay on as executive vice chairman of the combined company, which would now be based in Calgary, Alberta.

This deal has been in the works since late July, when Brookfield Homes and Brookfield Properties Corp. (now BOP) started talking about combining their American and Canadian residential operations, so that Brookfield Properties could concentrate exclusively on commercial development.

Norris had been running Brookfield Properties’ residential division, known as Carma Developers, since 1994. Carma builds homes in Alberta and Ontario, and develops land in Texas and Colorado to sell as finished lots to other builders.

In an interview with BUILDER on Monday afternoon, Norris said that he’s been on Brookfield Homes’ board of directors for several years, so he's familiar with its operations in the United States. He does not anticipate the combination will result in many personnel or strategic changes on either side of the border. “There’s a lot of compatibility,” he says.

At the time of the definitive agreement, Brookfield Homes was a move-up builder focusing its construction and sales activities in California and the Washington D.C.-Virginia areas. It controls 8,277 lots in Northern California; 8,948 in its San Diego-Riverside, Calif., market; 3,673 in the Los Angeles area; and 5,017 in the D.C. market.

Through the six months ended July 29, 2010, Brookfield Homes had closed 291 homes and had generated $136 million in housing revenue. (Both those numbers were up from the same period the previous year.)

Carma controls 47,591 lots in Edmonton and Calgary, Alberta, where it builds mostly entry-level homes priced between $200,000 and $320,000 under the names Hawthorne Homes (multifamily) and Heartland Homes (single-family); 9,439 lots in Ontario, where it builds under the name Brookfield Homes; 15,864 lots in the Austin, Texas, area; and 10,151 lots in Denver.

Norris says there’s a possibility that the combined company could eventually build homes in Colorado and Texas.

When asked about further expansion in North America, Norris says Brookfield Residential Properties is not necessarily looking to become one of the largest builders in sales or closings, but is willing to leverage its larger size and balance sheet to explore other markets, albeit cautiously. “The U.S. market is still struggling, and there are still a lot of unknowns,” he said.

The deal calls for Brookfield Office Properties to be paid C$480 million (Canadian dollars) in the form of promissory notes, and to receive 51.5 million shares of new common stock in Brookfield Residential, valued at US$515 million. (BOP’s shareholders will be entitled to acquire this stock at $10 per share when this transaction closes.) BOP also gets another US$217 million in “expected distribution,” of which it has already received US$177 million.

Shareholders in Brookfield Homes would receive roughly 0.765 shares of new Brookfield Residential common stock for every share of Brookfield Homes they own. And Brookfield Asset Management will convert its 9.9 million shares of preferred stock in Brookfield Homes into 35.4 million shares of common stock in Brookfield Homes, effectively raising its ownership of the American builder to 91% from 66% prior to the combination. (Brookfield Asset Management owns 51% of the commercial developer, too.)

This transaction, which is subject to approval from both companies’ shareholders and both countries’ regulatory agencies, is expected to close next January.

John Caulfield is senior editor for BUILDER magazine.

Learn more about markets featured in this article: Washington, DC, San Diego, CA, Los Angeles, CA, Austin, TX, Denver, CO.