“We have 13,000 lots ahead of us and very strong entitlements in place and a good land team, but we have no housing presence,” says Don Merlo, Brookfield’s chief operating officer in Arizona and Texas. “That’s where Grand Haven comes into the equation. When you’re a large player, it only makes sense to have a home building platform as a path for innovation on the land side.”
But Brookfield didn’t want just any builder. “Grand Haven has a top tier management team,” Merlo says. “They have a very passionate staff. Their philosophical and cultural approach is strongly aligned with what we stand for as a company.”
The acquisition also gives Grand Haven the dry powder for additional growth. “The synergies here are, land and housing are more powerful together,” Merlo says. “From the Grand Haven point of view, they get bolted on to the biggest land platform in the market—to a company like ours with access to capital.”
Despite Grand Haven’s size, it closed 156 homes last year, representing about 3% of the market. Merlo says the company has scalable internal processes and structures.
“Their existing land positions are highly compatible to our land positions,” Merlo says. “When you put them together, we now have insight into every major submarket in the Austin metro. For a large player with existing land base looking to grow, its great fit all the way around.”
Betting On Austin
And, it’s a market where home builders can operate a margin-based business. Grand Haven is a premium builder, but Merlo thinks it can build that top-of-the-line product for a lower price point.
“It’s a somewhat fragmented market on the home building side,” Merlo says. “It has greenfield growth and brownfield growth and urban intensification growth. There are a lot of ways to find margin in home building in that market.”
Right now, Brookfield has a development platform in 12 different markets. With the Grand Haven purchase, it now has home building operations in 11 of those locales. The only market where it doesn’t own a home builder is Phoenix, which it only entered a couple of years ago.
“That’s probably a natural fit,” Merlo says. “When the land is right and situation is right, we probably would look to see if it [buying a builder] made sense there.”
But Merlo doesn’t anticipate moving beyond its 12 markets anytime soon. “We have a lot on our plate building the company we’ve got versus going into new markets.”