The recent $62 million acquisition of Phoenix-based builder Joseph Carl Homes (JCH) by Coral Gables, Fla.-based Avatar Holdings brings together a new company that emerged from the housing recession’s wreckage with a nearly 50-year-old builder/developer that has been trying to shake off the ill effects of the severe downturn.

The deal had been in the works for about 45 days, and came together “very quickly,” explains Carl Mulac, JCH’s founder and CEO, who is now president of Avatar Properties and executive vice president of Avatar Holdings. “It was really a ‘fit’ issue for both of us.” It is likely that active adult “will be a big part” of the company’s marketing efforts and growth, he says. Mulac points specifically to Avatar’s 4,300-acre Solivita master-planned community in Poinciana, Fla., and JCH’s CantaMia active-adult community, which is entitled for 1,781 homes in the Estrella Mountain Ranch master plan in Goodyear, Ariz., as examples of the similarities in both companies’ approaches to targeting the active-adult buyer segment.

On Thursday afternoon, BUILDER spoke with Mulac and Reuben Leibowitz, managing director with JEN Partners, the New York-based investment firm that provided JCH with startup capital in 2009. Mulac, who will commute between Florida and Arizona in his new job, says JCH’s management team and employees are staying on as part of this agreement, which closed on Monday. Beyond that, though, he and Leibowitz were circumspect in discussing how this transaction could reshape Avatar’s operations.

Any plans to expand Avatar’s home building activities beyond its communities in two states “will be a board decision,” said Leibowitz, who is now a member of that board along another JEN managing director, Allen Anderson. As part of its sale of Joseph Carl Homes to Avatar Holdings, JEN Partners owns approximately 8% of Avatar’s common stock. And after Mulac was named to his new post, he received 180,000 Avatar shares, according to an SEC filing. At Avatar’s $17.97 per share closing price on Thursday, Mulac’s stock would be worth about $3.2 million. He’s fully vested to trade this stock in 2015.

Mulac says that because he now works for a public company, he couldn’t disclose JCH’s projected closings or revenue for 2010, except to say “we are on plan.” At the very least, JCH—which recently had a soft opening of its fifth community, The Preserve at Palm Valley in Goodyear, Ariz.—should provide a booster shot to Avatar’s residential home sales.

Through the first six months of 2010 (the latest figures for which data were available at presstime), Avatar’s three communities in Florida and Arizona had closed 95 homes (compared to 108 during the same period a year earlier), had signed contracts for 97 homes (versus 112), and had a backlog of 28 homes (versus 74). “Most of our sales contracts were signed at selling prices that have resulted or will result in losses upon closing when factoring in operating costs such as sales and marketing and divisional overhead,” the company reported in its latest quarterly filing with the SEC.

During this period, Avatar reported $168,000 in impairments and a net loss of $15.9 million on revenue of $26.9 million that was down 22.4% from the same period in 2009, when it reported an $18.4 million net loss.

Its recent financial and sales performances notwithstanding, Avatar has kept spending through the recession to acquire homes, developed lots and land. In September 2009, it acquired 87 completed and partially completed homes, 267 developed lots, 364 partially developed lots, and an estimated 400 undeveloped master planned lots at a community called Seasons at Traditions in St. Lucie County, Fla. On June 1, 2010, it paid just fewer than $5.7 million to acquire an estimated 1,064 lots in a community known as Tortosa in Maricopa, Ariz. Two months later, it paid $7 million for 368 residential lots in the Turtle Creek master plan in St. Cloud, Fla.

Avatar’s acquisition of JCH, though, was somewhat surprising. Neither Leibowitz nor Mulac, in interviews with BUILDER this summer, gave any hints that they were looking to merge with a larger company. Indeed, in a Sept. 2 interview with the Arizona Republic, Mulac—who had previously worked for Standard Pacific Homes and Engle Homes—was quoted as saying that one of the reasons he started his own business was “I had really matured and gotten a lot of confidence to where I felt like I could do this on my own.”

The rationale behind this deal, though, isn’t hard to discern for either side. Avatar’s retiring president and CEO, Gerald Kelfer, said this “transformative” transaction would strengthen his company’s management team and market position. Jon Donnell, the 51-year-old former Del Webb and Dominion Homes executive whom Avatar hired to replace Kelfer as of November 15, added in a prepared statement “many of the properties we have just acquired are in the sweet spot of our strategy to build premium active-adult communities.” (Avatar declined to make Donnell available for an interview with BUILDER.)

For its part, JCH is joining a company with significant real estate holdings that, as of June 30, included 16,000 acres in Florida and Arizona that Avatar controls through partnerships, and 830 acres of developed, partially developed or developable residential, commercial and industrial properties. Avatar also owns 15,000-plus acres of preserves, wetlands, open space and other areas that it won’t develop but nonetheless have economic value for preservation or conservation purposes, according to the company’s SEC documents.

Its acquisition of JCH includes 445 acres in Florida’s Orange County that are comprised of 839 partially developed lots, a multifamily tract, and a two-acre commercial site.

John Caulfield is senior editor for BUILDER magazine.

Learn more about markets featured in this article: Phoenix, AZ, Port St. Lucie, FL, Anderson, IN.