In a move to broaden its market, John D. Lusk & Son said Wednesday it has paid approximately $20 million cash to acquire the Northern California assets of Broadmoor Homes, a subsidiary of Genstar Corp., a Canadian firm based in San Francisco.
Donovan Huennekens, president of the Irvine-based Lusk company, a major Southern California home builder, said his company has been "looking to start an operation in Northern California for some time." Acquisition of Broadmoor, he said, presented a prime opportunity.
As a result of the April 30 transaction, he said, Lusk has taken over five Northern California residential projects that Broadmoor had begun to develop. The projects, located in Pleasanton, Concord and San Jose, are expected to gross $60 million in sales over the next 23 months and to boost Lusk's annual revenue about 50%, to $75 million from $50 million a year, Huennekens said.
Huennekens said the Lusk company believes it made an "excellent buy" from Genstar, a giant, diversified public company which needed the sale to accomplish its goal of withdrawing completely from the homebuilding business. Negotiations with Genstar, he said, started last fall.
Huennekens said Lusk absorbed Broadmoor's 15-person residential staff in Northern California. John Zellhoeffer, formerly president of Genstar's Northern California operations, has been appointed vice president, regional manager of the acquired company, renamed Broadmoor/Lusk Homes, which will continue to be based in Dublin, near San Francisco.
Broadmoor came into being in the early 1970s, during the Southern California real estate boom, when Genstar bought an Irvine building company and renamed it Broadmoor Homes. The company soon became a leading home builder on the Irvine Ranch and later expanded operations into Northern California and San Diego.
Broadmoor, however, was caught with a large inventory of unsold houses in the 1982 recession and sustained severe financial losses, prompting Genstar's decision to pull out of the home-building business, said Dexter Lindberg, vice president of Genstar's real estate group.
Partly because of a drop in home sales in the face of rising interest rates, Genstar lost $84 million on revenue of $1.76 billion in 1982. The company has rebounded, last year posting annual earnings of $131.8 million on revenues of $1.9 billion. In the first three months of 1985, Genstar earned $5.3 million on revenues of $439 million.
Lindberg said he believes that because of the cyclical and risky nature of the homebuilding industry, "it is no longer a business for a large corporation."
He said Genstar, which closed its Irvine Broadmoor office in 1982, sold its San Diego projects to George Nicholas, a private builder, in March and also has shut down its Canadian homebuilding operations. The sale to Lusk, he said, was Genstar's final step out of residential construction.