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Builder Bought Out by Insiders

British parent sells its Barratt American unit for $165 million in a leveraged transaction.

August 31, 2004|Annette Haddad | Times Staff Writer

Executives of Southern California builder Barratt American Inc. took control of the company Monday after completing a leveraged buyout valued at $165 million.

Moving out from under publicly traded British parent Barratt Developments and going private gives the Carlsbad-based builder "control of our own destiny," said Chief Executive Michael Pattinson. He and six other members of management together hold a majority stake in the newly independent company.

Barratt's parent could have been "more aggressive" with its investments in the California subsidiary, which was its only overseas unit, Pattinson said. Instead, the British firm focused on increasing its share of the market in its homeland. Thus, "we felt now was a good time to part company."

Barratt Developments agreed. "This is a good strategic move for us," said David Pretty, CEO of the company, based in Newcastle-Upon-Tyne. "The sale ... will enable us to concentrate our activities in the U.K."

Concentrated in San Diego and Riverside counties, Barratt American has built about 20,000 mostly single-family tract homes since its founding in 1980. It is the 15th-largest builder by market share in the region, having sold 359 homes in the first half of this year, according to Meyers Group, a real estate research firm in Costa Mesa.

Pattinson has moved aggressively to expand Barratt American's offerings -- from entry-level homes starting in the low $200,000s to large estate residences carrying multimillion-dollar price tags.

The company has launched three "urban redevelopment" condominium projects, initiated its first tract-home developments in San Bernardino and Orange counties and acquired the 2,600-acre Fanita Ranch site in the San Diego County city of Santee -- a parcel long eyed by developers for its potential as a master-planned community of more than 1,200 homes.

Fanita Ranch has yet to receive city approval and opponents are backing a special election next year to put the issue before Santee voters.

Pattinson "is very aggressive and wants to do projects that don't fit the style of a publicly held corporation," said real estate consultant and economist Alan Nevin.

Indeed, Pattinson, a past president of the California Building Industry Assn. trade group, is known for his uncompromising stance against what he perceives as excessive permit fees charged by cities and counties and has filed a number of lawsuits against municipalities.

Next year, the California Supreme Court is expected to review an appeal that Barratt American brought after losing a case to the city of Rancho Cucamonga. That decision ultimately could determine how local governments across the state charge building fees.

The American company owns or controls 4,500 lots in Southern California, and has about 470 under construction with a backlog of 250 units, Pattinson said.

Barratt American posted $305 million in revenue for its fiscal year ended June 30. The company recorded the sale of 702 residential units.

Pattinson led the buyout with Chief Financial Officer Steven Reid and General Counsel Michael Armstrong.

Financing was provided by Bank of America and an undisclosed investor.

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