Brookfield Residential to Acquire Newland With Eye on Master-Planned Development

Brookfield Residential is acquiring Newland—one of the nation’s largest master-planned community developers.

With the acquisition, Brookfield will get immediate access to nine incremental markets—Dallas-Ft. Worth, Houston, Atlanta, Tampa, Seattle-Tacoma, Portland, Raleigh-Durham, Wilmington, and Charleston. The merger will also expand Brookfield’s offerings in San Diego, Denver, Austin, Phoenix and Washington DC, where each developer has a presence today.

In addition to the management company, Brookfield will acquire the (5%) general partner’s equity interest in 15 (of the 20) master-planned communities that Newland is currently developing. The acquisition is targeted to close on June 1, 2021, subject to customary closing conditions.

Adrian Foley, managing partner, real estate and president, development, says the acquisition will allow the company to leverage its land development expertise to become a large-scale provider of lots to third-party builders and also provide expansion potential for the Brookfield Residential homebuilding brand.

“The acquisition of Newland adds phenomenal master-planned communities to our portfolio in exciting new markets that are experiencing tremendous growth and a lack of supply of new homes,” Foley said in a prepared statement. 

Newland has five decades of experience in a wide range of real estate developments.

“This acquisition will provide more opportunities for the continued development of additional mixed-use masterplans well into the future as well as give us significant additional vertical development opportunities,” Bob McLeod, executive chairman, Newland, said in a prepared statement.

The merger is occurring in an environment where there is a lack of single-family homes, especially starter homes.

In 2018, Freddie Mac estimated a housing shortage of about 2.5 million units measured against long-term demand; that number rose to 3.8 million units by the end of 2020. That sustained increase is “extremely unusual,” Freddie Mac economists say, particularly since recessions typically see demand slow and supply rise.

The answer lies in the lack of starter SFRs: in 2020, only 65,000 entry-level homes were completed while 2.38 million first-time homebuyers entered the market.  Contrast that number with figures from the late 1970s, when the construction of entry-level homes averaged 418,000 units per year.

The supply of entry-level homes has dwindled steadily since that peak, and even at its cyclical peak in 2004—the same year homeownership peaked—only 186,000 starter SFRs were constructed.

“We expect the housing supply shortage to continue to be one of the largest obstacles to inclusive economic growth in the US,” writes Sam Khater, vice president and chief economist, Economic & Housing Research at Freddie Mac.  “Simply put, we must build more single-family entry-level housing to address this shortage, which has strong implications for the wealth, health and stability of American communities.”