Southwest Diversified Links Up With Canadians in Growth Bid

A Newport Beach-based real estate developer has teamed up with three Canadian partners to expand its presence in the Southern California real estate market.

Southwest Diversified, which is developing 2,700 residential units mostly in Northern California and Arizona, said Friday that it has formed an equity partnership with affiliates of two Toronto-based real estate companies, Coscan Development and Carena Bancorp, and with First City Financial of Vancouver, Canada.

“Our mandate from the partnership is to continue to expand our development activities in Northern California and Arizona and to become a significant player in the Southern California development market as well,” Southwest President William D. Foote said in a statement Friday.

Foote wouldn’t reveal how ownership of the partnership is divided among the four parties. And he said the group has no specific target for the amount of money it intends to invest.

“The partnership has considerable financial resources,” Foote said. “How much we spend is based on how much my partners want to commit to California. The money is available if the opportunity is there.”

Several area real estate specialists said, however, that there is no evidence that the Southwest deal signals the start of a new rush of Canadian investment in Southern California.

The impetus behind the deal was Coscan’s desire to re-enter the Southern California real estate market--one of the fastest-growing in the world. The Canadian development company had made an unsuccessful foray into the California market in 1980-81, the end of a period that saw many Canadian developers invest heavily in Southern California real estate only to get caught when the bottom fell out of the market in the early 1980s.

“We’ve had an interest in being in the (California) market for eight years,” L. Ross Cullingworth, Coscan’s president and chief executive, said in a telephone interview from Toronto. “We started a (real estate development) operation in 1980, but it was just before the downturn in the real estate market. The timing wasn’t the best.”

Cullingworth said he doesn’t think Coscan will repeat its earlier mistake.

“We haven’t got in at the bottom” of the market, Cullingworth said. “The growth expectations for the California market are probably stable. It will be a good, stable market to operate in.”

Coscan, whose stock is publicly traded in Canada, is a residential and commercial builder with 1986 sales of about $257 million (U.S.). Its home-building activities in the United States are limited mostly to the Phoenix area.

Coscan is 49% owned by Carena Bancorp, a real estate holding company and merchant bank. Carena also is controlling shareholder of Bramalea Ltd., which has a large residential development operation--Bramalea California--headquartered in Costa Mesa.

Although its offices are in Newport Beach, Southwest currently has only two small projects in Southern California: a 70-home project in Dana Point and a 154-unit oceanfront development in Santa Barbara. In the Bay Area, Southwest has developed 1,700 homes, mostly in suburban areas of Marin and San Mateo counties. Southwest also operates a home-building and community development division in Tucson.

In Southern California, Foote said the partnership will focus on Orange and San Diego counties.

He added that the group hopes to develop about 600 homes a year in Southern California, or roughly the same number it now builds in the Bay Area.

Foote is a former partner in First City Financial, the Vancouver financial services company, and before that was president and managing partner of the Newport Beach-based development arm of Cadillac Fairview Corp., a Toronto-based real estate giant. Cadillac Fairview Homes West built thousands of homes in Southern California before quitting the residential market here in the early 1980s.

Under the agreement, Southwest will be the managing partner of the group, Coscan and Carena will be general partners and First City Financial will become a limited partner. First City formerly was the general partner for Southwest’s development activities.