"The maximum shareholder value will be realized from selling portions of the portfolio to support homebuilding," chairman and CEO William Friedman pointed out during a company conference call. The company has identified approximately 2,000 apartment units that could be converted to condominiums and is also targeting a large office park for redevelopment. The rental properties will become a discontinued operation.

Friedman said Tarragon, together with its investment bankers, LazardFreres & Co. LLC, explored other possibilities including a spin-off and IPO, but determined a sale was the best route to go. Friedman pointed out that half of the company's consolidated debt is associated with the rental properties. "The large amount of debt associated with our rental properties distorts the financial strength of our company, impeding our continued rapid growth. The capital is worth more to us in homebuilding."

Homebuilding division revenues, including revenues from unconsolidatedcommunities, doubled in 2004 from $154 million in 2003 to $315 million. Approximately 75% of revenues were generated by Floridahome sales. Friedman sees more strength in the pipeline. "Our homebuilding pipeline includes over 3,800 units with potential sales in excess of $1.5 billion in communities where we have site control, and have initially determined project feasibility. Last year, that pipeline was less than $700 million.