Tarragon Corporation (NDAQ:TARR) announced earlier this week that it would be spinning off its core homebuilding and real estate development divisions in order to shift its focus on the rental market - an area poised for steady growth as prospective home buyers wait out the residential real estate collapse. The company develops and owns multi-family housing in Florida, New York, Tennessee, and Texas. The spin-off, which is slated for mid-2007, would provide the company with additional funds and enable it to focus more strongly on its multi-family rental business. Tarragon will continue to operate its real estate services business, which provides asset and property management, leasing and renovation services to residential and commercial properties. Following the spin off, Tarragon will change its name to Sage Residential, Inc. while Tarragon's homebuilding and development business will be renamed Tarragon Corporation.

The company believes that the spin off will, among other things, provide both businesses with direct and differentiated access to financing and the capital markets, allow each company to grow through acquisitions appropriate to its business and provide each company with the opportunity to align management incentives with the performance of its business. Moreover, given the current weakness in the sector, the new spin-off may end up being severely undervalued when it makes its debut as an independent entity - creating a great opportunity for enterprising investors to get in at low prices. Regardless, this is definitely a company to watch as it attempts to rid itself of underperforming divisions and turn itself around!

Related Companies
Colonial Properties Trust (CLP)
Developers Diversified Realty Corp (DDR)
Washington Real Estate Investment Trust (WRE)