By Alison Rice.

2002 Walk-Through

For private builders, 2002 might have been the year to cash out. With public builders sitting on cash and trading at high multiples, they had ample opportunity to play "Let's Make a Deal." Here's a snapshot of key industry transactions in 2002.

$7.9 billion: Weyerhaeuser Co. acquired fellow Pacific Northwest forest company Willamette Industries through a hostile takeover in early 2002. Weyerhaeuser, which owns Pardee Homes and three other home builders through its real estate development company, paid $55.50 a share for Willamette (approximately $6.2 billion) and assumed $1.7 billion of Willamette's debt.

$800 million: In September, Masco Corp. announced it had purchased four companies--a cabinet distributor and installer, and three other building product installers--for a total of $800 million in cash and stock. The buys are expected to increase Masco's market share among builders.

$637 million: With a final consideration of $637 million in cash, stock, and debt, Beazer Homes U.S.A.'s merger with fellow public company Crossmann Communities ranks as the single biggest builder deal announced in 2002. (D.R. Horton, which paid $1.6 billion in cash, debt, and stock for Schuler Homes, announced its merger in 2001, closing the deal in 2002.)

Photo: Glenn Hilario

$500 million: All eyes were on Lennar, which finished its fiscal year with hundreds of millions of dollars in cash. In one quarter of 2002 alone, they picked up six builders--two in Chicago, two in California, one in Baltimore, and one in Colorado--for an estimated total value of $500 million in cash and debt, according to analysts. $231.5 million: As California wavered, Standard Pacific looked east in 2002--and picked up three Florida-based builders (Westfield Homes U.S.A., Colony Homes, and Westbrooke Homes) for a total of $231.5 million in cash, stock, and debt. The company expects the deals to push Standard Pacific's closings beyond the 8,000 mark in 2003.

The Low Road

For those we wish had taken a different path.

Unfortunately, not every home buyer ends up with their dream home. Some find themselves in lawsuits over construction quality, others find their closing date postponed over and over again, and still others learn that they never really owned their new home at all, thanks to their builder's shenanigans.

Check's in the mail. A third-generation home builder, William "Bill" Erpenbeck's company imploded last spring when the FBI began investigating the Cincinnati company for bank fraud. The $107-million scandal involves diverted funds, forged loan payoff letters that left homeowners thinking they had clear title to their new homes when they didn't, and unpaid subcontractor debts in the millions of dollars.

Brothers grim? Brothers Wayne and Alan Giancaterino owned the now-bankrupt Murex Development, a Florida builder that went under in 1999, leaving homes unfinished and buyers without their deposits. Murex customers have filed claims totaling more than $500,000 against a state-run fund designed to protect consumers, but not all of them will recoup their money. The fund limits payouts to $250,000 per builder.

Homestore hoods. John Giesecke, CEO, and former CFO Joseph Shew have been charged with conspiracy to commit securities fraud and have plead guilty to fraudulently inflating their company's earnings. What did they do? Oh, the usual. They lied about how much money their company was making to inflate values and screwed investors in the process by means of a complex shell game, using middlemen to create the illusion that new revenue was coming in, when, in reality, the bottom line was not affected.

Dirty deeds. Tammany Holding Corp. of Slidell, La., pleaded guilty this year to violating the Clean Water Act and was fined $300,000 for illegally filling a wetland without a permit. In addition, while building the Lakeshore Estates development near Lake Ponchatrain, La., the company dredged and dumped material into the lake. It must pay restitution to four environmental groups, along with the fine.

Lousy lender. Financial services giant Citigroup will pay $215 million to settle predatory lending charges filed against it by the Federal Trade Commission (FTC). According to the FTC, Associates First Capital Corp. and Associates Corp. of North America (purchased by Citigroup in 2000) "engaged in systematic and widespread deceptive and abusive lending practices," taking advantage of borrowers with poor credit by refinancing their debts at high interest rates and selling them expensive credit insurance. It's the largest consumer protection settlement in FTC history.