By Iris Richmond. Fortress will soon cease to exist. On June 17, Lennar acquired a controlling interest in the company. Soon after, the Miami-based builder commenced a $3.68-per-share tender offer for the remainder of Fortress' common stock, which at press time was scheduled to expire on July 22 unless extended. Once the deal is complete, Fortress will become a wholly owned subsidiary of Lennar, but only long enough for the deal to close. Fortress spokesman Brian Buchanan says the company should cease to exist by August and its handful of employees be absorbed by Lennar, with the exception of Fortress president and CEO George Yeonas, who retires with undisclosed compensation.
After its purchase of Fortress' Carolinas operations last December, Lennar began its negotiations anew in March, this time for Fortress' Genesee Co., which built 600 homes last year and operates in Denver and nearby Fort Collins, as well as Tucson, Ariz. In order to snag the deal, Lennar agreed to acquire Fortress' remaining operation, Wilshire Homes, based in Austin, Texas.
"We decided to help Fortress sell off the remainder of the company because we felt that we had a better chance of ending up with Genesee if we worked with the seller's needs," says Bruce Gross, Lennar's CFO.
Lennar's hope was that a buyer for Wilshire would be found before the deal closed.
In fact, a buyer was found for Wilshire, reportedly dropping Lennar's net equity cost for Fortress from $50.7 million to $27.7 million in cash.
The Fortress Group's liquidation prompted Wilshire Homes' CEO, Ed Horne, in mid-May to approach Hearthstone in San Francisco about forming a joint venture. Horne and Hearthstone quickly teamed up to acquire the company, which will be called Wilshire Homes of Texas, from Fortress for $60 million, including debt and equity. The deal closed on June 26.
Management teams will remain the same, but the acquisition takes the company private, making it the largest private home builder in central Texas, according to American METRO/STUDY. As part of the acquisition, Hearthstone committed $450 million to finance the construction of more than 2,200 homes in Wilshire's two markets over the next five years. Wilshire sold 450 homes last year with prices ranging from $130,000 to $300,000. The company has roughly 2,000 lots in 25 communities in Austin and San Antonio.
Published in BIG BUILDER Magazine, August 2002