By Gerry Donohue. For the most part, the 13 builders who sold their companies to Fortress came out relatively unscathed. Five bought their companies back. In all but one case, the sale was at a discount from book value. For example, in selling Whittaker Homes back to the Whittaker family, Fortress realized a noncash loss of $12.8 million, $9.5 million of which was the write-off of goodwill.
Ed Horne, working with investment firm Hearthstone in San Francisco, bought back his company, Wilshire Homes, for $23 million, a $6-million discount from book value.
Horne says the Fortress connection improved his company. "We have a much better management team, we have the capital to do sizable land projects, and we have really strong management systems in place," he says.
As the second-largest equity shareholder at the end, the Genesee Co.'s Bob Short probably fared the worst among the builders. He received about $4 million in the sale to Lennar; when he sold the company to Fortress in 1996, he received $695,000 and common and preferred shares worth about $18 million. Short will not stay with Genesee. He plans to focus on a small, custom home building operation he started on the side several years ago. Looking back on the experience, he is not ambivalent.
"I would never do a roll-up again," he says. "It's just not a prudent course of action."
Published in BIG BUILDER Magazine, October 2002