By Wyatt Kash. Never underestimate where a dinner conversation might lead. Tom Bradbury's decision to sell Colony Homes to KB Home's CEO Bruce Karatz began like so many other deals: as a casual relationship between two businessmen who had become friends over the years and decided to have dinner one night. That dinner, at last year's Pacific Coast Builders Conference, led to a flurry of cross-country meetings and a deal Karatz had been coveting for a long time -- one that would finally pave the way for KB to enter Atlanta.
Colony Homes may not rank with Coke and Home Depot when it comes to brands built in Atlanta. But for families in Atlanta looking to buy their first homes, the Woodstock, Ga., company Tom Bradbury started 28 years ago has become far more than a household name. Colony's success at the entry-level price range -- average price: $130,000 -- made it the third largest builder last year in what has become America's largest home building market, based on new permit and survey data from The Meyers Group.
That's not to mention Raleigh, the country's 16th largest home building market, where Colony ranked fourth in starts last year. Then there's Charlotte, the nation's 11th largest home building market. Under the leadership of CEO Ron Pfeiffer, Colony launched seven new developments that are expected to catapult the company from almost nowhere in the market to within the shooting distance of the "Top 5" when 2003's figures are finally tallied, based on big builder estimates. All told, Colony Homes' delivered 1,872 sought-after homes last year and generated $244 million in revenues.
For Karatz, it was only a matter of time before KB Home secured a beachhead in America's big Southeastern markets. It wasn't for lack of trying.
While details are discreetly veiled with the usual southern charm, it's not exactly a secret that KB had been courting Brayson Homes, based in Duluth, Ga., which last year ranked 8th in Atlanta area starts. And there was talk of discussions with Buford, Ga.-based Bowen Builders, which ranked right behind Colony in Atlanta home starts last year. But the Los Angeles-based suitor had a hard time finding the right match.
Photo: Katherine Lambert
Meanwhile, KB did leap beyond its Southwestern, Colorado, and Texas strongholds. First it acquired Jacksonville, Fla.-based Trademark Home Builders in July 2001. Then it bought Orland0-based American Heritage Homes in 2002. Both acquisitions contributed to KB's 10 percent revenue growth last year. KB surpassed the $5 billion mark for the first time, delivering 25,565 homes and related services. But Karatz, understandably, had to have Atlanta.
While acquisition terms have not been disclosed, it appears the Colony deal was worth the wait. Both companies target the same clientele and offer comparable product lines. Colony's culture and management team should gel smoothly with KB Home's. Colony's 2002 figures are actually down slightly from 2001 when starts and revenues had both posted better than 50 percent year-over-year gains. The deal's real value is in the inventory of 8,200 lots in prime markets Colony brings to KB's growth agenda.
It remains to be seen how quickly KB Home can expand from Colony's foundation. Atlanta, and its sister cities in the south, have no shortage of big builders -- as well as some savvy regional competitors who aren't afraid to throw a few elbows. Then again, one shouldn't underestimate KB Home's determination and might. Don't be surprised to see Bruce Karatz spending a bit more time enjoying some of the South's fine dining in the months ahead.
2002 Permits: 49,952
|Rank||Builder||SF Units Sold||Market Share|
|Pulte Homes, Inc.||1,700||3.40%|
|2||D.R. Horton Inc. / Torrey Dobson Homes||1,134||2.30%|
|4||Bowen Builders Group||896||1.80%|
|6||John Wieland Homes & Neighborhoods||750||1.50%|
|Beazer Homes USA Inc.||496||1.00%|
|KB colony: KB Home's acquisition of Woodstock, Ga.-based Colony Homes last month gives the builder access at last to America's largest home building market.|
Source: The Meyers Group; U.S. Census Bureau (sf=single family)
Learn more about markets featured in this article: Atlanta, GA.