Lennar's gain is Fortress' loss.

By Lesley Brown Garland

Lennar made no secret that its 2001 goal was to move into the mid-Atlantic, so it did, with three late-year purchases that gave the builder strong positions in the Charlotte and Raleigh, N.C., and Baltimore markets.

Left in a weaker position was The Fortress Group, which sold its Charlotte-based Don Galloway Homes and Raleigh-based Sunstar Homes for $20 million cash along with Lennar's assumption of a $30 million debt.

Fortress reported a loss of $21 million on the deal, $12.9 million of which was a write-off of goodwill. Fortress sold the two divisions, which contributed 21 percent of its $332 million of consolidated assets last year, to get cash to repurchase some of its bonds at a discount. Lennar took immediate possession of the divisions when the deal closed on Dec. 21, saying it would leave in place the companies' names and management teams.

Illustration: Eric Larsen

Brian Buchanan, Fortress' vice president for investor relations, says the company is trying to reposition its finances to be more attractive to investors. The builder expects a hearing with NASDAQ early this year to determine whether its stock will be delisted. Buchanan says the stock needs to reach the $2.08 per share mark to pass muster with NASDAQ. At year end, Fortress' price was $1.70, up from its 2001 low of $1.

Meanwhile, Lennar may not be out of acquisition mode. Spokesman Marshall Ames says the company is still looking for good growth opportunities. Investors are not likely to worry about the builder's recent purchases, which include the Baltimore-based Patriot Homes, because of the company's strong earnings and low debt, says Goldman Sachs analyst Christopher Winham.

"Lennar has been a very disciplined buyer," he says, "buying less for timing and more for opportunity.

BIG BUILDER Magazine, February 2002