Patriot Homes to join No. 1 firm

Area's No. 8 builder is bought by Lennar, largest in the nation

November 27, 2001|By Robert Nusgart | Robert Nusgart,SUN STAFF

Patriot Homes Inc., the eighth-largest homebuilder in the Baltimore metropolitan area last year, has been acquired by the nation's largest homebuilder, Lennar Corp. of Miami.

Rick Kunkle, president of Columbia-based, privately held Patriot, confirmed the sale yesterday and said the transaction is scheduled to close in January.

Financial terms were not disclosed. Kunkle, however, said the company's name will remain and all 85 employees will be retained.

"We've had other national builders contact us in the past, but we really liked Lennar," Kunkle said. "We like the fact that we can continue to market and exist as Patriot Homes."

The acquisition of Patriot Homes gives Lennar - which became the nation's largest homebuilder after its $476 million purchase last year of U.S. Home Corp. - a stronger foothold in the Baltimore market, which has been dominated by No. 1 Ryan Homes Inc. and No. 2 Ryland Homes.

Lennar, founded in 1954, operates in 14 states and had total housing revenue last year of $4.9 billion based on 22,560 new-home sales. It is ranked No. 1 in total housing revenue by Professional Builder magazine.

Shares of Lennar lost $1.09 yesterday on the New York Stock Exchange to close at $36.06.

U.S. Home was the 10th-largest builder in the Baltimore area last year, with 208 net sales, according to the Meyers Group, a Washington firm that tracks and analyzes the new-home industry.

Kunkle said Patriot, which is operating in 20 communities, closed on 407 homes last year in Maryland with revenue of approximately $100 million. This year he expects net sales to be 375 homes, generating the same revenue.

"I think it was a very good offer and it was an opportunity to align ourselves with a national builder where there was a cultural fit," Kunkle said. "They are buying a company, an organization, as opposed to our land position.

"The timing seemed to be right. This will give us the financial strength to compete for new land deals that right now we really can't compete with."

Marshall Ames, vice president of investor relations for Lennar, said the purchase of Patriot, comes "in a geographical area that we find very desirable."

Ames dismissed the notion that U.S. Homes would be a direct competitor of Patriot, emphasizing that each would maintain its own identity. "Those companies that had regional brand names ... have been expanded, protected and grown," he said.

Patriot Homes has been an equal partnership since 1991 between Harry L. "Chip" Lundy, owner of luxury builder Williamsburg Group in Howard County, and Kunkle, who had been a senior vice president with NVR Homes.

The company positioned itself as a moderately priced builder of single-family homes and townhouses primarily in Baltimore and Howard counties, with average prices ranging in the low $200,000 range.

Today, however, with high land costs as well as consumer demand, a Patriot-built home averages in the $280,000 range.

"Because of the success of Williamsburg, we started Patriot, and then we started to grow and grow," Lundy said. "Now Patriot became the driver, so now I am back to doing what I used to do."

Fritzi Hallock, whose Towson-based firm, MarketSmart, acts as a consultant to builders, said the Patriot acquisition gives Lennar what it wants most: market share.

"They [Patriot] create a volume. They are one of the top 10 builders in the market, and they are privately held, so for those two reasons, they are a great acquisition candidate for a national builder looking to build market share and presence. That's what it means to Lennar," Hallock said.

"For Patriot, what it means is that they now have great access to capital; the ability for management to grow, personally and professionally; and to grow the Patriot brand."

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