Technical Olympic USA, Inc. - Company Profile, Information, Business Description, History, Background Information on Technical Olympic USA, Inc.



4000 Hollywood Boulevard, Suite 500 North
Hollywood, Florida 33021
U.S.A.

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We believe that our diversification across a range of fast-growing ma rkets, across a range of product types and prices, and across a range of homebuilding and financial services will enable us to thrive in a variety of economic conditions. We invite you to watch our results a s we execute this strategy!

History of Technical Olympic USA, Inc.

Technical Olympic USA, Inc. (TOUSA) is a designer, builder, and selle r of detached, single-family homes, townhomes, and condominiums. The company operates in four regions: Florida, the Mid-Atlantic, Texas, a nd the West, concentrating its activities in 15 metropolitan markets. TOUSA, which eventually intends to create a single national brand fo r its homes, operates under several brand names, including Engle Home s, Newmark Homes, D.S. Ware Homes, Masonry Homes, Trophy Homes, and G illigan Homes. The company sells more than 7,000 homes per year at an average sales price of $275,000. TOUSA also operates a financial services business through three subsidiaries, Preferred Home Mortgag e Company, Alliance Insurance and Information Services, LLC, and Univ ersal Land Title Inc. TOUSA's mortgage financing services are used pr imarily by buyers of its homes, while its closing services and insura nce agency operations are used by its customers as well as other clie nts purchasing or refinancing residential or commercial real estate. TOUSA subcontracts nearly all of its construction work, assigning its own construction superintendents to monitor and to coordinate the co nstruction of each home. Technical Olympic S.A., a Greek construction firm, owns approximately 70 percent of TOUSA's stock.

Origins

TOUSA represented the efforts of a Greek construction company to ente r the U.S. home-building market at the end of the 1990s. The Greek co mpany, Technical Olympic S.A., was founded in Patra in 1965 as Pelops Constructions. Its founder, Konstantinos Stengos, a civil engineer w ho was a graduate of the National Technical University in Athens, spe cialized in the construction of apartment buildings and public works projects. Stengos served as chairman of Technical Olympic S.A. and mo re than two dozen other subsidiaries at the time TOUSA was formed, ha ving spent the previous 30 years creating a massive construction cong lomerate. After decades of development, his company held sway as a gi ant construction firm, operating as a contractor for residential dwel lings, tourist resorts, marinas, and large-scale industrial projects throughout Greece. By the 1990s, the extent of Technical Olympic S.A. 's growth had begun to work against the company, leaving it with fewe r opportunities for commercial, residential, and industrial construct ion projects. The company had grown too large to subsist solely on th e business available in Greece, a natural consequence of its own succ ess that prompted Stengos to look beyond Greece's borders for work. H e began expanding geographically, founding Technical Olympic UK, PLC, based in London, and Eurorom Constructii SRL, a Romania-based subsid iary, in 1997. Next, he plotted the company's foray into the United S tates, a move to be spearheaded by the newest Technical Olympic S.A. subsidiary and TOUSA's direct predecessor, Technical Olympic Inc.

Technical Olympic Inc. was a company with Greek lineage, but its busi ness was American with its own historical roots. A dual citizen of so rts, Technical Olympic could explain its corporate lineage by followi ng two paths: One led back to Patra in 1965 and followed the developm ent of Stengos's construction business and the other led back to Hous ton in 1983, to the formation of Newmark Homes Corp. Technical Olympi c was formed for the express purpose of buying its way into the U.S. construction industry, an objective completed when the company acquir ed Newmark in 1999 and became a going enterprise. Technical Olympic's development would be shaped almost entirely by the acquisitions it m ade, with each new addition expanding the company's operations in a s ignificant way, but with no acquisition as important as the Newmark a cquisition. Newmark lent Technical Olympic a corporate identity, defi ning it at its birth, and it gave the company tangible assets for the first time, and because of this, its influence over the company supe rseded its Greek parentage. Technical Olympic, as it described itself in later years, was a company with historical roots stretching back to Houston in 1983, not to Patra in 1965.

Newmark was a nearly $500 million-in-sales company when Technical Olympic acquired 80 percent of its stock for $86 million. During its first 15 years of business, Newmark had developed into a geograp hically diverse designer, builder, and seller of single-family detach ed homes. The company operated as holding company for its Newmark Hom e, Westbrooke Communities, The Adler Companies, and Pacific United De velopment subsidiaries, a group of businesses that served seven major markets in the Southwest and Southeast. Newmark built its business i n Texas before expanding into Tennessee. In 1995, after a dozen years in business and with a substantial presence in Houston, Austin, Dall as/Fort Worth, and Nashville, the company acquired The Adler Companie s, Inc. The Adler Companies, formed in 1990 in Miami, constructed hom es in south Florida, tailoring its construction efforts to attract "m ove-up," or second-time homebuyers. In 1998, Newmark increased its co nstruction activity in Florida by acquiring Westbrooke Communities, I nc., a company founded in Miami in 1976. Once Newmark had completed t he purchase of Westbrooke, it merged its two Florida acquisitions int o a single operation and expanded into North Carolina, entering Charl otte and the Greensboro/Winston-Salem area. The year of the merger al so coincided with Newmark's initial public offering of stock, which m ade Technical Olympic a publicly traded company once it purchased New mark in December of the following year.

The purchase of Newmark was a defining event for Technical Olympic, o ne that was followed by an acquisition of significant size. In Novemb er 2000, less than a year after acquiring Newmark, Technical Olympic purchased Boca Raton, Florida-based Engle Holdings Corp. in a deal va lued at $465 million. A publicly traded company, Engle Holdings w as founded in 1978 by Alex Engelstein, who continued to serve as the company's chairman and chief executive officer when it was acquired b y Technical Olympic. Engelstein took Engle Holdings public in 1992, w hich gave him $27 million to make land acquisitions to accelerate the growth of his company. In the years preceding its acquisition by Technical Olympic, Engle Holdings recorded impressive growth, increa sing its revenues from $245 million in 1995 to $742 million b y 1999. During the period, the number of homes sold by the company mo re than tripled, jumping from 1,137 to 3,514, as it expanded its busi ness into Georgia, North Carolina, Virginia, Colorado, Texas, and Ari zona. Despite the company's accomplishments, the reaction from Wall S treet was less than Engelstein would have hoped for, fueling his dise nchantment with running the company. In his mind, Engle Holdings' sha re price never accurately reflected the value of the company, a perce ption that led him to sell the company to Technical Olympic. "It was one of the things," he said in an October 13, 2000 interview with the Miami Herald, referring to the decision to sell his company t o Technical Olympic. "The frustration that the market, per se, didn't give us full credit for our accomplishments."



With Newmark and Engle Holdings constituting its operations, Technica l Olympic stood as a recognizable force in the nation's home-building industry, having quickly penetrated the U.S. market. Based on the nu mber of homes the company sold in 2001, a year in which revenues reac hed $1.4 billion, Technical Olympic ranked as the 12th largest ho mebuilder in the country. The company pressed forward with its strate gy of expanding by acquiring local and regional homebuilders, doing s o under new leadership appointed in 2001. Antonio B. Mon was named pr esident and chief executive officer, bringing with him 35 years of ex perience in finance, investment management, consulting, venture capit al, and constructing residential properties. In his position before j oining Technical Olympic, Mon served as vice-chairman of Pacific Grey stone Corp., a company he had cofounded in 1991. During his stay at P acific Greystone, Mon presided over the company's development into a major homebuilder in the western United States.

Merger in 2002 Creating TOUSA

Technical Olympic resumed its acquisition campaign in 2002, a signifi cant year for the company. In April, the company sold Westbrooke, the south Florida builder it had acquired through the purchase of Newmar k, to Standard Pacific Corp., a homebuilder with extensive holdings i n California and Florida. In June, the company merged Newmark with it s Engle Holdings subsidiary, a transaction that gave birth to a new n ame for the entire organization, Technical Olympic USA, Inc., or TOUS A, as the company preferred to call itself. Under its new corporate b anner, the company added to its portfolio of home-building brands, sh oring up its presence in Florida and adding a new market to the geogr aphic scope of its operations. In October, TOUSA purchased D.S. Ware Homes, LLC for $35.6 million. Founded in 1987 by Donald Ware, D.S . Ware operated in Jacksonville, Florida, where it ranked as the city 's fourth largest builder, selling between 300 and 400 homes each yea r. The following month, TOUSA completed a smaller acquisition, paying $17.1 million for Masonry Homes, Inc. Founded in 1971, Masonry c onstructed homes in the northwestern suburbs of Baltimore and in sout hern Pennsylvania, selling 250 homes at an average price of $214, 000 in the year before its acquisition by TOUSA.

With a substantial foundation in place, Mon added to TOUSA's holdings as if adding pieces to a puzzle. The company was focused on ten stat es: Florida, Texas, Arizona, Virginia, Colorado, Nevada, Tennessee, M aryland, Pennsylvania, and Delaware. Housing markets deemed to be ove rpriced, markets such as San Diego, Boston, and Los Angeles, were avo ided, as were markets that lacked employment growth. The company was reluctant, for instance, to establish a presence in the Midwest, wher e little employment growth existed. Instead, Mon and his management t eam concentrated on areas where employment growth had been steady for at least five years and where second-time homebuyers could be found. TOUSA's typical customer wanted a three- to four-bedroom home, 3,000 square feet of living space, and a two-car garage. "They're a little older, in their 30s and 40s," Mon said, describing the typical TOUSA customer in an April 18, 2005 interview with Investor's Business Daily. "They're more financially successful and have equity in th e homes they're selling."

A Single Brand for the Future

Mon selected acquisition candidates that matched the criteria of the company's expansion strategy and fleshed out TOUSA's market presence, making several additions during his first five years of leadership. In 2003, he acquired two builders, completing both purchases in Febru ary. First, he acquired The James Construction Company, a homebuilder operating in the greater Denver area, paying $22 million for the company. Next, he acquired Trophy Homes, Inc., paying $36 millio n for the Las Vegas-based homebuilder. In 2004, he acquired Gilligan Homes, a homebuilder with operations in Maryland, Pennsylvania, and D elaware, gaining control of roughly 1,100 home sites. The company end ed the year, its fifth anniversary, eclipsing $2 billion in sales , a total derived from the 7,221 homes it sold during the year.

As TOUSA looked ahead, the company anticipated creating a single nati onal brand out of its local and regional construction firms. As its a cquisition campaign continued, it planned to retain the name of the l ocal or regional company it acquired for two years, after which point the acquisition would adopt the single identity of the entire organi zation, a single corporate banner under which all of the company's fi rms would operate. As a cohesive whole, TOUSA's construction activiti es in its four geographic regions--Florida, Mid-Atlantic, Texas, and the West--stood to benefit from the project-management and inventory- flow technology employed by the company. "You can't have the drywall guys come in before the plumbers," Mon said in his April 18, 2005 int erview with Investor's Business Daily. "Our system allows us t o track each stage of construction and alert subcontractors to get re ady." To this system, Mon was expected to add additional local and re gional homebuilders. The company's acquisition of Transeastern Proper ties, Inc., a Coral Springs, Florida-based construction firm purchase d in August 2005, set the tone for the years ahead: TOUSA would conti nue to expand through acquisitions, fleshing out its presence in its four major operating regions.

Principal Subsidiaries: Engle Homes Residential Construction, LLC; Alliance Insurance and Information Services, LLC; Preferred Home Mortgage Company; Universal Land Title Inc.; Newmark Homes, L.P.; Tr ophy Homes; Fedrick, Harris Estate Homes; TOUSA Homes, Inc.; Universa l Land Title, Inc.; Woodland Pines, L.P.

Principal Divisions: TOUSA Homes, Inc.; TOUSA Financial Servic es.

Principal Competitors: Centex Corporation; D.R. Horton, Inc.; KB Home.

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