Vegas builder sold back to founder

Grace Leong and David Strow

Wednesday, Aug. 8, 2001 | 11:02 a.m.

Las Vegas luxury home builder Christopher Homes, sold some six years ago to McLean, Va.-based Fortress Group Inc., is being sold back to its founder for about $30 million under a deal announced today.

The sale, which includes J. Christopher Stuhmer taking back Christopher Homes, Custom Home Division LLC, and assuming its secured debt and other liabilities, is expected to be completed by the end of the third quarter.

Brian Buchanan, Fortress Group's vice president and treasurer, said Christopher Homes' "long building time and different operating style made it a candidate for sale."

"Christopher Homes' homes take a long time to build because they are large, custom-made, complex, and expensive. Regular production housing, or smaller single family homes, can be built in about three to four months, but Christopher Homes' homes can take about a year to build," Buchanan said. He said the homes sell from $500,000 to $1 million.

Buchanan also said the sale was part of the company's restructuring efforts to reduce debt. "We've embarked on an operational and financial restructuring program to streamline operations and reduce debt. As part of its effort, we had sold several other subsidiaries this year."

Fortress Group also said it expects to report a $10 million to $11 million loss on the transaction.

"Fortress has invested additional funds in the company since its acquisition of Christopher Homes in 1996. Christopher sold us his company and got Fortress stock," he said. "The $10 million loss is an adjustment to the value of assets to reflect market value. The company's assets on its books were $40 million. Christopher pays us $30 million and we lose $10 million. It's like holding a mark-down sale, when instead of selling inventory for say, $100, you sell it for $90, taking a loss of $10," Buchanan said.

Christopher Homes built 126 new homes in Las Vegas in 2000, giving it a small market share compared to other large homebuilders. It sold about 120 new homes in both 1999 and 2000, a market share of 0.57 percent, according to Las Vegas-based Home Builders Research.

But all of those homes are luxury homes, with market prices exceeding $500,000. And in that market, Christopher Homes is an established, respected company, said Dennis Smith, president of Home Builders Research.

"They've been a leader in the (luxury) market since we've had one," Smith said. "If there's any new master-plan (development) in Las Vegas that wants luxury homes, I can almost guarantee you the builder they go to is Christopher Homes."

Demand for luxury homes has increased in sync with the rest of the home-building market. But that's also increased the number of players in the high-end home building market, Smith said.

"Any time you have increased competition, that leads to tighter profit margins," Smith said, though he said he didn't know if Christopher Homes' profit margins had been falling over the past several years.