Engle Homes, Inc.
Engle Homes, Inc.
Wholly Owned Subsidiary of Technical Olympic USA
Sales: $844 million (2000)
NAIC: 23321 Single Family Housing Construction; 52421 Insurance Agencies and Brokerages
Engle Homes, Inc. is one of the largest homebuilders in the United States, operating in Florida, Colorado, Texas, Georgia, Virginia, and North Carolina. Engle Homes designs, constructs, markets, and sells, detached single-family homes, condominiums, townhouses, and patio houses. Through two subsidiaries, Preferred Home Mortgage Company and Universal Land Title, the company offers financial services to its homebuyers, providing financing and title insurance services, respectively. Technical Olympic USA, a subsidiary of Greek construction giant Technical Olympic S.A., owns 100 percent of Engle Homes.
One of the United States’ most prolific homebuilders during the 1990s never progressed past the fifth grade. Alec Engelstein, founder of Engle Homes, was born in Romania in 1930. The political upheaval following World War II cast Romania into communist hands, prompting Engelstein to flee Romania and find refuge in Italy—not the first time he would seek shelter from threatening political winds. After a brief stay in Rome, Engelstein moved to Canada, settling in Montreal, where he first learned the homebuilding trade. Engelstein arrived in Montreal in 1948, at the age of 18.
Engelstein spent 20 years in Montreal. He worked for a homebuilder whose projects were primarily located in the city’s suburbs, gaining experience that would prove invaluable during his entrepreneurial career. That Engelstein ever decided to start his own homebuilding business was because of the relationship he enjoyed with his employer, a partnership of sorts that steered Engelstein toward his life’s work. Engelstein’s employer spent every winter in Florida, leaving his apprentice to sell homes and preside over the construction projects while he was away. The experience introduced Engelstein to the practicalities of working as a homebuilder, convincing the transplanted Romanian to make a career for himself in the business. Engelstein’s turning point—the moment he decided to set out on his own—occurred when he was 38 years old, a decision that was triggered by an uncertain political climate.
Founder Moves to Florida in 1968
To Engelstein’s thinking, the separatist movement in Quebec had created a tenuous business environment by 1968. In search of more peaceful pastures, Engelstein decided to follow the path of his employer’s winter migration. He moved to Florida, intent on carving a place for himself in the homebuilding market. Engelstein spent much of 1968 looking for land, before forming his first company, A.E. Development, in 1969. Through A.E. Development, the predecessor to Engle Homes, Engelstein began his first project in Florida. Dubbed Lakeside Village, the project was located in Palm Springs, comprising a 760-unit condominium complex that included one-bedroom units selling for $9,990 and larger two-bedroom units selling for $17,900.
The completion of Lakeside Village represented the first Engelstein-inspired housing project, the first of many to follow. Once out of the gates, however, Engelstein and A.E. Development stumbled. The real estate market in southern Florida collapsed in late 1970, forcing the 40-year-old Engelstein to regroup. To contend with the precarious business climate, Engelstein merged his homebuilding interests with another developer, American Capital. The two entities worked as one until 1978, when they separated under amicable terms.
Under the conditions of the corporate divorce, Engelstein departed with one of the two projects under development by the merged companies. Engelstein’s acquisition was a project consisting of 900 single family homes composing a development called Lakes of Sherbrooke, located in Lantanc, Florida. With this asset, Engelstein formed Engle Homes in 1978, purposefully transposing the “L” and “E” in his surname. One year later, he asked his brother Harry to join him in the business. Together, the brothers quickly fashioned the company into one of the largest three builders in the Palm Beach area. The pernicious cyclically of the home building market again forced Engelstein to counterattack, however. By 1982, Engle Homes was bearing the brunt of recessive economic conditions in the Palm Beach market. The solution, as it would be later in his career, was for Engelstein to diversify his market, to expand geographically. Engelstein decided to broaden the scope of Engle Homes’ southward—the first destination: Boca Raton.
Expansion into Southern Florida in the 1980s
As Engelstein expanded, he followed a growth strategy that evoked images of a military invasion. In a July 25, 1997 interview with South Florida Business Journal, Engelstein explained: “You enter a new market by creating a beach head and then you keep enlarging it. The objective is to create markets that will continue to grow and expand. We’ve strategically chosen regions offering strong economies with new business and employment growth.” Such was the case in Engelstein’s initial foray into the Palm Beach area, where he and his brother targeted first-time homebuyers. For Boca Raton, extant market conditions dictated Engelstein’s actions, prompting Engle Homes to target a market niche that was under-served.
During the early 1980s, the Boca Raton housing market offered numerable buying opportunities for those wishing to spend in excess of $200,000 for a home, but less expensive new homes were hard to find. Engelstein explained, noting in a September 20, 1999 interview with The Palm Beach Post, “We said, all right, there are people working, young professional people who cannot afford that price range.” The company’s response to the untapped market was Concord Green, its first development in Boca Raton. Prices at Concord Green started at $74,000. “We hit the mother lode,” Engelstein remembered in his interview with The Palm Beach Post. “From there, it just went one after another.”
Engle Homes grew steadily throughout the 1980s. The push southwards continued, reaching as far south as Cooper City by 1992, when Embassy Lakes, a large master planned community opened. One pressing problem that faced Engelstein at the beginning of the 1990s was a lack of capital, the money to develop projects such as Embassy Lakes. Recessive economic conditions had caused banks to grow wary, which restricted Engelstein’s supply of capital, forcing him to search for alternative ways to fuel his expansion plans. Engelstein decided to sell his company to the public, filing for an initial public offering (IPO) in October 1991. Engle Homes’ shares were expected to debut in November 1991, but anemic market conditions led Engelstein to cancel the offering. In 1992, his second attempt at an IPO succeeded, when 2.3 million shares were sold on the NASDAQ at $11.50 per share.
With a fresh supply of capital gleaned from the IPO, Engelstein was ready to press forward with his expansion plans. He now had shareholders to answer to and analysts to appease, forces that, to a certain extent, would direct the direction of Engle Homes’ growth. The company could no longer depend entirely on developing properties in Florida, partly because it was becoming harder to find land in the company’s home state and partly because of the sensitive expectations of Wall Street. Home building, perhaps more than others, was a capricious market, subject to fluctuations that could send a developer’s fortunes soaring and just as quickly cause financial ruin. With all its assets tied to the southern Florida housing market, Engle Homes was exposed to the vagaries of one market, a vulnerability that sent shivers down the backs of investors and analysts alike. Engelstein realized this and began formulating an expansion strategy that would satisfy Wall Street and fuel Engle Homes’ growth.
National Expansion Begins in 1993
The solution was to expand outside Florida. Engle Homes was set to become a national homebuilder with a presence in a variety of markets, using a diverse portfolio to insulate itself from the fluctuations of one particular market. Engelstein chose Dallas, Texas, as the first beach head for the company’s expansion outside Florida. An Engle Homes division was established in Dallas in 1993, followed by the establishment of divisions in Tampa and Orlando before the end of the year. In 1994, the company expanded to the east, establishing divisions in the Washington, D.C., suburbs of Virginia and Maryland and in Raleigh, North Carolina. Further expansion pushed Engle Homes into Denver, Colorado, where the company’s entry into the market was completed through the acquisition of Park Homes West, a local developer.
For nearly a quarter century, the people at Engle Homes have dedicated themselves to offering customers a home buying and building experience that is “Simply Better.” We understand that purchasing a home is one of the most important decisions you will ever make. That is why it is our mission to make this experience the best it can be. We take pride in keeping our customers involved and informed every step of the way. To make your home buying process even easier, we offer the services, strength, and expertise of our subsidiaries, Preferred Home Mortgage Company and Universal Land Title, Inc. These are just a few of the reasons why so many of our homeowners refer their family and friends to us again and again. As one of America’s leading homebuilders, we’ve built a solid reputation by providing exceptional homes at an outstanding value. Across the nation, Engle Homes carefully selects only the finest locations in the most desirable areas.
Expansion engendered appreciable gains in sales, as Engle Homes’ stature swelled. In 1992, the company posted $78.2 million in sales. By 1994, the total had mushroomed to $220.9 million. The same could not be said of the company’s profitability, which essentially remained flat during the growth spurt. Moreover, not every foray into a new market proved successful, the company’s entry into the Raleigh market standing out as a glaring miscue. According to a February 11, 1998 article in the Wall Street Journal, Engle Homes “dashed into an area already overrun with national builders, started to pay too much for hilly land bypassed by others, and brought in managers unfamiliar with the area.” There were missteps, to be sure, but overall Engle Homes was fast becoming a recognized homebuilder on the national scene. Engelstein was undeterred by the occasional foible and pressed ahead with expansion into new markets.
In 1997, Engle Homes established a presence in two of the fastest-growing housing markets in the United States. In May, the company opened an office in Atlanta, Georgia, the first step toward securing a toehold in the lucrative market. Engle Homes division president, Geoffrey Brunning, left little doubt about his company’s aspirations in Atlanta. In a January 23, 1998 interview with the Atlanta Business Chronicle, he declared, “Our goal is to be one of the top five home builders in the market as quickly as we can. We’re intending to come in as a significant player.” Not long after Brunning’s declaration, Engle Homes controlled 623 lots in the Atlanta metropolitan area, with two developments under construction and others in the offing. Meanwhile, the company was making headway in Arizona. Engle Homes sold its first house in Arizona in 1997, realizing $136,656 in gross income. By the following year, the company had sold 234 properties, registering $47 million in gross income. In 1999, 552 houses were sold, generating $166 million in gross income, totals that ranked the company’s Arizona division as the fastest-growing homebuilder in the nation.
By the end of the 1990s, Engle Homes’ financial record told the tale of a rapidly growing company. Sales increased nearly ten-fold during the seven years separating the company’s IPO and the end of the decade, reaching $742 million in 1999. Net income, which had languished between $6 million and $8 million during the first half of the decade, recorded strident growth during the late 1990s, surging to $28 million in 1999. Behind the numbers stood a well-balanced homebuilder operating in eight of the leading 20 home-building markets.
Diversification had carried Engle Homes into the financial services sector, where the company operated two companies to better serve its home-buying clientele. Through Preferred Home Mortgage Company, a full-service mortgage banking subsidiary, the company arranged financing for customers in all its markets. Engle Homes had also acquired a title company, Universal Land Title, which provided title insurance services to customers in Florida, Denver, and Dallas.
As Engle Homes entered its second decade as a publicly-traded concern, the strength of its operations attracted a suitor. Technical Olympic S.A., a Greek construction company with operations in Greece, the United Kingdom, the United States, and in Engelstein’s native country of Romania, was the interested party. A builder of major infrastructure projects, including highway, tunnels, airports, and marine and harbor works, Technical Olympic operated in the United States through Technical Olympic USA. In October 2000, Technical Olympic USA began negotiating for the purchase of all Engle Homes’ outstanding shares of common stock. Engelstein welcomed the bid, resulting in the completion of the deal in November 2000. Technical Olympic USA paid $465 million for 100 percent ownership of Engle Homes, which subsequently became an indirect, wholly owned subsidiary of Technical Olympic USA. The trading of Engle Homes’ common stock ceased November 22, the day the deal closed.
Engle Homes’ acquisition by Technical Olympic USA marked the beginning of a new era for Engelstein’s corporate creation. A septuagenarian by the time the merger was completed, Engelstein remained in charge of the company following the merger, serving as a director and its chief executive officer. His brother Harry served as executive vice president and chief construction officer. Together, the brothers applied their considerable experience toward continued success in the new century, supported by the deep financial pockets of its Greek parent company.
Preferred Home Mortgage Company; Universal Land Title, Inc.; Engle Homes/Pembroke, Inc.
Pulte Homes, Inc.; The Ryland Group, Inc.; Centex Corporation.
- Alec Engelstein founds A.E. Development.
- Engle Homes is formed to develop Lakes of Sherbrooke.
- Engle Homes completes its initial public offering of stock.
- National expansion of Engle Homes begins.
- Divisions in Atlanta and Phoenix are established.
- Engle Homes is acquired by Technical Olympic USA.
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—Jeffrey L. Covell