Bruce Karatz

Bruce Karatz
Born (1945-10-10) October 10, 1945
Chicago, Illinois, U.S.
Education Boston University (B.A.)
USC Gould School of Law (J.D)
Known for Chairman and CEO of KB Home
Religion Judaism
Spouse(s) Janet Dreisen (divorced)
Sandra Lee (divorced)
Lilly Tartikoff
Children Elizabeth Karatz
Matthew Karatz
Teddy Karatz

Bruce Karatz (born 1945) is an American businessman and philanthropist. He is noted for his role as Chairman and CEO of KB Home,[1] and for his philanthropic efforts to help re-build both Los Angeles after the L.A. Riots and New Orleans following Hurricane Katrina.[2] During the 20 years Karatz served as CEO, KB Home grew revenues from $491 million to $11 billion and grew annual home deliveries from 4,500 homes in 1986 to over 39,000 homes in 2006. Karatz now operates BK Capital LLC and is based in Beverly Hills, California. In March 2013, Karatz was a recipient of The Malibu Times' 23rd Annual Dolphin Awards.[3]

Early life

Karatz was born in Chicago, Il and raised in Minneapolis, Minnesota to a middle class Jewish family[4] where his father owned a movie theater and his mother was a homemaker. He graduated from high school in 1963 and from Boston University in 1967. Karatz received his Juris Doctor degree from the University of Southern California in 1970.

Career

In 1972, Karatz joined Kaufman & Broad (the company took the KB Home name in 2001) as an associate general counsel.[1][2]

After spending a short time as an in-house counsel, Karatz moved to the home building side of the business and soon thereafter became head of KB Home’s French division. He made a mark in 1977 when he installed a full-sized model home on the roof of the Au Printemps department store. More than 500,000 people toured the rooftop house. During his time in France, KB Home grew into one of France's largest homebuilders.[2]

In 1981 Karatz re-joined the Los Angeles headquarters of KB Home and in 1986 was named CEO. As CEO, Karatz oversaw the company’s growth into one of the most successful home building companies in the world. Karatz is credited with changing the company’s business model of building homes on speculation and then selling them in favor of building houses on order. KB Home's new business model allowed middle class home buyers to customize their homes and defined a far more efficient and profitable business model for the industry.[2]

In the early 1990s, when the real estate market in Southern California collapsed, Karatz moved aggressively to expand the company by acquiring other regional home builders such as the San Antonio-based builder Rayco for $105 million in 1996. The success of the new business model led KB Home to acquire additional companies and expand organically into markets across the country to provide customized homes for middle-class families.[2]

As CEO, Karatz built on his Paris marketing achievements. Working with Fox Broadcasting, which was celebrating the tenth anniversary of The Simpsons, KB Home constructed a real-life replica of the Simpsons' home in one of KB Home's Nevada subdivisions, which helped turn Las Vegas into KB Home's top market.[5]

During his tenure as CEO, KB Home became a Fortune 500 company. Karatz oversaw a 1476% increase in the company’s market capitalization, an 800% increase in the companies stock price, a 575% growth in revenue, a 400% rise in dividends and increased the number of employees from less than 500 to over 6,000. In 2006, KB Home was ranked the #1 homebuilder in Fortune Magazine’s 2006 list of America’s Most Admired Companies and was listed by Fortune as one of America’s Most Admired Companies[4] and won the American Business Award as the Best Overall Company.[6] Karatz in turn became one of the country's highest-paid CEOs during this time.

In 2005, Karatz’ last full year as Chairman and CEO, KB Home’s profits were $1.29 billion.[7]

Recent career

In October 2014, Karatz partnered with Guy Nafilyan, the former Chairman and CEO of Kaufman & Broad France, to create the Paris-based real estate development company called Nafilyan & Partners.[8] Karatz and Nafilyan each own 37.5% of the company and the remaining 25% is owned by two investment groups and two financial institutions.[9] Nafilyan & Partners opened for sale its first development in Villepinte, a suburb of Paris, France on October 11, 2014.[10][11] As of October 2014, Nafilyan & Partners has 22 projects representing approximately 2,000 residences throughout suburban Paris.[9][12]

Philanthropic activities

After the Los Angeles riots in 1992, Kaufman and Broad spearheaded the effort to rebuild Camp Hollywoodland, a rustic canyon retreat for inner-city children whose main hall, dining room and other structures were gutted by fire.[13]

In the early 1990s, Karatz co-chaired along with Los Angeles Mayor Richard Riordan the Mayor’s Alliance for a Safer LA, which raised over $16 million to place computers in all LA precincts.[14]

In December 2005, shortly after Hurricane Katrina, Karatz directed that KB Home become the first, and at that time only, national homebuilder to go to New Orleans to support re-building efforts in the wake of Hurricane Katrina. KB Home acquired 74 finished lots in downtown New Orleans and bought 3,000 acres in Jefferson Parish. At the time, Karatz said,

"We're now seven, eight months into post-Katrina, and we're the only ones that have stepped up. I honestly think that's part of the problem with New Orleans: It's a weak business community. And I personally felt it was important for a company like ours to do something, because if we waited for others, we could be waiting a long time. And if we're successful, it will motivate others."

[15]

Karatz had to overcome reservations of KB Homes’ Board of Directors. Fortune Magazine wrote at the time, "It’s not often you hear a CEO express goals in humanitarian, not bottom-line, terms, especially when its shareholder money with which he’s do-gooding."[2]

Karatz agreed to make KB Home the builder for an episode of ABC’s Extreme Makeover Home Edition after listening to a pitch from employees. The show featured a family headed by a single mother, Patricia Broadbent, who had been diagnosed with lung cancer and had seven children. Six of the children were adopted, three of those born with HIV.[16]

Ms. Broadbent is a longtime children’s advocate, former social worker and an internationally recognized AIDS activist.[16]

Rather than remodel the family’s home, Karatz decided to raze it and build a 3,200-square-foot (300 m2) home in 48 hours. Hundreds of workers and KB Home demolished the Broadbents’ 1,450-square-foot (135 m2) cinderblock house while Ms. Broadbent and three of her daughters were on vacation. In the closing moments of the episode, Karatz tore up the family’s mortgage, promised to pay off the entire loan on their behalf and said they’d never have to worry about making those payments again.[16]

In 2007, Karatz founded the Keep Your Home Foundation to support people in California facing foreclosures as a result of the mortgage crisis. Keep Your Home Foundation supports a clearinghouse website to provide information to homeowners facing foreclosure.

From May 2010 to August 2011, Karatz worked as a full-time volunteer with the non-profit, HomeBoy Industries, which provides a second chance to formerly incarcerated gang members by training them to re-enter society. Today, Karatz is a member of the Homeboy Industries’ Board of Trustees and serves as a board member of Phoenix House, a non-profit leader in substance abuse treatment.[17] He is also chairman of the Bruce Karatz Family Foundation.[18]

Karatz other philanthropic/non-profit initiatives have included:

Karatz has been recognized for his philanthropic leadership, including:

Political activity

Over the years, Karatz generated attention over his support of Democratic candidates,[5] including Bill Clinton, Barack Obama, Al Gore, Antonio Villaraigosa and Dianne Feinstein (according to public campaign finance records.)

Legal

On November 12, 2006, Karatz retired from KB Home and agreed to pay the Company the profits he received based on KB Home’s stock option back-dating procedures.[19] On September 15, 2008, Karatz settled civil charges brought by the Securities and Exchange Commission ("SEC") arising out of these stock option back-dating procedures.[20] Under this settlement, Karatz, among other things, consented to an order barring him, for five years ending in September 2013, from acting as an officer or director of a company with securities registered with the SEC or required to file reports with the SEC. On November 10, 2010, a federal judge sentenced Karatz to probation for a term of five years, including eight months of home detention, for his role in the Company’s stock option back-dating procedures.[21] The federal judge later entered an order providing for the early termination of Karatz’s five-year term of probation effective April 27, 2012.[22] The sentence of probation was based on a report of the U.S. Probation Office concluding that Karatz’s "conduct does not appear to have resulted in any pecuniary harm" to KB Home or its shareholders and stating as follows:

Truly, in the collective 30 plus-year experience of the undersigned Probation Officer and Supervising Probation Officer, this office has never seen such an array of efforts to assist the community . . . These letters [submitted on Mr. Karatz’s behalf] all note the defendant’s support during times of need. Most notably, the letters describe the involvement of the defendant and reflect a participation that involved much more than mere financial donations. This is not a man who simply shared his wealth. He extensively shared his expertise and time as well.[23]

Family life

Karatz has been married three times. From 1968 to 2001, he was married to Janet Dreisen, an art consultant and board member of various arts and other non-profit institutions in Los Angeles.[24] From 2001 to 2005 he was married to Sandra Lee, a television personality.[25] Lee converted to Judaism.[26][27] Karatz is currently married to Lilly Tartikoff, a leading cancer activist best known for co-founding the annual Revlon Run/Walk events in New York City and Los Angeles and Revlon/UCLA Women's Cancer Research Program, which helped raise more than $80 million for cancer research.

Karatz has three adult children, Elizabeth, Matthew and Teddy, and four grandchildren. Elizabeth is the founder and chief executive officer of La Loop, a privately owned firm which manufactures and sells a line of patented eye glass products.[28] Matthew served as Deputy Mayor of the City of Los Angeles and the head of the City’s Office of Economic and Business Policy. He has oversight of all housing related City departments from the Los Angeles Department of Water and Power asset and real estate management to the City Planning Department.[29] Teddy was recently named to head up the Los Angeles office of a New York-based private equity firm.

References

  1. 1 2 Berry, Kate (2004-9-6). "Coming home: Bruce Karatz started as in-house counsel, but learned the business and turned what is now KB Home into an international market leader (Interview)." http://www.highbeam.com/doc/1G1-122661156.html Los Angeles Business Journal
  2. 1 2 3 4 5 6 Birger, Jon (2006-3-29). "Man on a Mission: Why on earth has KB Home CEO Bruce Karatz launched a major building project in the wildly uncertain New Orleans real estate market?" http://money.cnn.com/magazines/fortune/fortune_archive/2006/04/03/8372982/index.htm Fortune (Time Inc.)
  3. ↑ Magruder, Melonie. "23rd Dolphin Awards honor Malibu's citizens of the year". The Malibu Times. Retrieved 13 March 2013.
  4. ↑ Jewish Telegraph: "‘Mini-Madoffs’ facing federal fraud raps" By Tom Tugend March 9, 2009
  5. 1 2 Krantz, Matt (2004-11-22). "KB chief builds on creativity: CEO of homebuilder steps outside box to get attention." http://www.usatoday.com/educate/college/careers/profile43.htm USA Today
  6. ↑ "KBHome - KB Home Wins American Business Award For Best Overall Company". Kaufmanandbroad.com. Retrieved 2010-09-14.
  7. ↑ KB Homes net loss falls in Q1, Austin Business Journal, 23 March 2010, retrieved 16 January 2013
  8. ↑ "IMMOBILIER : NAFILYAN & PARTNERS, UN NOUVEAU PROMOTEUR". Direct Gestion. Retrieved 8 November 2014.
  9. 1 2 "Nafilyan & Partners (N&P) vise 1 500 réservations par an en Ile-de-France et de petites opérations tertiaires". Du Logement. 20 October 2014.
  10. ↑ Barbara Kiraly (30 October 2014). "L'ancien P-DG de Kaufman & Broad crée sa société". Le Moniteur.
  11. ↑ "Guy Nafilyan et Bruce Karatz créent Nafilyan & Partners". Business Immo. Retrieved 8 November 2014.
  12. ↑ "Nafilyan & Partners (N&P) vise 1 500 réservations par an en Ile-de-France et de petites opérations tertiaires". Le Courier.
  13. ↑ 18 June 1992 (1992-06-18). "18Jun92 USA: KAUFMAN AND BROAD LEADS REBUILDING OF CAMP HOLLYWOODLAND IN CALIFORNIA. | News | Construction News". Cnplus.co.uk. Retrieved 2010-09-14.
  14. ↑ Pfeifer, Stuart (2 April 2010), Bruce Karatz brings in star character witness: Richard Riordan, Los Angeles Times, retrieved 13 January 2013
  15. ↑ Knox, Noelle (2006-3-21). "KB Home bets on Stewart, New Orleans." http://www.usatoday.com/money/economy/housing/2006-03-21-kb-home-usat_x.htm USA Today
  16. 1 2 3 "Extreme Makeover: Home Edition: How'd They Do That?: Broadbent Family Episode Summary on". Tv.com. 2008-03-26. Retrieved 2010-09-14.
  17. ↑ Phoenix Houses of California Welcomes New Board Members, Phoenix House, 7 August 2012, retrieved 13 January 2013
  18. ↑ "Nonprofit Report for Bruce Karatz Family Foundation". Guidestar. Retrieved 13 November 2014.
  19. ↑ KB Home Form 8-K (PDF), United States Securities & Exchange Commission, 13 November 2006, retrieved 13 January 2013
  20. ↑ Litigation Release No. 20717, United States Securities & Exchange Commission, 15 September 2008, retrieved 13 January 2013
  21. ↑ U.S.A. v. Karatz, United States District Court, Central District of California, Case No. 2:09-CR-00203-ODW, Docket Entry #467, 27 April 2012
  22. ↑ U.S.A. v. Karatz, United States District Court, Central District of California, Case No. 2:09-CR-00203-ODW, Docket Entry #452, 10 November 2010
  23. ↑ U.S.A. v. Karatz, United States District Court, Central District of California, Case No. 2:09-cr-00203-ODW, Docket Entry #446 ("Defendant Bruce Karatz’s Sentencing Memorandum"), 5 November 2010
  24. ↑ Ms. Dreisen Rappaport, Member of the Board of Trustees, California Institute of the Arts, zoominfo, 16 October 2011, retrieved 11 January 2013
  25. ↑ Karni, Annie (3 December 2009), Sandra Lee and Andrew Cuomo: A Love Story, New York Post, retrieved 11 January 2013
  26. ↑ New York Magazine: "The Ravenous and Resourceful Sandra Lee" By Benjamin Wallace March 27, 2011
  27. ↑ The Tablet: "Semi-Homemade, Totally Jewish - Turns out Sandra Lee converted a decade ago" by Allison Hoffman April 5, 2011
  28. ↑ La LOOP, LaLOOP, retrieved 11 January 2013
  29. ↑ Mayor Villaraigosa To Business Community: Together, We Can Create Jobs, Grow Our Economy, City Of Los Angeles, 19 July 2011, retrieved 11 January 2013

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