Lennar Profits Buying Distressed Real Estate Loans

Lennar Corporation, one of the nation's largest homebuilders will pay the Federal Deposit Insurance Corp. $243 million for a stake in two loan portfolios. The transactions represent the purchase of two portfolios of loans with a combined unpaid balance of $3.05 billion.

February 12, 2010

Lennar Corporation, one of the nation's largest homebuilders will pay the Federal Deposit Insurance Corp. $243 million for a stake in two loan portfolios. The transactions represent the purchase of two portfolios of loans with a combined unpaid balance of $3.05 billion.
Lennar Corporation, one of the nation's largest homebuilders will pay the Federal Deposit Insurance Corp. $243 million for a stake in two loan portfolios. The transactions represent the purchase of two portfolios of loans with a combined unpaid balance of $3.05 billion.

Other details of the transaction include:
-  A subsidiary of Lennar, Rialto Capital Advisors, will conduct the day-to-day management and workout of the portfolios.
- Lennar acquired indirectly 40% managing member interests in the limited liability companies created to hold the loans.
- The FDIC is retaining the remaining 60% equity interest and is providing $627 million of non-recourse financing at 0% interest for 7 years.
- The transactions include approximately 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships.

According to Lennar, the company’s workout strategy of distressed properties during the last housing downturn in the 1990s was extremely profitable. Last month, Lennar reported a profit of $35.6 million. In the prior-year period, it reported a loss of $811 million. In 2009 the firm lost $417 million, a big improvement over the $1.1 billion it lost in 2008.

Comments on: "Lennar Profits Buying Distressed Real Estate Loans"

Email Subscriptions