Lennar Wraps Up $740M Acquisition of Distressed Real Estate Assets

All told, 35 percent of the assets are commercial, with the remaining portion accounting for residential assets. The financing portion of the portfolio includes a group of 397 loans consisting predominantly of non-performing residential and commercial acquisition, development and construction loans.

October 5, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user Lori and the Bell Jar

If any real estate company is taking advantage of the proliferation of distressed assets in this credit crunch-beleaguered environment, it is Lennar Corp. Eight months after closing a multi-billion-dollar loan-portfolio acquisition with the Federal Deposit Insurance Corp., the homebuilder has closed the discounted purchase of 703 distressed real estate loans and properties valued at an aggregate $740 million in three individual transactions with major financial concerns.

All told, 35 percent of the assets are commercial, with the remaining portion accounting for residential assets. The financing portion of the portfolio includes a group of 397 loans consisting predominantly of non-performing residential and commercial acquisition, development and construction loans. The unpaid principal balance on these loans totals approximately $529 million. Lennar’s newly purchased portfolio also features 306 REOs with an appraised value of $211 million. Spanning 17 states, mostly in the Mid-Atlantic and Southeast, the REOs encompass multifamily and single-family residential communities, as well as land and lots. Lennar bought the REOs with cash-on-hand and a senior unsecured financing package supplied by one of the three financial concerns involved in the transactions.

The company has placed Rialto Investments, a subsidiary, in charge of the day-to-day management of the portfolio, as well as its workout.

It has been a busy year for the homebuilder. In February, Lennar closed two structured transactions with the FDIC involving a total of 5,000 distressed commercial real estate and residential loans with an aggregate unpaid balance of just over $3 billion. The company shelled out approximately $243 million for a 40 percent managing member interest in the limited liability companies that held the loans.

And given the current state of the troubled asset market, there appears to be ample opportunity for Lennar and other investors to strike additional deals. According to an August report by global commercial real estate research firm Real Capital Analytics, the total value of distressed commercial real estate in the U.S. is $186.9 billion.