MIAMI, Feb 10, 2010 /PRNewswire via COMTEX/ — Lennar Corporation (NYSE: LEN and LEN.B),one of the nation’s largest homebuilders, today announced the closing of two structured transactions with the Federal Deposit Insurance Corporation (“FDIC”).
The transactions represent the purchase of two portfolios of loans with a combined unpaid balance of $3.05 billion. 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 for approximately $243 million (net of working capital and transaction costs), including up to $5 million to be contributed by the Rialto management team. 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.
Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, “Acquiring and working out distressed real estate loans was a large and extremely profitable part of our business during the last major real estate down cycle in the early 1990s. We are pleased to return to this business and honored to partner with the FDIC to manage, work through and add value to these portfolios of real estate loans. We take great pride in understanding market cycles and identifying the opportune point of entry. As we have noted on our quarterly conference calls, we have been carefully preparing to invest in this space for the last two years. Our strong cash position and proven track record in this area enables us to capitalize on this market cycle and create long-term value for our shareholders. We expect these transactions will be accretive to 2010 earnings.”
Jeffrey Krasnoff, Chief Executive Officer of Rialto, added, “We have been assembling and incubating the Rialto management team within Lennar since late 2007. Many on our team have worked together and with Lennar for several decades. Our track record of successfully managing the resolution of distressed real estate loan portfolios puts us in a unique position at this point in the cycle. We are very pleased to be partnering with the FDIC and look forward to the opportunity to build on our business relationship.”