Lennar paid $243 million for the portfolios, which include 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships. But the Miami-based builder says it’s no stranger to working with troubled mortgages.
“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,” said Stuart Miller, president and CEO of Lennar
Corporation. “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.”
Miller says the company has been preparing to invest in the distressed loan space for the last two years and has been closely watching the market to identify “the opportune point of entry.”
As part of the deal with the FDIC, Lennar receives a 40 percent stake in the limited liability companies created to hold the loans. The FDIC will retain a 60 percent equity interest in the companies and will provide $627 million of nonrecourse financing at zero percent interest for seven years, Lennar explained.
Rialto Capital, a subsidiary of Lennar, will conduct the day-to-day management of the portfolios and the loan workouts, and will contribute up to $5 billion toward the acquisition, Lennar said. Rialto is a real estate investment management company focused on distressed real estate assets.
A Rialto related entity is also a sub-advisor to Alliance Bernstein in one of the eight Public Private Investment Program (PPIP) partnerships sponsored by the U.S. Treasury to purchase residential and commercial mortgage backed securities.