Homebuilder Lennar Corp.'s subsidiary Rialto Capital completed the first closing of a real estate investment fund with initial equity commitments of around $300 million. This amount includes $75 million committed by Lennar.
The fund's aim over its three-year investment period is to buy distressed real estate assets and other related investments that fit within the its investment parameters.
As reported by ASR's sister publication National Mortgage News, although the core operations of homebuilders have lagged in recent years, Lennar has suceeded in buying real estate owned (REO) properties and distressed mortgage debt via its Rialto subsidiary.
According to National Mortgage News, transactions that occured in 2010 include a $3.05 billion portfolio from the Federal Deposit Insurance Corp. The February offering had a combined 5,500 mortgages from two note pools, such as distressed residential and commercial real estate (CRE) assets, from 22 failed banks.
A more recent transaction from early October, National Mortgage News reported, was a series of deals to buy a combined $740 million in distressed CRE and residential real estate assets from three undisclosed financial institutions. When the transaction was announced, Lennar said the acquired assets comprised 397 loans with a total unpaid principal balance of around $529 million and 306 REO properties with an approximate $211 million appraised value.
Lennar stated that the acquisition was purchased at a discount and paid for with a combination of cash and senior unsecured financing provided by one of the selling financial institutions, National Mortgage News reported.
The Rialto unit’s activities in distressed asset investment netted Lennar $7.7 million in net operating earnings in its fiscal year third quarter that ended on Aug. 31. The firm posted full-year 3Q10 earnings of $30 million, which is equivalent to $0.16 per share, compared with a net loss of $171.6 million, $0.97 per share, over full-year 3Q09, National Mortgage News said.
Lennar Corp., founded in 1954, builds affordable, move-up and retirement homes mostly under the Lennar brand name. Lennar's financial services unit offers mostly mortgage financing, title insurance and closing services for both buyers of the firm's homes and others.
Rialto Investments is a subdiary of Lennar that is primarily focused on distressed real estate asset investments, asset management and workout strategies.