Miami-based home builder Lennar Corp. has announced the closing of two structured transactions with the Federal Deposit Insurance Corp. (FDIC).
The transactions represent the purchase of two portfolios of loans with a combined unpaid balance of $3.05 billion. Rialto Capital Advisors, a subsidiary of Lennar, 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 nonrecourse 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.
Buying and working out distressed real estate loans became a focus for Lennar in the early 1990s, and the company's president and CEO, Stuart Miller, says Lennar is pleased to return to the business.
"We take great pride in understanding market cycles and identifying the opportune point of entry," Miller says. "As we have noted on our quarterly conference calls, we have been carefully preparing to invest in this space for the last two years."
SOURCE: Lennar Corp.