The First of Many Big Bulk Purchases to Occur

December 6, 2007

I realize that I’m late to disclose the following information but I thought I’d write a post about it anyways.

There are many of you out there that read about this major transaction on Monday, as I did, in the Wall Street Journal or the many other online and print publications that were released that day. However, I’m sure there are some of you that are unaware of what transpired Monday morning.

Lennar Corp. (NYSE: LEN), a major Miami-based homebuilder in the United States, revealed Monday morning that they sold a substantial portfolio of properties at a large discount. These properties were previously valued by Lennar at $1.3 billion dollars as of September 30, 2007.

The portfolio, consisting of “about 11,000 homesites in 32 communities nationally, consisting of raw land and both partially and fully developed homesites in California, Colorado, Florid, Illinois, Maryland, Massachusetts, Nevada and New Jersey,” was sold to a joint venture which consisted of an 80 percent stake by major Wall Street bank Morgan Stanley for $525 Million, or about 40 cents on the dollar. Lennar Corp. will own the other 20 percent stake and receive fees for managing the properties.

I think we’ll see more and more of these bulk deals occur in 2008. A major hedge fund analyst that I spoke with on Monday told me that Lennar has traditionally been the first to acknowledge and act on given circumstances. It’ll be interesting to see, in 2008, which other developers make the same acknowledgment. It’ll be even more interesting to see which major bank is the first to dispose of properties in a major headline sale.