Lennar Corp. (LEN) recently acquired the distressed debt on the Century Grand project in Doral through one of its affiliates named Flordade LLC. State. The mortgaged property, which was purchased for an undisclosed sum, spans almost 153 acres of the Century Grand project.
Before the purchase, the project was handled by homebuilder Sergio Pino with a plan to build approximately 4,600 town homes, 150,000 square feet of commercial space with residential facilities on top along with a charter school, a church and a recreational center.
However, a foreclosure lawsuit valued at $65.6 million was filed against Atlas Property I LLC and the CEO of Century Homebuilders in late 2009 by Wells Fargo Bank (WFC), acting as a representative for a group of lenders. Wells Fargo holds almost $40 million of the loan, while the remaining $15 million is equally divided between BankAtlantic Bancorp Inc. (BBX) and the Federal Deposit Insurance Corp. The lawsuit is still pending.
During the second quarter of fiscal 2011, Lennar Corporation reported net earnings of $13.8 million or 7 cents per share compared with $28.7 million or 15 cents per share in the year-ago quarter. Total revenue in the quarter dropped 6.1% year over year to $764.5 million, due to poor performance across all the company’s reporting segments, except Rialto Investments.
Lennar continues to focus on land purchases and expansion of communities despite the economic downturn. The company recently acquired land at Berewick community located in Southwest Charlotte, North Carolina. Last month, the company inaugurated two brand new communities at Coral Lakes and Garden Estates at Kendall. Moreover, Lennar also expanded its footprint in the Dallas/Fort Worth market with the addition of three new communities.
However, a depressed housing industry is the biggest concern for any homebuilder including Lennar. Besides, there is no sign of a speedy recovery. Home sales have declined consistently in each of the first three months of the year. The situation is feared to deteriorate further.
In addition, house prices also plunged continuously, driven by an excess supply of homes in the face of depressed demand coupled with tough competition from pre-owned homes.
Keeping these in mind, the shares of Lennar are maintaining a Zacks #3 Rank, which translates into a short-term Hold rating.
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