Project Description

Lennar Spin-off (Non-core assets) Notes

March 18, 2021 Update

  • Lennar announced during its conference call (there was no mention of it in the press release).
  • The businesses that will be spun off with include the Lennar Mortgage Finance business and its technology investments.
  • The entity that will be spun off will include $3BN to $5BN in assets with no debt.
  • It’s unclear exactly what will be included (I don’t think Lennar has 100% certainty) but here’s what was mentioned duringt the conference call:

As noted in past conference calls, we have been working on strategies to better position our multi-family business called LMC, along with our now maturing SFR or Single-Family for Rent business that Rick will talk about in a minute.

Additionally, we have a dynamic and growing land program and land management business. We have also LMF, Lennar Mortgage Finance, our commercial mortgage business, another excellent business. And finally, we have a growing technology investment business which is part of LENx. We’ve concluded that the best way to enhance corporate value is to have Lennar standalone as a pure play homebuilder and financial services company and to enable these blue chip businesses to thrive and excel independently.

Therefore, we are working to construct a tax free spin-off of all or parts of these ongoing businesses in a unified company. This Spinco may contain all or part of the assets of these businesses together with certain land assets and programs, as well as part of our LENx investment business. The expected size of the spun enterprise would be between $3 billion and $5 billion in asset base with no debt, which our balance sheet can comfortably accommodate.

The remaining Lennar would see almost no loss of operating income from this spin-off and will continue to have a very liquid balance sheet. The standalone company would ultimately drive income from significant asset management fees. The Spinco will be focused on building an active asset management business that raises third-party capital to support ongoing business verticals included in land – including land development.

The company will become an active asset and property management company. The backbone for the company will be LMC’s operating platform together with the LMV structures. This resolution is no longer a long-term strategy, but it is immediate as we focus on driving higher return with less noise in our numbers from lumpy profits and losses, which will increase visibility for the capital markets into our core operations.

Expect to hear a lot more about the spin over the next quarters as our thinking matures. Today, we can only give a brief sketch of the future of this program. I know you will thirst for more detail, but we are not in a position to give it at this time. But we did feel that it was time to share our thinking with the investment world as we work to fill out the detail and build a new company.