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Lennar Sells 11,000 Homes For 40 Cents On Dollar

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By BOB IVRY, Bloomberg News

Published: January 11, 2008

Lennar Corp.'s November sale of 11,000 properties in eight states set a price that may mark the bottom for the U.S. housing market: 40 cents on the dollar.

That's how much Morgan Stanley Real Estate paid for an 80 percent stake in the 32 communities, 60 percent less than the price at which the properties were valued just two months earlier. That's also what some investors say they would pay for distressed land, condominiums, homes and whole developments, whether it's now or later this year.

"If you're an opportunistic buyer with enough cash and credit, it will be one of the best opportunities for acquiring property in our lifetime," said Jack McCabe, whose McCabe Research & Consulting in Deerfield Beach advises hedge funds and other investors on real estate sales.

As the U.S. housing slump drags into its third year, sellers will start cutting prices as much as it takes to find buyers, said Marcel Arsenault, a self-described "vulture investor." Properties will be available to buyers with the financial strength to ride out the slide. Now that a price has been set, all that's left is the waiting.

Arsenault, based in Broomfield, Colo., bought real estate during the savings-and-loan collapse of the early 1990s. He said he has put together a $200 million fund he expects to expand to $800 million this year to buy distressed condos.

"We're watching Denver, Phoenix, Austin and Tucson, but South Florida is our principal focus," said Arsenault, 60. "If you're a vulture, Florida has more carrion. This stuff is lying on the ground. It's lost life. Some of the stuff in Phoenix is still breathing. Perhaps not for long."

Arsenault said he and his three partners may buy a block of about 50 new, unsold condominiums in Orlando. They have a price in mind and they're willing to wait until they get it: 40 cents on the dollar.

"There's a risk to buying too early in the downturn, but buying too expensive is our biggest pitfall," he said.

Companies such as Miami-based Lennar, the nation's biggest home builder by revenue, need to generate cash to make up for slowing home sales, especially this time of year, said Vicki Bryan, a Friendswood, Texas-based senior high-yield debt analyst for Gimme Credit LLC.

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